Share Certificates - Small Business Owner's Guide

Introduction

Starting a small business in South Africa is an exciting venture. Among the numerous tasks you will handle, understanding share certificates is crucial. A share certificate is essential for legally recognizing the ownership of shares within your private company.

This article will break down key things that small business owners need to know about share certificates, as per the Companies Act 71 of 2008.

What are share certificates?

Are an official documents issued by a company to its shareholders. They signifies ownership of a specific number of shares in the company. For small business owners, ensuring that share certificates are properly issued and maintained is vital for clear ownership records.

Key elements of a Share Certificate?

The share certificate must contain:

Company Details : The full legal name and registration number of the issuing company.
Date of Issue: When the certificate was issue
Shareholder’s Details: The full name, ID/Registration number, residential address of the person/entity who will receive the share certificate.
Number of Shares: The specific number of shares that have been issued.
Class of Shares: Whether they are ordinary shares, preference shares, etc.
Unique Certificate Number: A unique identifier for the share certificate.
Signatures: Authorized signatures from company directors. If the company has one director then an authorized second signatory is required for the certificate to be valid.

When to issue them?

Under the Act, a company must issue share certificates within 60 business days after shares have been allotted or transferred. This ensures that shareholders have timely proof of their ownership.

Share register

Every private company must maintain a register of shareholders, detailing the number and class of shares held by each shareholder. This register must be kept at the company’s registered office and be available for inspection by shareholders.

Why Share Certificates Matter for Small Business Owner?

For small business owners, the certificates serve several critical functions:

Proof of Ownership: They provide legal proof of ownership, which is essential during business transactions or when seeking funding.
Facilitating Transfers: They are necessary for the smooth transfer of shares between parties.
Compliance: Proper issuance and management ensure compliance with the Companies Act, avoiding potential legal issues.

Conclusion

The solvency of a company helps determine if it is capable of growth. Also, solvency can help the company management meet their obligations and can demonstrate its financial health when raising additional equity or loans. Any business looking to expand in the long term should aim to remain solvent.