Unit 13 - Corporate finance Flashcards
Discuss par value shares versus no-par value shares.
- Par value was an indicator for the minimum value a company would get for issuing its shares.
- Under the current Companies Act, shares can no longer have a nominal or par value.
Discuss the conversion of unissued PV shares.
- Pre-existing companies that, immediately prior to effective date, had authorised but unissued (or re-acquired) PV shares.
- May not be issued until they have been converted to no par value shares.
- Board can convert shares by filing notice of that resolution anytime after effective date.
Discuss regulation 31(3) versus regulation 31(5).
- Regulation 31(3) deals with the instance in which all the shares of a class are unissued.
- This is different to regulation 31(5), where you have perhaps issued half of the par value shares of a certain class, and the other half remain unused.
- However, if you reacquire all par value shares in a class, it doesn’t matter that issued some of them before, and regulation 31(3) applies, meaning you cannot issue them.
What are the issues regarding PV shares ?
It essentially allows companies to cheat because the minimum value for which the shares might end up being sold for, may be higher than their actual true value.
Discuss the process of converting issued PV shares to no-PV shares.
- The board can propose the conversion at any time, ensuring it doesn’t primarily aim to evade tax laws.
- A report detailing the proposal must be created, including necessary information.
- The resolution and report must be shared with shareholders before the meeting.
- Both documents must be filed with SARS and the CIPC.
- The resolution is adopted if it receives special resolutions from each class of shareholders and further approval at a shareholders’ meeting.
Who may approach the court ?
- The company.
- An affected shareholder.
- CIPC or SARS.
What are the consequences if the court decides that the proposed resolution is compliant ?
- Can be put to vote.
- Sharehoders can still vote against it.
What are the consequences if the court decides that the proposed resolution is non-compliant ?
Company cannot put the proposed resolution to vote, unless the court order provides otherwise.
Briefly discuss the issuing of shares.
- Company can only issue the number of authorised shares as per the MOI or as determined by the board.
- Where unauthorised shares have been issued, may be ratified within 60 business days of issuing the shares, otherwise a nullity.
- A person acquires the share rights when name is entered into the securities register.
Discuss a pro rata offer.
Shareholder in private company has the right to be offered; and subscribe (in a reasonable time), to shares issued or to be issued equal to that person’s general voting power in the company.
To which issued shares are these rights not applicable ?
Pro rata offer.
- Options.
- Conversion rights.
- As consideration.
- As capitalization shares.
- During business rescue.
Discuss the consideration for shares.
- Shares can ony be issued as capitalization shares in terms of section 47; and for adequate consideration as determined by the board; or conversion rights that are associated with previously issued securities of the company.
- The adequacy of the consideration as determined by the board can only be challenged in terms of section 76 read with section 77(2).
What are the two common classes of shares ?
- Ordinary shares.
- Preference shares.
What are the steps to transfer shares ?
- There must be an agreement to transfer.
- There ought to be execution of the deed of transfer.
- There must be a registration of transfer.
Discuss the consequences if the third step is not complied with.
Transfer of shares.
- Not registered, and thus, with unregistered transfers, the buyer becomes a “beneficial owner”.
- Whilst the seller remains the “registered shareholder” (nominee or agent) of the buyer.
