The London and Irish Stock Exchanges are planning to replace the existing Talisman Settlement System with a new electronic settlement system to be known as "CREST". As an alternative to settlement using paper share certificates, CREST will be a voluntary system which will enable the holding and trading of shares in electronic form. The rationale behind CREST is to offer a faster, cheaper and more efficient settlement to existing ones. Essentially, CREST will work on the basis of responding to electronic messages from members to transfer stock between accounts. In order to participate in CREST, shareholders will need to either:
- have an account with CREST; or
- be sponsored by a sponsoring participating member who will be authorised to operate the CREST membership on their behalf.
While a company wishing to have its shares traded in the CREST system may change its Articles of Association to allow for this (in particular, to override existing Articles which require the transfer of shares to be evidenced by a stock transfer form and for share certificates to be issued), this is not absolutely necessary, given that new Regulations have been brought into force, both in Ireland and England to deal with this matter. However, there are procedural advantages for a company relying on a power in its Articles, rather than on the Regulations.
The Regulations adopted in Ireland (the Companies Act, 1990 (Uncertificated Securities) Regulations, 1996) were introduced with effect from 1st April, 1996. The Regulations are similar to those already in existence in the United Kingdom. It is expected that most companies quoted on The Irish Stock Exchange will opt for electronic settlement when the system is fully operational (at present, this is expected to be early in 1997 with the dates for entry by Irish companies provisionally set for October 1996 and January 1997). In his budget speech, the Minister for Finance announced that the Finance Bill, 1996 will extend to electronic transfers, stamp duty and capital duty on share transfers and the issue of shares. Under existing legislation, both duties arise on "paper" transactions and generate a tax of 1% on the transfer or issue value, subject to certain exemptions. Chapter 1 of Part 1V of the draft Finance Bill issued on 28th March, 1996 provides for the appropriate amendments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
