Security token platform Dusk Network says it will tokenize shares in the Netherlands and the wider Benelux region for thousands of small and medium-sized enterprises (SMEs).
The Amsterdam-based company has announced that it has partnered with Firm24, one of the largest shareholder registries in the region, and will use blockchain for an automated infrastructure capable of introducing market efficiency and transforming how non-publicly listed shares are traded.
LTO Network, Blockchain infrastructure provider, will also provide a Dusk-Firm24 interface to link off-chain activities to the blockchain system and manage procedures that require notary approval.
The business leader and director of Dusk Network, Jelle Pol, said that there were clear advantages in moving registers and operations of shareholders to a distributed ledger. Tokenisation, for example, creates a new secondary market for investors to trade shares and having all the information in one place makes it easier for businesses to monitor who owns their shares.
“Across the board, we’re definitely seeing these efficiency gains and especially also on the corporate side, the amount of data that they’re able to leverage additionally just opens up more custom-tailored services,” Pol explained.
Shareholder registries are essentially records of all individuals and entities owning shares in a particular company, and are to be continuously updated. That can be a laborious process, however, and notaries in the EU were required to sign off whenever records of shareholdings changed.
Although the process has improved significantly in recent years, with notaries placed in a more supervisory position, there are still recurring issues in keeping track of who owns the equity of companies. For smaller companies that are not listed publicly, it can be nearly impossible to pay out dividends and organize shareholder votes.
Partnership To Address Recurring Issues
This is an issue that Firm24, which has over 35k small and medium-sized enterprises from Belgium, the Netherlands and Luxembourg (known as the Benelux region), hopes to address with the new partnership.
Since many smaller firms are not publicly listed on exchanges, the trades taking place in the secondary market occur privately. The management of the cap table breaks down because nobody, not even the issuer, is made aware of those trades. Even when recorded, they typically use a different notary that makes it difficult to create and maintain a single source of truth.
“For almost a decade we have been bringing automation to everything related to the company incorporation procedure,” said Firm24 CEO Martijn Migchelsen. “Thanks to Dusk and LTO we are now ready to deploy our Tokenized Share Register, automating corporate actions, and lay the foundation to connect our customers directly with the world of alternative finance.”
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