Directors and Shareholders

Are directors personally liable for company debts?

A director is not personally liable for company debts. Should the company face a situation where the creditors are suing them for outstanding debt and the company cannot afford to pay the outstanding amount of debt the company assets are then at risk not the personal assets of the director(s). If an asset is bought under the name of the company (car, house, laptop etc) this will then be classified as the company’s assets and not the personal assets of the director and this will also be at risk in this situation.

What is the difference between a director and shareholder?

When a company is formed it has to have at least one director and one shareholder within the company. Without the two a company cannot be successfully registered. Although the role of the director and shareholder are important in a company the roles of the two are different. The difference between a director and shareholder are that directors manage the day to day operations of a company and a shareholder owns the company by the shares that the shareholder has. CIPC only keeps record of shareholders on a company that was registered before the 1st May 2011.

How do I change directors on CIPC?

To do director changes on a company using CIPC requires some paperwork. You will firstly need to ensure that your annual returns are up to date with CIPC otherwise you will not be able to do the changes. You will then log onto CIPC and then do the changes on their website and then upload the supporting documents in order for the change to be completed. The supporting documents include the Digital lodgment that gets sent from CIPC (this document needs to be signed by the directors); the certified IDs of all the directors, the minutes and resolution stating what changes are to be done.  

All these documents are required to be uploaded on CIPC in order for the director change to be completed. For some people this might be daunting and time consuming, that is where a third party company that specializes in this changes (like SwiftReg) can make this process easier for you. All the tedious paperwork gets cut out and you are in constant communication with the process of your change.

Can a shareholder and director be the same person?

Should a shareholder wish to be a director or a director wish to be a shareholder this can be possible. It does not mean that a person is a director that they can’t be a shareholder on the same company also. Should a director want to be a shareholder also, the director of the company will be issued with a share certificate to indicate that they are the shareholder of the company and it will indicate the number of shares they own in the company.

Should a shareholder wish to be a director they will be added to the company’s registration document indicating that they are now a director of the company and it will reflect on the records of CIPC that they are a director of the company.

How many directors can one company have?

The company has to have a minimum of one director in order for the company to be successfully registered on the registrar (CIPC) database. The maximum number of directors a company can have is unlimited as it all depends on what was initially decided amongst all those involved in the company. This requirement though is only for a Pty (Ltd) company. The number of directors does vary depending on the type of company you wish to register as each type of company (Inc, NPC etc) has a different amount of directors needed in order to be registered.

Can a company be a shareholder?

Yes a company can be a shareholder of another company. This is called a Juristic Shareholder. The company that is a juristic shareholder will own the company that they are a juristic shareholder of. In order for a company to be a juristic shareholder the company needs to be registered with CIPC and have a registration number.

The company wanting a juristic shareholder cannot be a juristic shareholder of the company so for example if a company’s name is ABC Traders, ABC traders cannot be a juristic shareholder of ABC Traders. Another company with a different registration number can only be added as a juristic shareholder. A trust with a trust number can also be added as a juristic shareholder to a company.

What is the difference between par value and non par value shares?

In short par value shares have a value per share whereas non par value shares do not have a value. When a Pty (Ltd) company gets registered and share certificates were issued to the shareholders par value shares were issued. Since the new companies act that took place in 2011 this is not the case anymore.

When a Pty (Ltd) company gets registered now it is non par value shares that get issued. Value gets added to the amount of shares that a shareholder has by determining the value of the company as a whole and then determining from that amount the value of the shares that the  shareholder has and how much the shares are worth.

How do I transfer shares between shareholders?

This process is called a share transfer and is basically taking shares from one shareholder and giving it to another. You can give shares to a brand new shareholder or to an existing shareholder. When doing a share transfer the new or existing shareholder will get issued with a new share certificate depending on the change. For example if you have 2 shareholders with 600 shares each and one of the existing shareholder wants to have 800 shares. 200 shares will get transferred from the one shareholder to the other. One shareholder will get a new share certificate with 400 shares stated on there and the previous share certificate that they previously had with 600 shares will get cancelled.

The other shareholder will keep their 600 shares share certificate as that certificate doesn’t get cancelled as no shares were taken from that share certificate. The shareholder however will get issued with another share certificate of 200 shares that will add to the amount of 800 shares. To ensure that the transfer gets done appropriately and correct a third party company like SwiftReg or an accountant can assist with it. SwiftReg has a software called ShareVault that makes the process easier with a drag and drop option.

What is a share register?

A share register is a document that keeps a record of all share changes that took place within the company. It will also state what share certificate numbers were cancelled and the date it was cancelled and the new share certificates were issued. This document is important for a company to have as CIPC does not keep track of what share change gets done only what director change gets done.

