The importance of shareholding of a private company.

There seems to be confusion about what is the difference between a director and a shareholder. The article will attempt to explain how it works and the importance of getting the paper work up to date as soon as a private company is registered.

Director vs Shareholder

Being a director of a company doesn’t automatically make you a shareholder. A director is seen as merely an employee of the company that has to attend to the day to day running of the operation. This is where the shareholders come in. They are the owners of the shares of the company, thus making them the owners of the company. They have the powers to appoint and dismiss directors as set out in the memorandum of incorporation of the company..

Why it is important to have a share certificate.

Without a share certificate, it is impossible to show that you are the owner of the company, even if you are a director. This should be done as soon as a new company is registered, they have to issue certificates to the relevant share owners which is signed by the directors. This process should also be followed when buying into an existing company. You have to request for a certificate to be issued.

I have had many cases where directors were removed by other directors, and did not have share certificates. This makes it extremely difficult to proof that you are an owner, or have any authority over the company.

Beneficial ownership

It is now mandatary for all companies to declare their beneficial ownership to CIPC if there is a shareholder with more than 5% interest in the company. This simply means that you have to tell CIPC who the shareholders are. It is important that this information is submitted correctly with the right information. It is also important to update these details at CIPC when the ownership of the company changes.

We can assist with share certificates for your private company, and to submit the beneficial ownership to CIPC.