Who is a Shareholder of a Company in South Africa
Shareholders own the company, but they are not always involved in the daily operations. That responsibility falls on the directors and company management. However, company directors can also be shareholders.
Section 1 of the Companies Act, 71 of 2008, assigns the following meaning to the term ‘Shareholder’;
“Shareholder”, as defined in sections 1 and 57(1) of the Act, is the holder of a Share and under certain circumstances as the context may indicate, the holder of a Security issued by the company and who is identified as such in the certificates or uncertificated Security Register of the company.
A shareholder is someone who invests money in a company and can vote on company decisions. This includes people who hold debentures and options in the company.
What are the powers of a Shareholder or Shareholder’s Rights?
Shareholders typically do not have the right to directly participate in the operational management of a company. The director of a company exclusively holds the role in terms of legislation.
Shareholders can remove or replace directors if they are unhappy with their performance or choose not to re-elect them. Shareholders usually do not have a say in corporate decisions, and directors do not always have to follow what shareholders want.
The board of directors manages the company's day to day operations, but shareholders can still have an impact by using their rights and powers.
These include–
- passing resolutions at shareholder meetings;
- electing/appointing directors;
- electing to sell their shares;
- exercising minority buy-out rights (the minority shareholder can approach the court for an order for the company to buy back their shares);
- requesting the company, in writing, to furnish them with information held by the company (with a right to appeal to the court if the company refuses);
- requiring the company to provide the shareholder with a statement of the shares that he or she holds, and of the various rights, privileges, conditions and limitations that attach to those shares; and
- adding or changing restrictions on the issue, transfer or ownership of shares.
- adopting any amendments to the company’s Memorandum of Incorporation (MOI)
Frequently asked questions
Who is the owner of a company
The ownership of a company is determined by the number of shares held on the private limited company or public company. It is possible to be a part owner based on the number of shares held.
What are the different types of shares in South Africa
Shares can typically be divided into three categories namely:
- Ordinary shares
- Preference shares which may be cumulative, non- cumulative, participating, redeemable and/or convertible.
- Deferred shares which may be founders' shares, vendors' shares, promoters' shares and/or management shares.
Who are the ordinary shareholders
Ordinary shareholders are often referred to as unsecured creditors as shareholders are the last in line to receive dividends if any. The company first distributes the dividends among its preferred shareholders and bondholders. Only then are the dividends, if any, are made available to the ordinary shareholders.
Who has the most voting rights in a company
In large, publicly held companies, shareholders exert the most control by electing the company's directors. However, in small, privately held companies, officers and directors often own large blocks of shares. Therefore, minority shareholders typically cannot affect which directors are elected. It would be the majority shareholders who typically have the most voting rights.
What is a securities register
The securities register, commonly known as the share register, consists of the register of share allotments, the register of share transfers and the member's share accounts.
What is an MOI
An “MOI” is a “Memorandum of Incorporation” and is a document that sets out the rights, duties and responsibilities of shareholders, directors and other persons involved in a company. Every company incorporated and registered in South Africa needs to have an MOI. This is the company's constitution.
Are there other types of shareholders
Ordinary shares are the most commonly used share in companies, where typically one share equals one vote, and each share possesses equal rights to dividends. Other share options include preference shares, redeemable shares, non-voting shares, redeemable preference shares, deferred ordinary shares and cumulative preference shares. The rights shareholders have can be limited through the use of these different classes.
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