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Companies Act, 2008 (Act No. 71 of 2008)

Chapter 2 : Formation, Administration and Dissolution of Companies

Part D : Capitalisation of profit companies

37. Preferences, rights, limitations and other share terms

 

 

1) All of the shares of any particular class authorised by a company have preferences, rights, limitations and other terms that are identical to those of other shares of the same class.

 

2) Each issued share of a company, regardless of its class, has associated with it one general voting right, except to the extent provided otherwise by—
a) this Act; or
b) the preferences, rights, limitations and other terms determined by or in terms of the company’s Memorandum of Incorporation in accordance with section 36.

 

3) Despite anything to the contrary in a company’s Memorandum of Incorporation—
a) every share issued by that company has associated with it an irrevocable right of the shareholder to vote on any proposal to amend the preferences, rights, limitations and other terms associated with that share; and
b) if that company has established only one class of shares—
i) those shares have a right to be voted on every matter that may be decided by shareholders of the company; and
ii) the holders of that class of shares are entitled to receive the net assets of the company upon its liquidation.

 

4) If a company’s Memorandum of Incorporation has established more than one class of shares the Memorandum of Incorporation, in setting out the preferences, rights, limitations and other terms of those classes of shares, must provide that—
a) for each particular matter that may be submitted for a decision to shareholders of the company, at least one class of the company’s shares has voting rights that may be exercised on that matter; and
b) the holders of at least one class of the company’s shares, irrespective of whether it is the same as any class contemplated in paragraph (a), are entitled to receive the net assets of the company upon its liquidation.

 

5) Subject to any other law, a company’s Memorandum of Incorporation may establish, for any particular class of shares, preferences, rights, limitations or other terms that—
a) confer special, conditional or limited voting rights;
b) provide for shares of that class to be redeemable, subject to the requirements of sections 46 and 48, or convertible, as specified in the Memorandum of Incorporation—
i) at the option of the company, the shareholder, or another person at any time, or upon the occurrence of any specified contingency;
ii) for cash, indebtedness, securities or other property;
iii) at prices and in amounts specified, or determined in accordance with a formula; or
iv) subject to any other terms set out in the company’s Memorandum of Incorporation;
c) entitle the shareholders to distributions calculated in any manner, including dividends that may be cumulative, non-cumulative, or partially cumulative, subject to the requirements of sections 46 and 47; or
d) provide for shares of that class to have preference over any other class of shares with respect to distributions, or rights upon the final liquidation of the company.

 

6) The Memorandum of Incorporation of a company may provide for preferences, rights, limitations or other terms of any class of shares of that company to vary in response to any objectively ascertainable external fact or facts.

 

7) For the purpose of subsection (6)—
a) ‘‘external fact or facts’’ includes the occurrence of any event, a variation in any fact, benchmark or other point of reference, a determination or action by the company, its board, or any other person, an agreement to which the company is a party, or any other document; and
b) the manner in which a fact affects the preferences, rights, limitations or other terms of shares must be expressly determined by or in terms of the company’s Memorandum of Incorporation, in accordance with section 36.

 

8) If the Memorandum of Incorporation of a company has been amended to materially and adversely alter the preferences, rights, limitations or other terms of a class of shares, any holder of those shares is entitled to seek relief in terms of section 164 if that shareholder—
a) notified the company in advance of the intention to oppose the resolution to amend the Memorandum of Incorporation; and
b) was present at the meeting, and voted against that resolution.

 

9) A person-
a) acquires the rights associated with any particular securities of a company-
i) when that person's name is entered in the company's certificated securities register; or
ii) as determined in accordance with the rules of the Central Securities Depository, in the case of uncertificated securities; and
b) ceases to have the rights associated with any particular securities of a company-
i) when the transfer to another person, re-acquisition by the company, or surrender to the company has been entered in the company's certificated securities register; or
ii) as determined in accordance with the rules of the Central Securities Depository, in the case of uncertificated securities