Section 51 of the Companies Act No. 71 of 2008 (“Companies Act”) determines the requirements for the registration and transfer of certificated securities. It is important to note that additional requirements must be complied with in order to transfer certificated shares to an entity that is not a resident of the Republic of South Africa (“South Africa”).

Requirements for the transfer of certificated shares in terms of the Companies Act:

Sections 51(5) and (6) of the Companies Act determine the transfer requirements for certified securities.

In terms of section 51(5) of the Companies Act a company must enter in its securities register every transfer of certificated securities. The entry must include the following information:

  1. name of the transferee;
  2. address of the transferee;
  3. description of securities or interest transferred;
  4. date of transfer; and
  5. value of consideration to be transferred with regards to a transfer in terms of section 40(5) or (6) of the Companies Act.

Section 51(6) of the Companies Act further states that an entry contemplated in terms of section 51(5) of the Companies Act may only be made if the transfer is properly evidenced by means of an instrument of transfer that has been delivered to the company or the transfer is occurs by operation of law.

Additional requirements for a transfer to non-South African residents:

In the event that certificated shares are transferred to an entity that is not a South African resident, the share certificate being transferred must, in addition to the abovementioned requirements, be endorsed by an authorised dealer. Authorised dealers are ordinarily banks and are listed in the Currency and Exchanges guidelines for business entities published by the South African Reserve Bank (“SARB”).

Regulation 14(1)(c) of the regulations promulgated in terms of the Currency and Exchanges Act No. 9 of 1933 (“Exchange Control Regulations”) states that no person shall, without the permission of the Treasury or a person authorised by the Treasury and in accordance with such conditions that the Treasury or the authorised person may impose, make any entry in a securities register which involves the transfer of a security into or out of the name of a non-resident.

Regulation 14(2)(a) of the Exchange Control Regulations states that any person holding, possessing or who has in his custody any controlled securities must submit those securities to an authorised dealer within 30 (thirty) days from the date on which the securities come into his possession, are held or placed in his custody.

Regulation 14(2)(b) of the Exchange Control Regulations requires that the submission to the authorised dealer must contain the following information:

  1. full name and country of residence of the owner or person interested in the securities, along with a signed declaration by the holder that to the best of his knowledge, the owner or interested person is actually a resident in the stated country;
  2. name of company or body which issued the securities;
  3. number of securities; and
  4. full name and residential address of the person who has the securities in his custody or in possession of the securities.

The Treasury may then direct authorised dealers to affix their stamp to the securities submitted to them along with such endorsement as the Treasury may determine.

An authorised dealer will assist with the application to SARB to get the required endorsement. The application to endorse the original share certificate must be submitted within 10 (ten) days of issuing the share certificate and such application must be accompanied by the following documentation:

  1. original share certificate;
  2. proof of flow of funds for the purchase of the shares;
  3. the directors’ resolution or minutes; and
  4. share subscription or transfer agreements.

Conclusion:

The requirements for the transfer of certificated securities to non-South African residents are more onerous than the transfer between South African residents. It is important to understand these requirements when transferring certificated securities to entities who reside outside South African borders.

21 February 2019