Corporate finance Flashcards
Shares and securities
s1:
Shares: one of the units into which the proprietary interests in a profit company is divided
Securities: any shares, debentures or other instruments, irrespective of their form or title, issued or authorised to be issued by a profit company
s35:
Shares are an intangible movable property
Shares Meaning according to the court
Bundle of personal rights against the company, not co-owners of the company’s assets, not only rights, but also obligations. Shareholders are only allowed to share in a company’s assets at liquidation Profits if dividend is declared
par value shares
-Shares no longer have nominal (par) value in 2008 Act
-Exceptions for existing companies with issued par value shares: can be converted but not required- Special resolution by shareholders + subsequent decision at a shareholders meeting
-May not issue unissued authorized par value shares until they have been converted into non-par value shares
Authorised vs Issued shares
Authorised:
-Shares have no rights prior to issue - S 35(4)
-S 36(1)(a): A company’s MOI must set out the classes of shares, the number of shares of each class, that the company is authorised to issue
Amended provision-
Special resolution of shareholders
Board (unless MOI provides otherwise) - S36(2)
Rights of shareholders
1) Right to vote
-General voting right - S 37(2)
-Irrevocable right to vote - S 37(3)
-Ordinary resolution = 50%
-Special resolution = 75%
2) Right to information e.g. annual meeting reports
3) Right to share in profits distributes (declared dividend)
4) Right to share in surplus at liquidation
Ordinary Shares
-Dividends only after preference dividends
-Dividends not at a fixed rate
-Surplus at liquidation after preference shareholders’ capital has been repaid.
-Usually greatest amount of voting rights
Preference Shares
-Receive dividend before ordinary shareholders
-Cumulative
-Participating preference shares= Can in addition to preference dividends also share with ordinary shareholders in surplus of distributable profits
Blank shares vs unclassified
Blank
Shares in a specific class whose preference, rights, limitations or other terms of the class have not yet been specified.
Unclassified:
-Shares that do not yet fall into a specific class
-unissued shares
Issue of shares
S 38(1): Board: resolve to issue shares but only within the classes, and to the extent, that the shares have been authorised in the MOI
S 41(1): Special circumstances: Issue of shares must be authorised by shareholders by special resolution if shares are issued
Non authorised shares
If the company issues shares which are 1) not authorised, or 2) more shares than authorised in a class, then: Rectification
by:
-By Special Resolution
-Only if they are authorised in the MOI to increase the amount of authorised shares
-Within 60 days of the shares being issued
OR
The issue of shares is void
-Issue price is paid back to the shareholders/company with interest
-Share certificate and entry in register is void
-Directors are possibly liable for damages suffered by the company (S77)
Adequate authorisation
(S40)
Board must determine-
-What consideration for the shares will be; and
-What class of share are we dealing with and what rights are linked to it (terms on which the shares will be issued)
-Inadequate consideration will result in the directors being personally liable
Once consideration is received-
1) Issue shares
2) Enter the name of the shareholder in the securities register
Debentures
S43 applies to “debt instruments”:
-Directors may authorise issue debentures unless MOI provides otherwise
-Directors must determine whether debentures are secured or unsecured
Shareholders and nominees
S50- securities register
-Establish a register of its issued securities in the prescribed form; and
-Maintain its securities register in accordance with the prescribed standards
S1 Securities Services Act
When someone doesn’t want to be known as the shareholder
Nominee= a person who acts as a registered holder of securities on behalf of another person
Holder=
1) Receive or participate in any distribution in respect of the company’s securities
2) Exercise or cause to be exercised, in the ordinary course, any or all of the rights attaching to the company’s securities; or
3) Dispose or direct the disposition of the company’s securities, or any part of a distribution in respect of the securities.
S56(3)
All public companies must disclose the names of beneficiaries as well as the scope of their interest
Certified shares
paper based
S 51(1)(a)
1) Name of the company who issued the shares
2) Name of the person to whom the shares were issued
3) Number of and class of shares issued
4) Any restriction on transfer of security
5) Must be signed by 2 persons authorised by the board
S 51(1)(c)
The certificate acts as evidence of the holding of the securities
Uncertified shares
Not paper based
Securities that are not evidence by a certificate or written instrument and are transferable by entry without a written instrument
Central Securities Depository (CSD):
SA= STRATE
-Persons administrating securities and accepted as participants by STRATE
Currently 6 (5 are banks and Computershare)
-CSD or member must hold information as required regarding certificated shares
