Profession:Herbert Smith

The Uncertificated Securities Regulations 1995 have been completely replaced by a new set of Regulations, the Uncertificated Securities Regulations 2001. These Regulations set out the legal basis for the operation of the CREST system, which is the means by which shares in listed companies are held electronically.

Transfer of title to shares

The key effect of the new Regulations is to create a system for the electronic transfer of title.

Previously, when CREST members sent instructions to CRESTCo for the transfer of uncertificated shares, and that instruction settled, CRESTCo sent a Register Update Request (RUR) to the Company's Registrar. The Company's Registrar then updated the share register. CRESTCo in the meantime reflected the transfer of the shares in the CREST member accounts of the buyer and the seller, which operate as the equivalent of a share certificate.

Under the new Regulations, CRESTCo itself is the holder of the register of the uncertificated shares in the company. The Company's Registrar will continue to hold the register of the certificated shares but will only have a copy record, obtained from CRESTCo, of the uncertificated shares. This means that when a buy and sell instruction settles in CREST, the transfer of title will happen electronically and simultaneously with settlement. CRESTCo will notify the Registrar of the transfer by way of an RUR instruction, but this will be for the purpose of updating the company's record of the register.

Changes to the Companies Act

This is obviously a key change, not just in terms of CREST, but also for company law purposes. Instead of making specific amendments to the Companies Act 1985, the Regulations (in Schedule 4) simply deem the relevant Companies Act provisions relating to registers to be amended in a specified way in relation to uncertificated shares. This means that, when looking at any point on share registers in relation to a company whose shares are admitted to CREST, both the Companies Act and the new Regulations will need to be checked.

Company registers

The Regulations mean that company registers are now technically split in two. The register kept by the company is known as the "issuer register of members". This includes a complete list of members, but the details about the number of shares held is only given in relation to the certificated shares. CRESTCo maintains a register known as the "Operator register of members" showing the number of shares held by those members who hold...

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