Authorised Share Capital and Share Transfers Explained

Подписаться 16 тыс.

Просмотров 6 тыс.

50% 1

Authorised Share Capital and Share Transfers Simplified
When you register a new company, the most important decision you will make; is who will be the shareholders and how many shares each shareholder will get. When starting a business, the shareholders are usually the people who finance the business and risk their own money in order to make future profits.
The shareholders therefore own the business while the directors manage the business.
You need to decide how many shares you would like to create. These shares are then issued to the shareholders. The total number of shares that you decided to create is called the authorised share capital and these shares legally belong to the company. They are dormant as they have no rights associated with them until they are issued to the shareholders. The rights such as voting rights or preferential dividend pay-outs are binding only once the shares are issued to the shareholders.
You can choose any number of shares to make up the authorised share capital. We used 1200 shares as our default amount. This is because you can’t own a fraction of a share. This becomes a problem if your authorised share capital is 1000 and you have three equal shareholders all wanting 1/3 ownership. 1000/3 = 333.33 The problem is the .333 of a share, which is not allowed. So, the 1 share will then either have to be jointly held or remain unallocated with the company.
Therefore 1200 is a more practical number as it is devisable by most numbers. For example, if you are three equal shareholders then each shareholder will get 400 shares. 1200/3 = 400 and there are no factions to complicate the transaction.
Just to complicate matters, you do not have to issue all the authorised share capital to the shareholders as some shares can remain unallocated with the company.
The amount of authorised share capital is stated in the Memorandum of Incorporation or MOI which you will receive when you register your company. It describes the number and types of shares and the rights and limitation associated with each class of shares. We use the standard MOI as drafted by CIPC as it is cheaper and already compliant with the Companies Act. It also only has a single class of ordinary shares to simplify matters. There is no need to concern yourself too much with this document when registering your company as it can always be amended at a future date.
The next concept to get to grips with is the number of authorised shares has nothing to with the value of the company. Many of our clients get confused with this as they feel that the more shares they create when establishing the business, the more valuable their company will be.
This is definitely not the case; this is because the value of a company is completely independent of the number of shares. The value of the of a company is based on many factors, but in the end, it boils down on what a willing buyer and a willing seller agree upon and has nothing to do with the number of shares.
Let me give you an example: Let’s assume the company is valued at R1m. To determine the value of each share you must divide the value of the company by the number of issued shares.
For example, let say we have 100 issued shares in total. The value of each share is therefore calculated by dividing the value of the company by the number of issued shares 1,000,000/100 = R 10,000 per share. If the same company now has a 1000 issued shares then the value of each the share would be 1,000,000/1000 = R1,000
So, the value of the company does not change only the value of the shares this is called non par value shares.
There is a lot of share terminology used in the business world such as issuing shares, transferring shares or allotting shares, but in the case of private companies they all follow the same procedures.
Please share this video with a friend:
• Authorised Share Capit...
Visit our Website for all types of business registrations:
www.swiftreg.co.za
Please help us by subscribing to our channel:
ru-vid.com...
Follow us on Facebook:
/ swiftreg-517735934922309

Хобби

Опубликовано:

20 июл 2024

Ссылка:

Скачать:

Готовим ссылку...

Добавить в:

Мой плейлист

Посмотреть позже

Комментарии : 53

@chris.christodoulidis 3 года назад

Beautifully explained Douglas! Building my first startup and I found your video at the perfect time! Thank you

@swiftreg 3 года назад

Glad it was helpful! Good luck with your business venture.

@mereskills2811 3 года назад

Unlike other sites, there was so much clarity in this and really helped me. Thank you!

@swiftreg 3 года назад

You're very welcome!

@samstrover2916 4 года назад

Makes it so much clearer, especially the part about the value of the shares

@swiftreg 4 года назад

Thank you for your positive feedback

@sharoncooke3875 2 года назад

Many thanks Douglas - I now have a clear understanding thanks to you !

@swiftreg 2 года назад

Glad to help

@tangikuu 3 года назад

Thank you very much this really helps!!

@swiftreg 3 года назад

Glad it helped!

@chrisg1610 Год назад

So helpful, thank you for this!

@swiftreg Год назад

You're so welcome!

@millzy696 2 года назад

Thank you Douglas.

@swiftreg 2 года назад

It's a pleasure, glad you enjoyed it.

@lindelwangqeza4056 3 года назад

Beautifully explained

@swiftreg 3 года назад

Thank you so much 🙂

@luwesus9599 2 года назад

Good day Douglas, would you mind explaining the process behind increasing a private company’s authorised share capital.

