Richard Wachman
The introduction of the Crest electronic share dealing system in the City this week is awaited anxiously by lawyers who will have to deal with a plethora of new paperwork.
Different documentation will be needed for rights issues and takeovers to take account of the Crest system which has been developed under the auspices of the Bank of England.
The high-tech set-up drops the need for share certificates and is designed to make trading quicker and easier than under current arrangements.
The aim of the system is to sustain London's status as a top financial centre in Europe.
But it is the transition period while Crest is introduced which is causing lawyers the biggest headache. Any City deal will need supporting documents which recognise that some investors will hold their shares in Crest while others will still be using the old system.
During takeovers this means acceptance documents will need to take account of both class of shareholder.
"It is perfectly possible there will be teething problems," said Freshfields' Vanessa Knapp, a member of the City of London law society Crest working party.
She has been working with lawyers at other firms in an attempt to ensure everyone follows agreed formulae when drawing up documents.
While big institutions are expected to switch to Crest swiftly - the costs are lower for large investors - small shareholders may prefer to stay with the current system, although this may eventually prove more expensive. This is because small investors who trade via Crest will not automatically appear on company share registers which means they will not be able to vote at annual meetings or receive annual reports and accounts.
For a Crest shareholder to appear on a share register, he or she must be a Crest member and that requires being hooked into the Crest computer system, an option not open to most private investors.
Clare Wilson, head of legal information at Herbert Smith, admitted that when it comes to annual meetings, where investors can quiz board directors, "there will no right of access" for Crest shareholders who do not appear on registers.
One way to ensure small investors do appear on registers is to seek sponsorship by their financial advisers. But sponsorship costs are not yet known.
