Articles on: Shares

What are shares and share classes?

Estimated reading time: 2 minutes and 30 seconds

Learn the difference between authorised and issued shares, how share classes work, and what South African companies must know to stay compliant with the Companies Act.

What Are Shares?



Shares are units of ownership in a company. If you own a share, you own a portion of the company — and with that come specific rights. These typically include the right to vote on important company decisions, the right to share in company profits through dividends, and the right to a portion of assets if the company is liquidated.

The extent of these rights can vary depending on the type of share class. A person who holds shares is known as a shareholder and is legally recognised as one of the company’s owners.

Par Value vs No Par Value Shares



Under the Companies Act 71 of 2008, most companies issue no par value shares — meaning the shares have no fixed nominal value. The value is instead determined at the time of a transaction, often based on the company’s current financial position.

The old Companies Act 61 of 1973 allowed for par value shares, where each share had a fixed face value (e.g. R1 per share). While the current Act still permits par value shares, they are less common and typically require special provisions in the company’s Memorandum of Incorporation (MOI).

If a company wishes to convert from par value to no par value shares (or vice versa), it must amend its share structure accordingly.

Authorised Shares vs Issued Shares



Authorised shares refer to the maximum number of shares a company is allowed to issue, as set out in its MOI. These shares are not all in circulation — they simply define the company’s capacity to issue equity.

Issued shares are the portion of authorised shares that have actually been allotted or transferred to shareholders. Issued shares determine the actual ownership and voting structure of the company.

For example, a company may be authorised to issue 1,000 shares, but may only have issued 100 to shareholders. The rest remain unissued until the company decides to allocate more.

Issuing Shares



When shares are issued or transferred, certain documents must be prepared to formalise the transaction. These include:

Resolutions forms authorising the issue of shares

Transfer forms authorising the transfer of shares

Updated company registers to reflect changes in ownership

Share certificates issued to each shareholder as proof of ownership

Every share transaction, whether it involves a new issue, a transfer between shareholders, or a conversion of share class, must be backed by the correct documentation. These documents must be signed, dated, and securely stored for legal and compliance purposes.

Maintaining accurate records is not just good governance, it’s a legal requirement under the Companies Act. In the case of an audit, sale, or legal dispute, your share history must be clear and up to date.

What Are Share Classes?



Not all shares are created equal. A company can create different classes of shares, each with its own rights and restrictions. These differences must be recorded in the MOI and reflected in the company’s records at CIPC.

Common variations between share classes include:

Voting rights (e.g. full votes, limited votes, or no votes)

Dividend preferences (e.g. preference shares that get paid first)

Ownership restrictions (e.g. reserved for founders or staff)

Liquidation rights (e.g. who gets paid first if the company is liquidated)

The MOI must clearly outline the rights attached to each share class, and any changes to share class rules must be submitted to the CIPC for approval.

Why Share Classes Matter



Having different classes of shares allows a company to:

Attract different types of investors

Protect control in the hands of founders

Offer incentives to employees without diluting key decision-making rights

Structure financial returns in a way that aligns with business goals

Share classes are especially useful in startups, partnerships, and businesses with multiple stakeholders who require different levels of involvement or return.

How InfoDocs Helps



With InfoDocs, managing share structures and classes is simple. The platform makes it easy to view, issue, transfer, and track shareholding, all in one place, and ensures that any changes to your share classes are correctly reflected and updated automatically in your company registers.

Get started with InfoDocs today.

Updated on: 17/05/2025

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