Digitisation Danger: “Fatal Flaws” Face Shareholders in UK Government-approved Recommendations

July 24, 2025

By Jack Grogan-Fenn

UK investor organisation ShareSoc has warned that recommendations made by the Digitisation Taskforce have “fatal flaws” for investors which could detrimentally impact the rights of shareholders.

ShareSoc lambasted the final report from the government’s Digitisation Taskforce released last week, branding its recommendations as a “betrayal of investors” that “puts shareholder democracy at risk”.  

The organisation argued that the attempted enhancements “fall short of the mark”, and that the taskforce’s proposals contain “fatal flaws that will strip essential rights from millions of investors and will erode their ability to hold company boards to account”.  

"This report fails to address some of the Digitisation Taskforce’s key objectives and is a significant blow to investors," said Mark Northway, Policy Director at ShareSoc. "The proposals in the final report show a clear bias in favour of issuers and financial institutions and threaten to further silence the voice of the investor."

The UK Digitisation Taskforce published its recommendations as part of a report which aimed to push towards a fully digitised UK shareholding framework. The government aims to achieve this by eliminating the use of paper share certificates and improving the UK’s intermediated system of share ownership.

The Digitisation Taskforce made 16 recommendations under three overarching categories. The government has already accepted all the recommendations. A technical group will also be set up to their implementation.

These suggestions included replacing physical share registers with digital ones by the end of 2027, as well as substituting physical share certificates with entries on these digitised registers.

ShareSoc stated that the recommendation would force all UK investors into a 'nominee' system where their shares held by financial institutions on their behalf.

The organisation noted that this has been “heavily criticised” for “disenfranchising” individual shareholders by ignoring the stewardship rights associated with share ownership. This also risks weakening the ability to directly engage with investee companies.

While ShareSoc acknowledged that some of the report’s recommendations offer an improvement over the current broken nominee system, it stated that these are “overshadowed by the fundamental and damaging flaws at the report’s core”.

ShareSoc spotlighted two “fundamental failures” in the report, warning that these place shareholder activism “at risk” and could financially incentivise investors to opt out of their ability to access rights associated with shares.

The Digitisation Taskforce’s report proposes a “Shareholder Bill of Rights” which sets out a baseline service level for intermediaries. ShareSoc stated that this fails to address key shareholder rights including the rights to inspect and receive copies of the shareholder register and to submit statements and requisitions at AGMs.

The recommendations also risk restricting investors for accessing the email addresses of fellow shareholders. This could handicap communication between shareholders on key stewardship matters including excessive executive pay, poor operational management or environmental and social failings, removing a key benefit of digitisation.

“It is particularly disappointing that the taskforce has chosen to prevent investors from leveraging digital technology to communicate between themselves by email,” said Northway. “Without the threat of shareholder activism, many of the corporate governance improvements of the past twenty years would not have happened”   

ShareSoc also criticised the report’s permitting intermediaries to offer a level of service with restricted access to shareholder rights or no access at all at a lower cost. The organisation cautioned that this creates a financial incentive for investors to opt out from the ability to access rights associated with shares.

It also adds the risk that nominees could introduce sizeable charges for the baseline service, essentially penalising responsible shareholders.

ShareSoc stated that taskforce has “placed the interests of issuers and financial intermediaries above those of investors”, with Northway adding that "this is a charter for boards to become unaccountable to shareholders”.

Northway said that the report "fails to protect key shareholder rights and introduces dangerous financial incentives which will further erode investor engagement”.

ShareSoc has urged the Treasury and government to “override the damaging elements of the report’s recommendations” and collaborate with investor organisations to “ensure a truly modern system that empowers all shareholders, rather than silencing them”.

However, not all reaction to the Digitisation Taskforce report has been negative. Financial services solutions provider Computershare welcomed it as a “bold step into the digital age” as the UK looks to “become a global leader in digital finance infrastructure”.

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