What are shares and share classes?

Shares are a units of ownership of a company. A company will issue or allot shares to a person or entity if they wish to allot or transfer a certain percentage or unit of ownership. The shares are the vehicle to allocate ownership in a company in the form of voting power and or profit share.

Unless specified as a different class, it is important to note that shares issued in the “new” Companies Act are all “No Par Value”. This means, that the shares are not given a certain monetary value when they are purchased or transferred. The value will in most cases be NIL, or will need to be determined at the point of the shares transaction. This will largely depend on a valuation of the company’s financial standpoint.

Issued shares reflect the “stake” of a company and can be distinguished into different classes (groups) of shares that have different qualities. These groups can be distinguished by:

  • The level of voting power they hold e.g (none, or equal to the percentage ownership, or something in between)
  • The preferences that they get paid Dividends (First, Last or only if certain parameters are met)
  • The type of shareholders that can be considered
  • and many other factors, depending on the company

The rules and details of your share classes must be lodged with CIPC as it will be a change to the Memorandum of Incorporation (MOI). These classes will then be reflected as a public record and all the rules and regulations will need to be detailed in the shareholders’ agreement as well.

Any shareholders’ agreement must be in agreement with the Company’s Act as well as the existing MOI on record.

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