
Originally Posted by
CLIVE-TRIANGLE
Here are the necessary steps to comply with section 40:
The directors, at an ordinary meeting where the notice may be waived if they are both present, must resolve what the consideration is. In other words determine a price.
They must then resolve if there is a payment agreement or not, and if so what the terms are.
Once the terms have been met, the company may issue the shares and record the subscription in the registers.
The Act puts it this way:
“40. (1) The board of a company may issue authorised shares only—
(a) for adequate consideration to the company, as determined by the board;
(b) in terms of conversion rights associated with previously issued securities of
the company; or
(c) as a capitalisation share as contemplated in section 47.
(2) Before a company issues any particular shares, the board must determine the consideration for which, and the terms on which, those shares will be issued.
(3) A determination by the board of a company in terms of subsection (2) as to the adequacy of consideration for any shares may not be challenged on any basis other than in terms of section 76, read with section 77(2).
(4) Subject to subsections (5) to (7), when a company has received the consideration approved by its board for the issuance of any shares—
(a) those shares are fully paid; and
(b) the company must issue those shares and cause the name of the holder to be entered on the company’s securities register in accordance with Part E of this Chapter.
Do not skip on the formalities or it will haunt you down the road.
I assume this company is incorporated under the new Act? If so the shares have no par or nominal value. They are simply shares at whatever the board decides and the company receives. The balance sheet reflects this as stated capital and there will never be a share premium.
You do not need to advise anyone about the shares so issued, just do it right.
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