According to the Exchange Control Regulations, all foreign shareholders of South African companies must be endorsed by an “authorised dealer”.
According to the Currency and Exchanges Manual for Authorised Dealers (13 December 2019) an authorised dealer can be defined as ” an authorised dealer that deals with foreign transactions authorised by the Treasury to deal in foreign exchange.” The manual further defines CMA as “the Common Monetary Area, which consists of Lesotho, Namibia, South Africa and Swaziland.”
This endorsement application process is handled by the companies business banker, “authorised dealer”. The approval of the endorsement is based on the requirements outlined by the reserve bank and the specific dealer (some have more stringent regulations than others). Once approved the original share certificate will receive a stamp at the branch and will hold the unique reference number from the reserve bank. This reference number will be used to authorize any funds that travel in or out of RSA as shareholder loans and or dividends. Any foreignly held shares that do not reflect the endorsement will not carry the ownership of the company until they have been recognized by the reserve bank in this way. South African companies have 30 days from the allotment date to get foreign shares endorsed.
South Africans who are residing outside of the region will need to formally emigrate and be declared as non-resident. Although the South Africans living abroad retain their citzenship, shareholders will not be considered local by the reserve bank if they do not have a valid South African residential address. Consquently their shares must be endorsed and their emigration status formalized (declaration on form MP336(b)).
If there is any South African interest in the foreign entity that is the sole or partial owner of a local company this will also need to be recognized due to the controls around external looping structures. Although the reserve bank has eased this slightly, there is still a restriction to South Africans owning equity or having voting rights in a foreign parent of a South African entity of up to 40% from 30 October 2019. If the ownership exceeds 40% the reserve bank will decline the endorsement. The shareholding will not be valid and funds will not be allowed to arrive or leave RSA as shareholder loans or dividends.