A share is incorporeal moveable property and is a measure of a shareholders’ interest in a company. A share is defined in the Companies Act No. 71 of 2008 (“New Act“) as one of the units into which the proprietary interest in a profit company is divided.
In Borland’s Trustee v Steel Brothers and Company Ltd (1901) 1 Ch 279 the court described a share as follows “an interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se.” In terms of the Companies Act No. 61 of 1973, the share capital of a company may be divided into shares having a par value or no par value, provided that all the ordinary shares or preference shares consist of either one or the other but not both.
The New Act preserves the requirement of an authorized share capital to be stated in the Memorandum of Incorporation. The New Act abolishes par value as a concept in share capital.
All shares issued by companies in terms of the New Act will be no par value shares. A pre-existing company may not authorize any new par value shares, or shares having a nominal value, on or after the effective date. Existing par value shares issued prior to the effective date of the 2008 Act must be converted to shares having no par value within five years of the effective date.
The board of a company may resolve to issue shares of the company at any time, but only within the classes, and to the extent, that the shares have been authorized by or in terms of the company’s Memorandum of Incorporation.
10 March 2011