This also helps you stay up to date with who is the current shareholder of the company. ShareVault (offered by SwiftReg) keeps this document updated automatically when a share change gets done and it available whenever it is needed.

What is the difference between authorized shares and issued shares?

The authorized shares of a company refers to the number of shares authorized by CIPC that a company is allowed to use (issue). This is usually stipulated on the company MOI document (COR 15.1A) and the amount is captured on the CIPC website when registering a company. Issued shares are the total amount of shares that are issued and distributed amongst the shareholders. The issued shares are usually summed up by calculating the amount of shares that are on the share certificates of the company.

Can a minor (under 18) be a director or a shareholder of a company?

A minor can be a shareholder of the company however it is not advisable as it could lead to complications with signing important paperwork or making important decisions for the company as well as at the bank with opening a bank account or making financial decisions where all shareholders needs to sign. A director of a company has to be 18 in order to be a director on the company as this is a requirement from CIPC.

What is the difference between a COR 14.3 and a COR 39?

A COR 14.3 document is a document from CIPC that is received when a company is successfully registered and a COR 39 document is a document received when a director change is successfully completed by CIPC. When a director change is completed and a COR 39 document is received the director of the company needs to take both the COR 14.3 and COR 39 document accompanied with all the other documentation received from CIPC to open a business bank account or to update the details of the director(s) of the company at the bank.

What is a consolidated share certificate?

When a share transfer is done from one shareholder to another and more than one share certificate is issued and the shareholder has more than one share certificate and they just want one share certificate, a share consolidation can be done. A share consolidation is basically cancelling all the other share certificates and issuing just one share certificate with the total amount of shares.

What happens is the other share certificate of the shareholder gets cancelled and a new share certificate gets issued with the total amount of shares on the one share certificate. So instead of having 3 share certificates with 100 shares on each share certificate a new share certificate will get issued with 300 shares stated on it and the previous 3 share certificates will get cancelled.

Can a share certificate expire?

A share certificate is not like a Tax Clearance or BEE affidavit that needs to get renewed yearly or in danger of having it expire. A share certificate cannot expire but it can be cancelled. A share certificate gets cancelled when a share change gets agreed upon and completed and shares are transferred from one shareholder to another. So basically a share certificate is valid until an agreement is made for shares to be transferred within the company.

Can a foreigner be a director or shareholder on a South African company?

A foreigner can be a director in a South African company however the address of the director needs to be a South African address. This is not the same for a shareholder; the address of a shareholder does not have to be a South African address. It can be an address from oversees.

A director needs to have a South African address as they run the day to day operations of the company and cannot run the day to day operations of the company from out of the country. However a shareholder can own a company but not be in the same country as the company.

What is the minutes and resolution document that is needed in order to remove or appoint directors?

The minutes and resolution document that is needed in order to change directors stipulates what changes are being done. So if a director is resigning it will stipulate the name and surname of the director as well as their ID number and then state that they will be resigning or they are being appointed to the company.

The minutes and resolution needs to be signed by the directors and also needs to be on the company letterhead (name and registration number of the company on top of the page). This document is to indicate that all directors agree to the changes and that a meeting was held to effect these changes. The date the meeting was held also needs to be on the minutes and resolution.

What is the difference between directors and members?

People tend to get the two terms confused as they are not familiar with the new company’s act that was brought into effective in the year 2011. Directors are usually found on a Pty (Ltd) company and members are found on a CC company. Directors also do not own a percentage of the company or an amount of shares within the company whereas members on a CC will have a percentage that they own of the CC on the company registration documents received from CIPC when successfully registered.

Can a company own its own shares?

A company cannot own its own shares. The company can either have a natural person as a shareholder with an ID number or passport number or another company that is fully registered and has a company registration number (Juristic Shareholder). The director of the company can also be the shareholder of the same company and own the full amount of shares that is within the company.

If a share change is done do directors change automatically also?

When doing a director change on CIPC the shareholder of a company does not change automatically and also vice versa. When a share change gets done the director does not automatically change. The two are not one in the same. This is two separate applications and therefore need to be applied for separately. The company can however have different directors and different shareholders within the company it all depends on what was decided and agreed upon amongst everyone.

Are shares allowed to be a fraction on a share certificate?

When a company has more than one shareholder within the company the full amount of shares needs to be distributed amongst them however the shares cannot be a fraction it needs to be a whole number. So if you have 3 shareholders the shares cannot be 33.3% shares per shareholder. One shareholder needs to have 34% and the other 2 shareholders 33% each. Which shareholder gets 34% and which one gets 33% is up to the shareholders to decide and agree upon.