Dematerialisatin of stock certificates in Japan took a major step forward yesterday with the news that the Legislative Council advisory committee had published a fresh draft of the necessary revisions to the Commercial Code.
Unlike the interim proposal announced by the Financial Service Agency in March this year, which allowed listed companies to chose whether or not to dematerialise, the new draft makes dematerialisation obligatory for listed companies within five years. required the listed companies to dematerialise stock certificates within the next five years by compulsion.
If the draft is agreed as drafted in September, it will be submitted to the Diet in fall 2003 and may become effective as early as April 2004. At that point, only unlisted companies will be allowed to continue issuing physical stock certificates.
A spokesman for Mizuho Corporate Bank in Tokyo points out that, since Foreign Ownership Limitation (FOL) stocks are kept in physical form, custodian banks will have to work with both the Japan Securities Dealers Association and JASDEC to work out how to manage the change.