Company and financial services


When the Uncertificat-ed Securities Regulations 2001 (USRs) came into force on 26 November 2001, they changed fundamentally the legal structure of settlement in the Crest system by introducing the concept of Electronic Transfer of Title (ETT). In the context of a transfer between two Crest members, this sees full legal title passing to the transferee at the point of settlement in Crest. Prior to this date, an equitable interest was created at the point of settlement, but legal title did not pass until the transfer was recorded on the issuer's register (usually some 20 minutes later). The technical risk of a failed delivery, which therefore existed in the intervening period, has now been eliminated.
A principal consequence of these changes is that issuers whose securities are transferred by means of the Crest system no longer maintain (either themselves or through their registrar) the register of those UK securities held in uncertificated form (although they continue to maintain registers of holdings in certificated form). The Crest electronic records have themselves become the registers of the relevant uncertificated securities and are updated automatically at the point of settlement.
While there have been separate registers of securities for certificated and uncertificated securities for some time now, it was not considered appropriate for a company's register of members to be maintained in part by Crest. Accordingly, the USRs require companies to maintain complete registers of members, detailing their names and addresses, the period of membership and, in relation to shares held in certificated form only, the number of shares held by each member and the amount paid up, or agreed to be considered as paid, on such shares. The number of shares held in uncertificated form and their holder is recorded on the register maintained by Crest.
The USRs also include an obligation on issuers to maintain a record (rather than a register) of the securities that are held in uncertificated form, and to enter on that record the information which appears on the register maintained by Crest. Where the relevant securities are shares, the company must additionally include on its record a statement of the amount paid up, or agreed to be considered as paid, on the uncertificated shares of each member – information that is not available to Crest. It is this record, rather than the Crest register, that members of the public are able to inspect, and this record that issuers will use for their own corporate actions and other processing. The issuer is required to reconcile regularly its record with the Crest register and, provided it has done so, it will be exempt from any liability that might have arisen as a result of relying on an inaccurate record.
While the new USRs may appear to be inconsistent with many existing Articles of Association and other terms of issue of securities already held within the Crest system, they should not necessitate any changes to these documents. The USRs provide that the current Articles/terms of issue shall cease to apply to the extent that they are inconsistent with them. Similarly, because the USRs are a re-enactment (with modifications) of the 1995 regulations, any references in such documents to the provisions of the 1995 regulations will (by virtue of the Interpretation Act) be taken to refer to the equivalent provision of the new USRs.
The USRs have brought about other changes, including:
-an amendment to the mechanisms that apply on a compulsory purchase of securities following a takeover;
-the relaxation of the provisions that required all transfers of certificated securities to be lodged with Crest through the Crest Courier and Sorting Service. This is expected to simplify the processing of placings and schemes of arrangement;
-provisions that enable issuers to request securities to be withdrawn from Crest to enable them to deal with the securities in accordance with their terms of issue (for example, to enforce restrictions).
Importantly, however, the changes will have little impact on the processing of corporate finance transactions.
The Crest Rules and Manual have been updated to reflect the new USRs and are available at
Jane Tuckley is a partner at Travers Smith Braithwaite, which advised CRESTCo on the legal aspects of the projec