Policy paper

Terms of Reference for Dematerialisation Market Action Taskforce (DEMAT)

Published 9 October 2025

Background

• On 15 July 2025 the Digitisation Taskforce published its final report, which recommended a staged approach to removing paper share certificates and ultimately moving to a fully intermediated system of shareholding in the UK. The government accepted the recommendations made in the report and set out in its response how it intends to take these forward. The report recommended a three step process:
  • Step 1 – Firstly, existing paper-based or ‘certificated’ share registers will be replaced by ‘digitised’ share registers, temporarily replicating the system as it exists today but without paper share certificates. This will happen before the end of 2027.
  • Step 2 – Secondly, improvements will be made to the intermediated system, in which most shares are already held, to facilitate the ability of beneficial owners of shares to exercise their rights effectively and efficiently through intermediaries. These improvements will be made over the course of this Parliament.
  • Step 3 – Finally, once these improvements have been made, shares on the temporary digitised registers will transition into the intermediated system. The report recommended considering methods for delivering this transition, such as making the digitised registers a ‘one-way street’, with shares moving into the intermediated system when shareholders take corporate actions, and/or setting a ‘sunset date’ by which all shares need to move.
• A key recommendation in the report was to establish a ‘Technical Group’ to work with industry stakeholders to deliver Step 1, including setting a precise date before the end of 2027 for this to take place, and creating a detailed plan for the changes which the market will need to make as part of Steps 2 and 3.
• The government has appointed Mark Austin to establish and chair the new Dematerialisation Market Action Taskforce (DEMAT). Mark is a corporate partner at Latham & Watkins, specialising in capital markets, and is a member of the Capital Markets Industry Taskforce. He delivered the Secondary Capital Raising Review in 2022 and was a member of the Digitisation Taskforce.
• DEMAT forms one part of the government’s wider Wholesale Financial Markets Digital Strategy. The government will separately appoint an industry expert as Digital Markets Champion, who will provide leadership from, and for, the sector on wider wholesale market digitalisation, looking at how digital technologies (such as tokenisation) could transform our financial markets. The Digital Markets Champion will be announced in due course.

Objectives and timeline

1) The government has asked the Chair to report back by Summer 2026 with a recommended ‘go-live’ date for Step 1, which should be before the end of 2027, and an implementation plan for the actions industry participants need to take to deliver this. This plan should include the Taskforce working with industry to implement and communicate the move to all stakeholders, making them aware of how the process will affect them.

2) The government also asks the Taskforce to begin working with market participants to identify and implement the actions they need to take as part of Step 2, including providing any further detail that may be required by firms – with the aim of the market being ready for Step 3 to begin by the end of this Parliament. These actions should include firms communicating and explaining any changes made in Step 2 to affected stakeholders. The Taskforce may also highlight to the government and/or the regulators any actions beyond those already set out in the Digitisation Taskforce report which it identifies that the government and/or regulators need to pursue under Step 2.

3) The Taskforce is also asked to assess progress in implementing Step 2 and to recommend a detailed plan for all shares to transition into the intermediated system in Step 3. The government has set out below the key principles which it considers to be the criteria for Step 3 to take place. The Taskforce should set out its recommended transition plan for Step 3, which should include a decision on the optimal method and timing for transitioning all remaining shares into the intermediated system, including whether a ‘one-way street’ and/or a ‘sunset date’ should be implemented or not.

Governance

• The Chair will decide the composition and structure of the DEMAT and determine the processes that will be followed in order to meet the objectives set out by the government.
• The Chair may invite any relevant stakeholders to be part of the Taskforce as appropriate, ensuring it properly engages the different interested stakeholder groups. It is also important that the views of vulnerable and older investors are considered and accounted for.
• Representatives from the government, the Financial Conduct Authority, the Bank of England and other relevant public bodies may attend meetings of the Taskforce as observers.

Criteria for assessing readiness for Step 3

The government has set the following key principles which can be used to assess progress on Step 2:

1) Beneficial owners can exercise their rights effectively and efficiently through intermediaries, based on the ‘baseline service’ recommended in the Digitisation Taskforce report

2) Beneficial owners can receive information promptly and transparently through intermediaries

3) Arrangements are in place for intermediaries to onboard remaining shareholders effectively and efficiently

4) Investors benefit from choice and transparency on the services that they wish to receive from intermediaries based on their different preferences

5) Relevant stakeholders are informed about the transition, how it affects them and what they need to do – and appropriate solutions are in place where the investor cannot be identified or contacted

6) The interests of vulnerable and older investors are considered and accounted for in the transition plan