A digital shareholder register is a list of owners of a company’s shares, updated on an ongoing basis, and directly available to all relevant parties.
The main purpose of a shareholder register has always been to provide a clear record of share owners and beneficiaries. This record is updated whenever shares change hands, or used as the denominator for dividend payouts, or voting right distribution. You could say it is the ‘source of truth’ for everything that has to do with a company’s shares.
By using blockchain technology firms can register their shareholder registry on the blockchain. We call this tokenization. When creating a digital blockchain-based share registry, the records of share ownership become automatable, and reconcilable by businesses and shareholders that rely on that data.
For example, developers of a digital share registry, can make sure that the rights and obligations of shareholders are programmed into the confidential smart contract that governs the shares. In other words, the digital shares are enhanced with legal logic, guaranteeing that the shareholders’ rights and obligations (as spelled out in the shareholder agreements and articles of association) are met, before any change can be notarized onto the blockchain.
Whenever the company, or a shareholder, decides to share their data with an integration partner, such as another business (i.e a cap table management firm, chamber of commerce, UBO register, et cetera) or a financial institution (i.e. security token exchange, bank, or other), the integration partner can be sure that it is looking at the most recent version of the shareholder registry. After all, any updates made are automatically reconciled across all the firms that rely on that data. Always up-to-date.
Once a digital share registry is created, and enhanced with legal logic, procedures like dividend payments and executing voting rights can be automated and supported by integration partners. Saving both company and shareholders time and effort, while keeping the data reconciled.
Firm24 and LTO Network
Interested to learn more? We are working on this use case together with Firm24 and LTO Network to tokenize equity for thousands of Dutch companies. Coindesk coverage.