Hong Kong's New Uncertificated Securities Regime: A Quick Guide for Listed Companies

The Hong Kong Securities and Futures Commission (SFC) has announced it is on track to launch the uncertificated securities market (USM) regime for Hong Kong-listed securities in early 2026, with the precise implementation date to be announced in due course. In addition, the Hong Kong Stock Exchange (HKEX) has issued an Information Paper to explain proposed changes to the Listing Rules and to outline preparatory steps for listed issuers. The USM regime will introduce a new way for investors to hold and manage listed securities and issuers will be required to take steps to facilitate its implementation. This note highlights the key features of the regime, as well as action points for listed companies.

Overview of key changes

• Currently, investors who wish to hold legal title to their Hong Kong-listed securities (i.e. in their own names) can only do so in certificated (paper) form outside of CCASS. Under the USM, investors will have the option to hold legal title without paper instruments, allowing them to enjoy shareholder rights directly and manage and transfer their securities electronically.
• Listed issuers participating in the USM must appoint an approved securities registrar (ASR) to operate an electronic system (termed the UNSRT system) to evidence and transfer uncertificated (paperless) securities and stop issuing physical title instruments by a specified date. Investor engagement and transparency will be enhanced as more investors move towards holding securities in their own names.

What should listed companies know?

1. Scope - The USM applies to “prescribed securities”, being Hong Kong-listed shares, depositary receipts, SFC-authorised funds where the units are withdrawable from CCASS (e.g. REITs), stapled securities, subscription warrants and rights under a rights issue. All issuers of prescribed securities fall within scope of the regime, but listed companies incorporated in Hong Kong, Mainland China, Bermuda and the Cayman Islands (Key Jurisdiction Issuers) will participate in the USM first.
2. Key preparatory steps and timing – all issuers of prescribed securities[1] must appoint an ASR (i.e. a securities registrar regulated by the SFC) by the USM implementation date, which is expected to be in early 2026. Such issuers must also amend the constitutional documents / terms of issue of the securities as necessary to align with USM requirements to the extent the amendments do not conflict with the laws of the relevant jurisdiction (i.e. where the issuer is incorporated in the case of shares).Key Jurisdiction Issuers are required to amend them within one year of the USM implementation date.
   
   Key Jurisdiction Issuers[2] must also set and announce a USM participation date on which their UNSRT system will launch and from which no paper certificates can be issued, and publish a USM plan.[3] The participation date cannot be later than the specific deadline set for that issuer by (amongst others) the HKEX and Federation of Share Registrars, with the deadline falling within a five-year period from the USM implementation date. The SFC has indicated the deadline may be negotiated (e.g. due to planned corporation actions or the need to amend articles). The aim is for issuers outside of the four key jurisdictions to participate within the five-year timeline as far as possible, but some cases (e.g. shares of UK issuers) may need more time due to local laws.
   
   See the table further below for more information on the key steps.
3. No “big bang” dematerialisation – Investors are not mandated to dematerialise existing securities (i.e. convert them to uncertificated form) unless in specific situations (see point 4 below). Participating issuers must therefore have parallel systems in place for an indefinite period to accommodate both certificated and uncertificated securities and the SFC has not currently indicated a long-stop date by which this must end.
4. Phasing out certificated securities[4] - However, from its participation date, an issuer can only issue new securities in uncertificated form (e.g. on a rights issue or scrip dividend) and cannot issue title instruments in respect of existing securities (e.g. upon a transfer). This means transfers and issuances of securities will result in uncertificated securities.[5] In addition, existing securities held in CCASS in the name of HKSCC Nominees will all be dematerialised, and uncertificated securities cannot be rematerialised except in limited situations such as delistings.
5. Uncertificated securities in UNSRT or CCASS – Investors will have the option to hold and manage uncertificated securities in their own name via a digital USI profile on the UNSRT system operated by the issuer’s ASR (the new option) or through an intermediary in CCASS in the name of HKSCC Nominees (existing option which will remain post-USM). USI-held securities must be deposited into CCASS before they can be traded on the exchange. However, the process for depositing uncertificated securities into CCASS will be faster and more convenient under the USM than today’s processes as it can be done electronically.
6. Ownership transparency and impact on corporate transactions – As more investors move towards holding shares in their own names rather than through brokers in CCASS, listed issuers would have a better idea of their shareholder base and can engage with them more directly and analyse their likely reaction where a shareholder vote is needed. In the context of takeovers and privatisations, there could be less need to rely on the ownership investigation procedure under section 329 of the Securities and Futures Ordinance, which involves sending a set of notices tracing ownership from brokers through to the ultimate beneficial owners – the process through layers of ownership can be difficult and time-consuming.
7. ASRs will have a significantly enhanced role under the USM and will be regulated by the SFC. An issuer must have an ASR at all times, with any gaps resulting in a suspension of listing (unless the SFC has granted permission for the vacancy). If an issuer subsequently changes its ASR, uncertificated holders who do not already have a USI facility with the new ASR will have to open a facility with them as USI facilities cannot be transferred from one ASR to another.
8. Cost and other implications - The USM will not be cost-neutral to listed companies. ASR fees chargeable to issuers and corporate investors will be a matter of commercial negotiation and not subject to caps (though ASRs are subject to an obligation to keep fees fair and proportionate). The cost and operational implications of an ASR running parallel systems may influence how issuers position their investor communications e.g. by encouraging dematerialisation. Issuers should also update their internal processes and policies to reflect the USM regime, such as faster processing times and new compliance obligations. For example, new types of communications must be sent to uncertificated holders, including an update when there is a change to the holder’s balance.

What key actions should listed companies take?

*Applicable to Key Jurisdiction Issuers and issuers voluntarily participating in the USM

Please get in touch with Clara Choi, Vincent Chan or your usual contact at Slaughter and May if you would like assistance with the USM regime or have any queries.