@swiftreg 2 года назад

Sure no problem, first you have to log onto CIPC and register as a client. Next, you must click on E-services to find the increase share capital link and then just follow the procedure. They will ask you what amount of authorised share capital your company currently has and how many new authorised shares you would like to add. If you get stuck please contact me on info@swiftreg.co.za and I will email you our application form.

@carelvandermerwe3907 4 года назад

Very well explained and helpful

@swiftreg 4 года назад

That was quite a technical video. I am pleased you found it helpful

@carelvandermerwe3907 4 года назад

@@swiftreg I don't think it was too technical for a novice like me. When I listen to it again, I will make notes to remind me of the sequence of the steps before I set up my company through Swiftreg. Thank you.Very valuable

@mbalenhlemndau5285 2 года назад

Afternoon, can the class of shares be changed at a later stage? From ordinary to non par value even after printing the share certificate?

@swiftreg 2 года назад

Hi Mbalenhle, yes they can. However in your case it may not be necessary. If your company was registered with CIPC after 2011 using the standard MOI then all the ordinary shares are already non par value, meaning no conversion is required.

@yanickdjembact Год назад

Hi Douglas! Thank you for this informative session. I have few questions I wanted to find out if you could assist me with 1. Can shares be sold or transferred into offshore entity such as a holding company? After been registered If so how what are the procedures 2. Does your company has attorneys or third parties we could speak to for more understandings on this matter? Thank you

@swiftreg Год назад

Hi Yanick, any transfer of shares is considered a sale. In your case funds would flow from outside the country into the company in South Africa you are investing in. Therefore I would recommend a purchase agreement. South Africa has foreign exchange controls so the transaction will go via the reserve bank. It is important to document this correctly as you would like to create a loan account so that in the future profits can be paid back to you. We don't have an in-house attorney so unfortunately I can't recommend one to assist you with this process. I hope this has helped answer your questions.

@tersiadenyschen778 2 года назад

Hi again, I am hoping you can assist me again. Scenario. The company is registered in the UK and founder shares were issued by the same service provider that registered the company. The directors are all from South Africa. Shares are being sold to a South African Company. Should the share records be updated on the UK side because the company was registered there?

@swiftreg 2 года назад

Hi Tersia, yes as it is a UK company all the company secretarial requirements including the shareholding must maintained according to UK law.

@IshHL 8 месяцев назад

Can a (Pty) Ltd. have both an individual director as well as a holding company director (two separate entities)?

@swiftreg 8 месяцев назад

Hi there, remember shareholders are the owners of the company, while directors are the managers of the company. The directors can only be natural persons (like you and me) while the shareholders can be both natural and legal (juristic) persons like companies or trusts.

@samratgc6987 3 года назад

*Scenario 2 in company B* 6:05 Why does previous shareholder get 250k when the investor purchased from authorized share? Shouldn't all the money go to company???

@swiftreg 3 года назад

Hi Samrat Excellent question! You are correct let me try and explain :) To recap, in this scenario, the company is valued at R1m. The 50% purchase price (R500k) is paid to the company (not the shareholder) according to this specific sales agreement. (Not the best idea, I may point out) The original shareholder's ownership has now been reduced to 50%, but as the payment went to the company; the company got a capital injection of R500k of which he still owns 50%. Therefore he effectively gets R250k increase in valuation of his shares but not the actual cash as that is still sitting in the company. For him to get the money in his personal name he would now have to pay PAYE or dividends tax.

@rowendowman724 7 месяцев назад

Hi @swiftreg, hope you well thanks for the informative video. I started a company with my partner in 2021, I selected 100 shares and it should be split 50/50. The company has been dormant however I now have revenue i would like to direct to the company. Are you able to asst me with the following. 1) What is the process to split the shares from 50/50 to 80/20. How does one do this? 2) How can i increase the shares from 100 shares to 1200 shares. TIA!

@swiftreg 7 месяцев назад

Hi there, yes we can assist you. It is not necessary for you for increase your share capital to 1200 shares. (This can always be done at a later stage if needed) For now, your partner simply has to transfer 30 of his shares to you. You will then have 80 shares and he will have 20. This means that you will own 80% of the company. All the authorized share capital will be issued which simplifies the structure. Please use the following link to print the new share certificates. www.swiftreg.co.za/Swiftreg/products/Share_Certificates.aspx On a side note, I would recommend a shareholders agreement. www.swiftreg.co.za/Swiftreg/products/ShareholdersAgreement.aspx I have made a video on this topic. ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-nxuVTCI-5PQ.htmlsi=qDuKdwDr-igwfd8l Kind Regards Douglas

@molatelo8231 3 года назад

What process does private company follow to issue shares?

@swiftreg 3 года назад

Hi Molatelo, the directors are responsible for issuing the shares. However the shareholders appoint the directors.

