The Securities and Exchange Commission of Pakistan (SECP) has approved sweeping reforms to fully digitise share ownership of unlisted companies, requiring a shift from physical share certificates to electronic book-entry form through the Central Depository System (CDS).
The CDS is operated by the Central Depository Company (CDC), which will oversee the transition aimed at enhancing transparency, strengthening investor protection and modernising Pakistan’s corporate framework.
Under the second phase of reforms, all existing unlisted companies maintaining physical share certificates will be required to convert them into electronic form before undertaking any share-related transaction. Following conversion, all transfers, allotments, rights issues, bonus shares, buybacks and changes in shareholding structure must be executed exclusively through the CDS.
The Commission said the move would eliminate risks linked to paper certificates, including loss, theft, forgery and damage, which have historically led to ownership disputes and prolonged litigation. Digital book-entry shares are expected to provide secure, tamper-proof records while enabling faster settlement and real-time tracking of ownership.
Electronic shares can also be pledged as collateral for financing, potentially improving companies’ access to credit and supporting business expansion. Officials added that the centralised electronic system would strengthen regulatory oversight and corporate governance among unlisted firms.
The SECP has already made it mandatory for newly incorporated unlisted companies to issue shares solely in electronic form. Physical certificates are no longer permitted for new entities. A formal notification outlining the implementation framework for existing companies is expected shortly.
The regulator has approved comprehensive procedures for induction into the CDS, including eligibility criteria, documentation requirements, verification protocols and applicable tariffs to ensure a smooth transition.
The initiative is being viewed as a significant step toward aligning Pakistan’s corporate sector with international best practices, improving ease of doing business and reinforcing investor confidence in unlisted markets.
