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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

41. Shareholder approval for issuing shares in certain cases

 

 

1) Subject to subsection (2), an issue of shares or securities convertible into shares, or a grant of options contemplated in section 42, or a grant of any other rights exercisable for securities, must be approved by a special resolution of the shareholders of a company, if the shares, securities, options or rights are issued to a—
a) director, future director, prescribed officer, or future prescribed officer of the company;
b) person related or inter-related to the company, or to a director or prescribed officer of the company; or
c) nominee of a person contemplated in paragraph (a) or (b).

 

2) Subsection (1) does not apply if the issue of shares, securities or rights is—
a) under an agreement underwriting the shares, securities or rights;
b) in the exercise of a pre-emptive right to be offered and to subscribe shares, as contemplated in section 39;
c) in proportion to existing holdings, and on the same terms and conditions as have been offered to all the shareholders of the company or to all the shareholders of the class or classes of shares being issued;
d) pursuant to an employee share scheme that satisfies the requirements of section 97; or
e) pursuant to an offer to the public, as defined in section 95(1)(h), read with section 96.

 

3) An issue of shares, securities convertible into shares, or rights exercisable for shares in a transaction, or a series of integrated transactions, requires approval of the shareholders by special resolution if the voting power of the class of shares that are issued or issuable as a result of the transaction or series of integrated transactions will be equal to or exceed 30% of the voting power of all the shares of that class held by shareholders immediately before the transaction or series of transactions.

 

4) In subsection (3)—
a) for purposes of determining the voting power of shares issued and issuable as a result of a transaction or series of integrated transactions, the voting power of shares is the greater of—
i) the voting power of the shares to be issued; or
ii) the voting power of the shares that would be issued after giving effect to the conversion of convertible shares and other securities and the exercise of rights to be issued;
b) a series of transactions is integrated if—
i) consummation of one transaction is made contingent on consummation of one or more of the other transactions; or
ii) the transactions are entered into within a 12-month period, and involve the same parties, or related persons; and—
aa) they involve the acquisition or disposal of an interest in one particular company or asset; or
bb) taken together, they lead to substantial involvement in a business activity that did not previously form part of the company’s principal activity.

 

5) A director of a company is liable to the extent set out in section 77(3)(e)(ii) if the director—
a) was present at a meeting when the board approved the issue of any securities as contemplated in this section, or participated in the making of such a decision in terms of section 74; and
b) failed to vote against the issue of those securities, despite knowing that the issue of those securities was inconsistent with this section.

 

6) In this section, ‘future director’ or ‘future prescribed officer’ does not include a person who becomes a director or prescribed officer of the company more than six months after acquiring a particular option or right.