Director Changes | Shareholder Changes

Director and Shareholder Changes

What you need to know

Director changes are required to be lodged with CIPC to ensure that their records are up to date.

Shareholder changes are the responsibility of the Directors and are NOT required to be lodged with CIPC.

We offer both services and can do them simultaneously.

The Directors run the company and Shareholders own the company.

Good to know

Director changes start at R490

Price : From R490
How long does it take? 1-7 Days

Call Centre
021 595 4433

Email
info@swiftreg.co.za

WhatsApp
060 070 2089

Why do companies change directors?

There are a number of reasons to change the directors of a company such as a change in management, the a sale of the company or even death.

Who appoints the directors of a company?

The shareholders (owners) of the company appoint the directors of the company to act in their best interest. The director on the other hand issue the share certificates to the shareholders.

How do you add or remove a director?

The appointment and removal of directors is a shareholder/s decision who are required to approve the change. This is followed by a letter of appointment or removal of the director. The process is then recorded in the minutes of the board meeting and the changes must be registered at CIPC to take effect. CIPC maintains a full record of past and present directors of all companies. The process of appointing and removing directors is set also out in the MOI of the company.

Is there a minimum number of directors required on a company?

Yes, 1. The Memorandum of Incorporation or MOI states that at all times there must be at least one director registered to the company, this means that the last remaining director will not be able to resign.

Is there a maximum number of directors allowed on a company?

Companies may an unlimited number of directors to a company; however this is not wise as it is impractical. For example when the company opens a bank account for the business all of the directors must be present and have good credit records.

What are the Director’s responsibilities?

All directors are required to act in good faith and in the best interests of the company. They are required to use great care, skill and diligence. If this is not the case they can can be held personally liable for any losses that can be linked to their reckless or ill-considered decisions or actions. This can include lack of action against known corruption.

Can a director be held responsible for his or her actions?

Yes, if the directors did not act with great care, skill and diligence and the consequences of their decisions or lack of decision results in any losses to the company they can be held personally liable for these losses.

What is the effective date of a director resignation?

The day the director signs his resignation letter becomes the effective date of his resignation and not the date on which the change took place at CIPC

What is the difference between directors and shareholders?

The directors manage the company and the shareholders own the company. In most companies the directors and the shareholders are the same people but this does not have to be the case. Shareholders can be companies or trusts or any other legal entity, but directors are always required to be natural persons.

What happens if a Director dies?

Only the executor of the estate of a deceased Director has the authority to resign the Director from the company.

When an individual dies, his/her estate is automatically frozen which means that the bank account is frozen until an executor of his estate has been appointed. The executor has the power to act on behalf of the director and has the authorisation to wind up the estate. The Executor is appointed by the Master of the Court will settle the debts from the proceeds of the estate and transfer the assets according to the last will and testament.

If no Executor is appointed in a last will and testament the government will appoint one.

How long does a Director appointment last?

The standard MOI as drafted by CIPC states that the term of a director is indefinite. However, this can be amended to allow the directors to be elected for a set term with or without the possibility of re-election.

If you resign as a director, are you still liable?

Yes and no, you can be held liable for your actions during your term of office even after you have resigned. You will not be liable for events which originated after your resignation unless you signed personal surety and the surety was not cancelled

Does CIPC issue share certificates?

No, share certificates are the responsibility of the directors of a company. SwiftReg has created an easy online system to print your own shares and capture all the shareholders details to generate an online company register.

What are the key elements of a share certificate?

A share certificate must have the name and registration number of the company, the share certificate number, the number and type of shares issued, the distinctive number range of the shares, the date and the shareholders details. The certificate must then be signed by the directors and the shareholder to validate the certificate.

What is a distinctive share number?

Every share has its own distinctive number to identify the actual share from the next share of the same type and class. For example, if your company has 1000 authorised ordinary shares of the same type and class and 500 were issued to a single shareholder then the distinctive number range for these issued shares would be from 1 to 500. If shares were required to be issued from the authorised share capital to a second shareholder, then the next distinctive number will start at 501 and will be linked to share number 501.

Where do I find my original share certificate?

A share certificate cannot be duplicated. If a copy is produced, then the certificate must clearly state that it is a copy. The original certificate is one which is signed by the directors and the shareholders to validate it. This original signed certificate is the proof of ownership and must be kept in a safe place.

Can I own a fraction of a share?

No, you can not own a fraction of a share, however you can own a share jointly.

What is authorised share capital?

Authorised share capital is the number of shares made available to be issued to the shareholders. The authorised shares are created out of thin air and have no value until they are issued to the shareholders.

The value of a company has nothing to do with the number of authorised shares. This is often misunderstood as ambitious entrepreneurs request to authorise tens of millions of shares, but this in effect just complicates the maths in terms of issuing share to the shareholders for private companies.

What is a company register?

A company register is a book or an online database where all of the shareholder transactions are captured; including the number and type of shares each shareholder owns. It is a record of the history of all share transfers from the inception.

Do I need a company register?

Yes, it is a compulsory for each company to have a company register. SwiftReg has a simple online solution to create and maintain a company registers it is called ShareVault.

How do I change shareholders?

As CIPC does not capture shareholders the responsibility belongs to the directors of the company. We have created ShareVault to assist directors to change shareholders and issue new share certificates as well as update the share register.

What type of shares are issue with the standard MOI?

To simplify the management of the shareholding CIPC has draft standard Memorandum of Incorporation which specifies that the shares are all ordinary share of a single class.

Are the shareholders captured on the Cor 39?

No, the shareholders list is maintained in the company register and the individual shareholders hold the original share certificate in their position as proof of ownership. CIPC do not keep any records of shareholding.

What is a class of share vs type of share?

There are two main types of shares, namely ordinary shares and preferential shares. Ordinary shares are the most common. Preference shares can be divided into further categories such as cumulative, convertible and participatory preference shares.

A class of share usually refers to ordinary shares and the voting rights associated with them. For example, a company could have Class A and Class B ordinary shares where Class B shareholders can’t vote at the AGM.

Transferring vs issuing shares?

Transferring shares refers to a transaction between two shareholders where one shareholder transfers some or all of his shares to the other shareholder. This means that the shares already exist as they have been issued. Issued shares refers to new shares which are issued from the authorised shares to the new shareholders for the first time.

Why is 1200 authorised share capital the ideal number?

Based on our experience SwiftReg issues all the authorised share capital to the shareholders so as not leave any share unallocated as this simplifies the management of the shareholding.

As a fraction of a share is prohibited, we have found that 1200 is devisable by most numbers which makes it the most practical number of authorised share capital for start-ups.