Uncertainty as to your status as a shareholder can present a multitude of issues in business, especially where matters reach the stage of litigation. This question of whether one is a shareholder may arise in various circumstances. It may be that you have acquired shares in a company that are found to be null, the shares were not properly authorised or that the shares are not properly reflected in a company’s security register. Consequently, one may wonder, am I shareholder? Have all the necessary formalities been followed? As will be discussed further below, it is crucial that your name is properly registered on the share register of the company.In South Africa, The Companies Act 71 of 2008 (“the Act”) sets out the guidelines regarding the determination of shareholders and shareholding.

The Act defines a shareholder as “subject to section 57(1), the holder of a share issued by a company and who is entered as such in the certificated or uncertificated securities register, as the case may be.” Section 57(1) similarly defines a shareholder, however it includes a person who can exercise any voting rights regardless of the form, title or nature of the securities attached to those voting rights. To sum it up, shareholders can be individuals or entities who have a stake in a company through their ownership of shares. This ownership grants shareholders certain rights, such as the right to vote on company matters and to share in the company profits and receive dividends.

Section 50(1)(b) holds that “every company must maintain its securities register in accordance with the prescribed standards.” Securities are defined in the Act to include shares. The prescribed standards are set out in the Regulations to the Act and include the following information to be recorded in the register: the names and addresses of the persons receiving the issued shares, along with the amount issued to them; the number of the certificates and their respective dates as issued; the ID number of the recipient and their email address; dates of transfer of securities; and the amount of securities that may be placed in a trust or whose transfer has been restricted in relation to those securities. The Act further provides at Section 24 that company records, including share registers, must be maintained for a period of 7 years (or less if the company is incorporated for less than this time) and these records must be accessible from the company’s registered office.

The requirements prescribe that the share register be kept at the registered office of the company in South Africa or other location/s in South Africa (Section 25(1)), but not that it be lodged with any independent authority. This is contrasted to other jurisdictions such as the United Kingdom, where shareholding is registered with the Companies House. Similarly, in the Netherlands, shareholding is lodged with the Chamber of Commerce. This official requirement to register shareholding with a third-party authority provides clarity in those jurisdictions for business-owners and is useful in minimising disputes around shareholding.

The courts in South Africa have held that the right to be registered on a share register as shareholder and the rights held as a shareholder are distinct. If, for example, a purchase agreement for the purchase of shares is concluded but the register is not amended, nor certificates issued, then the aggrieved purchaser may apply to court for amendment of the register. They cannot, however, make use of any other remedies available to shareholders in terms of the Companies Act as they are not officially a shareholder until such time as they are entered into the register (Section 37(9)(a)(i)). Moreover, the right to be on the share register is independent of ownership of the shares (De Sousa and Another v Technology Corporate Management (Pty) Ltd and Others [2017] 3 All SA 47 (GJ) [2017 (5) SA 577 at 79). Thus, it is crucial that shareholders ensure that the share register accurately reflects their names in order to enforce their rights as shareholders.

A share certificate is prima facie proof of ownership of the shares, in the absence of evidence to the contrary it will become conclusive proof of shareholding (S v Veldthuizen 1982 (3) SA 413 (A) at 416). A share certificate that is used as proof of shareholding must fulfil the requirements listed in Section 51 of the Act.

In circumstances where a share register is mistakenly, or fraudulently, amended, Section 55 of the Act may provide some respite:

  1. Liability relating to uncertificated securities

(1) A person who takes any unlawful action in consequence of which any of the following events occur in a securities register or uncertificated securities register, namely-

(a) the name of any person remains in, is entered in, or is removed or omitted;

(b) the number of uncertificated securities is increased, reduced, or remains unaltered; or

(c) the description of any uncertificated securities is changed,

is liable to any person who has suffered any direct loss or damage arising out of that action.

This section imposes liability on persons who unlawfully amend, or fail to amend, share registers and would notionally allow aggrieved parties to claim their legal costs of enforcing the amendment, loss of dividends or any direct financial loss suffered.

It is important to check your own personal records when in doubt as to the status of your shareholding to confirm what documentation was received subsequent to a share purchase. Bank statements, tax returns, email correspondence or brokerage statements can assist in bringing clarity where there is uncertainty as to the completion of a share purchase. Shareholders must receive annual financial statements and other information about the company’s activities and their absence will indicate that there may be an issue with the company record of shareholders.

Determining shareholder status in South Africa is crucial for business owners, as it can have an effect on, inter alia, your legal standing, voting rights and dividends. Thus It is important to ensure that shares purchases are authorized and reflected in the company share register. By adhering to the guidelines set out in the Act and taking necessary precautions, one can avoid disputes and protect shareholder status in South Africa.


Contact us today if you have a shareholding dispute or wish to regularise company documents.

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