Issue of Shares: Consideration and Beneficial Ownership Requirements

Recent amendments to the Companies Act No. 7 of 2007 have introduced important compliance requirements for issuing shares. A central part of the amended framework is the connection between receiving consideration and allotting the shares.

The board must determine the consideration

Under amended section 52, the board must decide the consideration for which the shares will be issued and resolve that the consideration is fair and reasonable to the company and its existing shareholders.

Once the company receives the consideration, it must generally allot the shares within 20 working days, subject to the statutory exception set out in the Act. This makes the date of receipt an important compliance date that should be identified and recorded accurately.

Verify receipt before allotting shares

Before the allotment is completed, the company secretary should obtain and retain proper evidence that the agreed consideration was received. Depending on the form of consideration, the evidence may include bank records, payment confirmations or other suitable documents.

Keeping this evidence with the company records supports the board's decision, establishes the date from which the allotment period runs and provides a clear audit trail for the transaction.

Form 6 — Notice of Issue of Shares

After the shares are issued, the company must notify the Registrar of Companies using Form 6 — Notice of Issue of Shares. The filing records the number of shares issued, the persons receiving them, the consideration for the issue and the resulting stated capital of the company.

The additional Form BO 02 requirement

The Beneficial Ownership Regulations add a further filing step. When shares are issued, the company must submit the resulting beneficial ownership information through Form BO 02 within 20 working days of the issue.

In the current Department of the Registrar of Companies process, the company first completes Form 6 through eROC. It can then make the BO 02 submission through the Beneficial Ownership Registry.

The complete compliance sequence

1. Obtain board approval for the proposed issue.
2. Determine the consideration and resolve that it is fair and reasonable.
3. Receive and verify the consideration with appropriate evidence.
4. Allot the shares within the applicable statutory period.
5. Update the company's share register.
6. File Form 6 — Notice of Issue of Shares.
7. Identify and document the resulting beneficial ownership.
8. Submit Form BO 02 through the Beneficial Ownership Registry.

What this means for company secretaries

A share issue is no longer simply a board resolution followed by Form 6. The company secretary must coordinate evidence of consideration, statutory timing, the share register, the Registrar filing and the beneficial ownership submission as one connected compliance process.

Before carrying out the issue, the secretary should also identify how the new shareholding affects beneficial ownership and ensure that the supporting ownership information is accurate and complete.