The Securities Board of Nepal (Sebon) has suspended trading in the shares of 69 companies listed on the Nepal Stock Exchange (Nepse) as their share certificates have not been converted into electronic format.

Sebon has made paperless share certificates mandatory from Friday, and it has barred trading of the shares of companies who have not abided by its directive. According to CDS and Clearing, a subsidiary of Nepse, only 170 companies out of the 239 listed on Nepse have dematerialised their shares. 

Dev Prakash Gupta, chief executive officer of CDS and Clearing, said they had made demat transactions mandatory since January 15. “Many of the companies that have not dematerialised their shares are in the process merger or acquisition,” he said. 

According to CDS and Clearing records, a total of 299.4 million shares of 170 companies have been transformed into electronic version. “An estimated 1 billion shares including promoter shares remain to be dematerialised,” Gupta said.

Commercial and development banks had been told to dematerialise their shares much earlier. The rule has now been extended to all the listed companies, Gupta added.

Sebon launched demat share transactions only on April 15, 2014 although Central Depository System Bylaws 2012 had stated that the demat system would be implemented for all the listed companies within six months of the law being passed. 

CDS and Clearing made paperless transactions mandatory for commercial and development banks in August last year.

 The rule also applies to companies belonging to the manufacturing, trading, hydropower and insurance sectors, as per CDS. More than 80 percent of the 

listed companies are banks and financial institutions.

There are 50 clearing members and 48 depository participants operating in the domestic area, CDS and Clearing said. While the depository participants are required to open demat accounts for investors, the registrars and transfer agents are responsible for verifying the signature when an ownership transfer is made.

Gupta said that clearing of share transaction would become easier with the enforcement of paperless transactions. While it used to take more than a week for clearing physical share transactions, the complete transaction process will now take not more than three days, said CDS and Clearing. 

“Now, in three days from the date of transaction (T plus 3), investors will receive the money along with the ownership transfer of the traded shares,” said Gupta, adding that the step would facilitate the plan to make stock trading fully automated.