@adenirandeborah1712 Год назад

Sir, I really want to break down the definition of shares, what are shares?

@swiftreg 11 месяцев назад

Hi there, as you know a share represent a part of the ownership of a company, there are many types of shares all which have different rights associated with them. This is a big topic so maybe I should make a dedicated video on this topic.

@moinonkonyana33 3 года назад

How much do I need to deposit on the CIPC account inorder to print a share certificate?

@swiftreg 3 года назад

Hi Moi the answer is nothing. This is because CIPC does not offer a shareholder certificate printing service. We at SwiftReg do, so please log on to www.swiftreg.co.za and select the service. The process is very user-friendly. However if you get stuck we will be happy to assist you telephonically on 021 -5954433 during office hours.

@moinonkonyana33 3 года назад

@@swiftreg Okey thank you, will do so. Great help indeed.👌

@michelletransel4859 3 года назад

What is a class A share and a Class B type share?

@swiftreg 3 года назад

Hi Michelle, there are two broad categories of shares namely ordinary shares and preferential shares. They deal mostly with voting rights, preferential dividend pay-outs and repayment priority in the event of bankruptcy. The A and B type shares you refer to are usually ordinary shares and deal with voting rights. The number and types of shares are defined in the MOI of the company.

@Top_5. 2 года назад

And how do Founders shares get transferred??

@swiftreg 2 года назад

Hi Shawn, the correct terminology is the shares get issued to the founders when the company is formed and when founders sell their shares to new shareholders it is called transferring shares. But the process is exactly the same in both scenarios, share certificates get issued, the company register needs to be updated and recorded in the company minutes. It may also be a good idea to draw up a shareholders agreement.

@baremind 2 года назад

Hi Thank you so much for this insightful video! We are in the process of drafting our shareholder's agreement for our start-up and want to know what are the tax implications of transferring your own issued shares to new investors as opposed to allotting new unallocated shares of the company to investors?

@swiftreg 2 года назад

Hi BM This is the great question and it is what I was trying to explain in the video. The difference is, do you want the investor to pay you or the company? I suggest you talk to your accountant on this matter and possibly a lawyer for the shareholders agreement.

@baremind 2 года назад

Thank you for your response @@swiftreg, so this is the conundrum we are trying to figure out. The video mentions that it simplifies matters if all shares are allocated upon registration. However I’d love more clarity if possible. Would it be best to allocate the shares and create a clause in our shareholders agreement that proceeds share sale proceeds are reinvested into the company? Or what would you suggest? Our lawyer has asked that we bear in mind the following: 1. That when you sell your personal shares (shares that have been issued to you), you sell them in your name and not in the company's name, therefore, the proceeds of the sale are your personal proceeds and not those of the company. This means the company does not benefit from the sale unless a specific clause places an obligation on shareholders to invest a certain percentage of the sale proceeds of each transaction into company. 2. On the other hand, when you allot the company's unallocated shares in the company's name as a separate entity to the shareholders, the proceeds of the sale belong to the company. This may be better for the company in the beginning when you are still growing and establishing the company's finances as it will ensure that the proceeds of the sale of shares go back into the company to increase the value of the company and share value. Share holders benefit from dividends. This is my first rodeo so to speak and really want to make the best decision on this so I’d really love to hear your thoughts.

@swiftreg 2 года назад

@@baremind Hi BM the general rule is if the company sell shares it is to raise capital, but if the shareholder sell shares it is to take profit.

@Top_5. 2 года назад

Would it be too much if I would like to have Half a billion authorized shares?

@swiftreg 2 года назад

Hi Shawn, it is a large number and may be a bit impractical with all the zero's especially if you have a private company. It is vital to understand that the amount of authorised shares has nothing to do with the valuation of the company. This is why we settled on 1200 authorised shares. If you have a public company and the intention is to list it on the Stock exchange with millions of shareholders, then that is a different matter. But then you would then have to convert your private company to a public company.

@tersiadenyschen778 2 года назад

I'm not sure if I'm missing any video that provides more information regarding share registers. I hope you do not mind if I ask on the platform regarding share registers. I try to pin down when what information should appear on the share register and when not. The scenario is that eg 2000 ords are issued. The consideration for the 2000 shares is e.g. R20 000 000.00. Should the R20 000 000.00 and the share price of R10 000 reflect on the share register?

@swiftreg 2 года назад

Hi Tersia, my recommendation is to capture all the information in the share register namely; transaction date, number of shares, distinctive numbers, type of share and value of transaction (share price) The share register must included all aspects of the transaction and be backed up by the minutes. This is necessary in order to refer back to and determine any capital gain in the future; so in short, yes the share price should be captured.

@tersiadenyschen778 2 года назад

@@swiftreg Thank you so much. This certainly helps a lot.