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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

47. Capitalisation shares


(1) Except to the extent that a company’s Memorandum of Incorporation provides otherwise—
(a) the board of that company, by resolution, may approve the issuing of any authorised shares of the company, as capitalisation shares, on a pro rata basis to the shareholders of one or more classes of shares;
(b) shares of one class may be issued as a capitalisation share in respect of shares of another class; and
(c) subject to subsection (2), when resolving to award a capitalisation share, the board may at the same time resolve to permit any shareholder entitled to receive such an award to elect instead to receive a cash payment, at a value determined by the board.


(2) The board of a company may not resolve to offer a cash payment in lieu of awarding a capitalisation share, as contemplated in subsection (1)(c), unless the board—
(a) has considered the solvency and liquidity test, as required by section 46, on the assumption that every such shareholder would elect to receive cash; and
(b) is satisfied that the company would satisfy the solvency and liquidity test immediately upon the completion of the distribution.