HC Deb 14 June 1989 vol 154 cc441-2W
Mr. Charles Wardle

To ask the Chancellor of the Duchy of Lancaster whether he will state the Government's intentions for facilitating paperless transactions and holdings in shares.

Mr. Maude

I announced on 1 December at column369 that I was considering proposing changes to the law that would, if both the company and the shareholder wished, enable shares to be held on computer, without certificates, and to be transferred without the need for paper transfer forms. This process, sometimes referred to as dematerialisation, is important for London's leading position as an international trading market. Paperless schemes will also offer important benefits for wider share ownership by providing a more efficient service to investors.

I issued a consultative document on the proposed changes and I am grateful to all those individuals and organisations who responded. It is essential that any schemes finally developed meet the legitimate needs of all potential users and I welcome the progress made by the international stock exchange as a result of its recent and continuing consultations.

The moves towards paperless trading are intended to reduce transaction risks and costs. In considering possible changes to legislation it is essential to strike the right balance between the interests of shareholders, of companies and of the financial institutions. I have also borne in mind that schemes will develop over time and that competitors may emerge with different approaches from the nominee-based scheme currently being considered by the stock exchange. Against this background it is clearly important that the framework should be flexible.

I hope to bring forward proposals in the form of amendments to the Companies Bill. These will be intended to ensure that the move towards paperless trading does not alter significantly the effect in practice of current company, investor protection and insolvency law. In order to achieve this the Secretary of State would be empowered to make regulations, subject to affirmative resolution, which would then provide a framework within which authorised systems would operate. The purpose of the regulations would be:

  1. (a) to facilitate the introduction and operation of computer based systems for recording the holding of securities (or interests in them) and for their transfer;
  2. (b) to ensure that, as far as reasonably practicable, investors, issuers (ie companies) and other are in a corresponding position under such a computer-based system as they are under the present paper-based system.

The regulations will make provisions inter alia for ensuring that authorised systems and their participants are properly regulated. They will also ensure that the speed and ease with which information about the identities of owners of shares is made available is comparable to present arrangements; and that investors continue to enjoy broadly the same rights as they do now.