Book-Entry Shares in Pakistan: SECP’s New Rules

Pakistan’s Securities and Exchange Commission (SECP) has issued a new statutory notification that directly affects unlisted companies and their physical shares. Specifically, S.R.O.328(I)/2026, dated 19 February 2026, now requires all unlisted companies with share capital to convert physical shares into book-entry form. As a result, every share-related transaction must go through the Central Depository System (CDS). Here is what compliance and legal teams need to understand.

Why has Pakistan introduced this requirement?

The SECP issued this notification under Section 510 of the Companies Act, 2017. It also relies on Regulation 44 of the Companies Regulations, 2024. Furthermore, it builds on the earlier notification S.R.O. No. 246(I)/2025, dated 27 February 2025.

The core objective is straightforward. Pakistan wants to eliminate reliance on physical share certificates. Instead, all share-related activity must move to a centralised electronic system. Consequently, this brings the country closer to international standards of corporate transparency. It also reduces the risk of fraudulent transfers and inconsistent shareholder records.

Which transactions does the notification cover?

The scope is broad. In particular, it covers any transaction involving the transfer of shares or the allotment of shares. This includes bonus shares, right issues, and shares issued otherwise than by way of rights. Additionally, the buy-back of shares falls under this requirement. The notification collectively refers to these as “share related transactions”.

Therefore, companies must replace all physical shares with book-entry form within thirty (30) days from the notification date. They must complete this step before undertaking any such transaction.

What steps must unlisted companies take?

Compliance involves several layers. Before reporting any share-related transaction to the Registrar, companies must first take the following actions:

• Apply to the Central Depository for CDS Eligible Security status.
• Follow the prescribed procedure to replace physical shares.
• Ensure all company shares enter the Central Depository System.

Moreover, every party involved must maintain their shares in book-entry form. This applies to allottees, transferors, transferees, and any other concerned person. In practice, they must complete this conversion before subscribing to rights or bonus issues. Similarly, they must do so before participating in buy-backs or accepting any transfer.

All unlisted companies must also comply with all applicable regulations and guidelines. The Commission or the Central Depository may issue these from time to time. As a result, companies should monitor updates regularly.

What additional documents must companies file?

Once companies replace physical shares, they must attach specific documents to their filings. The notification provides a clear framework for each form type.

• For allotment of shares, companies must include a statement of allotment or CDS list of allottees. They file this alongside Form-3 (Return of allotment of shares and change in shareholding or membership or voting rights).
• For transfer of shares, the required attachment is a statement of transfer or CDS Account Activity report. Companies also file this with Form-3.

When submitting Form-A (Annual return), companies must provide a complete list of shareholding. Alternatively, they can submit a CDS list of beneficial owners’ report. In addition, they should include a complete CDS list of share transfers where applicable.

For buy-back of shares, companies file Form-27 (Final return for buy-back of shares of unlisted companies). They must attach a statement of buy-back or CDS Account balance statement. This document must show where the buy-back shares are parked.

Who provides these documents?

The Central Depository holds responsibility for supplying the latest versions of all required statements. Consequently, companies can rely on the Depository to support their compliance under Regulation 44 of the Companies Regulations.

How long must companies retain cancelled certificates?

After replacement, companies must keep cancelled physical share certificates for at least ten years. The same applies to the Form for transfer of shares. However, this period extends under certain conditions.

For instance, if the Commission, a court, or another competent authority directs a longer retention, companies must comply. Similarly, if documents relate to pending proceedings, they must keep them until the matter concludes. This applies to any proceedings before a court or authority that the Commission or company knows about.

Can companies request an exemption?

Yes, but only under specific circumstances. Sometimes an unlisted company or concerned person cannot proceed with the replacement. This may happen due to a shareholding dispute, pending litigation, or any other reasonable cause.

In such cases, the company or concerned person must report the situation to the Commission. Once the Commissioner (LRD) receives this report, they may relax the requirements as appropriate. Therefore, proactive communication with the regulator is essential.

What penalties apply for non-compliance?

The notification addresses enforcement clearly. Any person who contravenes or fails to comply faces a penalty under sub-section (2) of Section 510 of the Companies Act, 2017. Given the breadth of this requirement, companies should treat compliance as a priority rather than an option.

Who received this notification?

The SECP distributed this notification widely. Recipients include Chief Executive Officers of all companies and the Institute of Chartered Accountants of Pakistan. Additionally, the Institute of Cost and Management Accountants of Pakistan and the Institute of Corporate Secretaries of Pakistan received copies. The Federation of Pakistan Chambers of Commerce and Industry and the Overseas Investors Chamber of Commerce and Industry also feature on the list. Finally, all Company Registration Offices received the notification, and the SECP posted it on their official website.

What’s next?

Managing statutory notifications in Pakistan requires detailed planning and full legal awareness. For more insights into processes in other jurisdictions, explore our article Euro Adoption in Bulgaria.

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