The Securities and Exchange Commission of Pakistan has approved the full digitization of share ownership for unlisted companies, launching the second phase of reforms aimed at transitioning from physical share certificates to electronic book-entry form through the Central Depository System operated by the Central Depository Company.
Under the new framework, all shares of unlisted companies will be converted into electronic form and maintained within the Central Depository System, commonly referred to as CDS. The move is designed to eliminate reliance on paper-based share certificates, which have historically posed risks related to loss, forgery, duplication and administrative inefficiencies.
According to the regulator, the reform is intended to strengthen transparency in ownership records, facilitate secure and efficient share transfers, and improve investor protection standards across the corporate sector. By digitizing shareholding structures, the SECP aims to create a more reliable and verifiable record-keeping system that aligns with international best practices in capital market infrastructure.
Physical share certificates have long been associated with operational challenges, including delays in verification, risks of fraudulent transfers and cumbersome manual documentation processes. Transitioning to electronic book-entry form through CDS is expected to significantly reduce these risks while enhancing traceability and accountability in ownership records.
The Central Depository System, operated by the Central Depository Company, already serves as the backbone of electronic settlement and custody for listed securities in Pakistan’s capital markets. Extending its infrastructure to unlisted companies represents a structural shift in how private corporate ownership is recorded and managed.
The SECP’s decision marks a major step in modernizing the regulatory framework governing unlisted entities, many of which have traditionally operated outside the digitized ecosystem available to publicly traded firms. By bringing unlisted companies into the CDS environment, the regulator is closing a long-standing gap in corporate documentation and investor safeguards.
The digitization initiative is also expected to streamline share transfer procedures. Electronic records enable faster execution of transactions, reduce paperwork, and limit discretionary interpretation of physical documentation. For shareholders, this means more secure custody of ownership rights and simplified processes for transfer or pledge of shares.
Beyond operational efficiency, the reform has governance implications. Transparent and centralized electronic records can strengthen oversight, reduce disputes related to shareholding structures and improve compliance monitoring. In cases involving mergers, acquisitions or corporate restructuring, accurate and readily accessible ownership data becomes critical.
The SECP has described the initiative as part of its broader reform agenda aimed at enhancing transparency, strengthening corporate governance and protecting investor interests. By mandating digitization for unlisted companies, the regulator is signaling a shift toward uniform disclosure and record-keeping standards across the corporate spectrum, not limited to entities listed on the stock exchange.
For Pakistan’s corporate sector, the reform aligns domestic practices with global norms where electronic custody and book-entry systems are standard. It also reflects increasing emphasis on leveraging digital infrastructure to improve regulatory oversight and market integrity.
As implementation progresses, companies will be required to coordinate with the Central Depository Company to complete the conversion of physical certificates into electronic form. The reform is expected to gradually phase out paper-based shareholding, embedding digital record-keeping as the default mechanism for ownership documentation in unlisted firms.
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