LML4806 EXAM PACK 2024

The legal definition of a share - Correct Answer Under the companies Act 71 of 2008, a share is defined as 'one of the units into which the proprietary interest in a profit company is divided". A share is a unit of the contribution made to the share capital. It is thus property and can be traded granting it incorporeal, moveable property. A share is also seen as a measure of a shareholders interest in a company, the interest consists of certain personal rights of the shareholder, which may be disposed of or transferred to someone else. How can the classes of shares authorized by a company, and the rights attached to those classes of shares be amended? - Correct Answer In terms of section 36 of the Companies Act of 2008, the rights attached to a specific class of share are determined by the MOI and the terms of issue of the shares. The MOI must set out the classes of shares that the company is authorized to issue as well as the a number of shares of each class it may issue. Section 36(1)(d) also provides that a companies MOI must further set out the preferences, rights limitations and other terms associated with that class of shares. However, a company could designate a class of shares in the MOI without setting out the preferences, rights or limitations that those shares will confer, and leave it open for the board of directors to decide on these terms at a later stage. Section 36(1) holds, that the MOI also sets out a stated number of unclassified shares that are subject to classification by the board. The board has the power to increase or decrease the authorised shares of the company and to reclassify shares that have not yet been issued. The company must then file a Notice of Amendment to the MOI to set out these changes effected by the board. In terms of the Companies Act of 1973, alterations of share capital could only occur after a special resolution to such effect by the general meeting. This remains an option under the Companies Act of 2008 but will probably rarely occur. The classes of shares most commonly found are preference shares, ordinary shares, and deferred shares. What types of preference shares are used? - Correct Answer Section 37 - class of shares whose holders enjoy preference over any other class of shares w.r.t. payment of dividends and sometimes to return of capital on winding up - usually carry only a modest income return and even if MOI pr