SECP Moves to Digitize Share Ownership of Unlisted Pakistani Companies

The Securities and Exchange Commission of Pakistan (SECP) has approved the next phase of corporate sector reforms aimed at fully digitizing share ownership of unlisted companies, replacing physical share certificates with electronic records through the Central Depository System (CDS).

Under the initiative, shareholdings will be maintained in book-entry form through the Central Depository Company (CDC), a move designed to enhance transparency, strengthen investor protection, and modernize corporate governance practices.

At present, many unlisted companies maintain paper share certificates, leaving ownership records vulnerable to loss, damage, theft, forgery, and disputes. Officials say the transition to electronic shares will create secure, tamper-proof ownership records and significantly reduce litigation related to fraudulent transfers and disputed shareholdings.

The digital system is also expected to streamline administrative processes by reducing paperwork, enabling faster share transfers, and ensuring real-time accuracy of ownership records. Book-entry shares may be pledged as collateral, improving access to financing and supporting business expansion.

As part of the reform, existing unlisted companies holding physical shares will be required to convert them into electronic form before executing any share-related transactions. Following conversion, all transfers, allotments, and other share transactions must be conducted through the CDS, with stakeholders maintaining holdings in electronic form.

The SECP has already made electronic issuance mandatory for newly incorporated unlisted companies. The forthcoming notification will require legacy firms to convert physical shares before undertaking transactions such as transfers, rights issues, bonus issues, buybacks, or changes in shareholding structure. The phased approach is intended to allow companies to continue routine operations while transitioning toward full digitization.

The regulator has also approved detailed procedures for induction into the CDS, including eligibility criteria, documentation requirements, verification mechanisms, and applicable tariffs, to ensure a secure and orderly transition.

Officials describe the initiative as a significant step toward aligning Pakistan’s corporate framework with international best practices, improving ease of doing business, enhancing regulatory oversight, and strengthening transparency in ownership structures.

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