In South Africa, the registration and transfer of securities play a crucial role in the functioning of companies and the broader financial market. Governed by specific provisions outlined in the Companies Act, as well as the Financial Markets Act of 2012, the process ensures transparency, accountability, and legal protection for investors and stakeholders.
Certificated and Uncertificated Securities
Securities, such as shares, can be categorised as either certificated or uncertificated. Certificated securities are evidenced by physical certificates, while uncertificated securities exist solely in electronic form. The Financial Markets Act defines uncertificated securities as those not evidenced by a certificate or written instrument or certificated securities held in collective custody by a central securities depository. Transfer of uncertificated securities occurs through electronic recordings.
Equal Status of Securities
Regardless of whether securities are certificated or uncertificated, the rights and obligations of security holders remain equal under the law. Provisions within the Companies Act apply equally to both types of securities, ensuring fairness and consistency in treatment.
Register of Certificated Securities
Companies are mandated to maintain a securities register by The Companies Act. This register serves as proof of ownership and contains essential details regarding securities issued by the company. Shareholders and interested parties have the right to inspect and copy information from this register, subject to prescribed charges.
Transfer of Certificated Securities
The transfer of certificated securities involves the acquisition of securities directly from the company or through transfer from the existing holder. A proper instrument of transfer must be delivered to the company for registration, and restrictions on transferability may apply.
Nominee Holdings and Beneficial Interests
Nominee holdings allow individuals to hold securities on behalf of others, functioning as agents with limited authority. Beneficial interests in securities may arise when someone other than the registered holder holds a right to receive distributions, exercise voting rights, or direct the disposition of securities. Disclosure of beneficial interests is required by law to ensure transparency and prevent misuse.
Uncertificated Securities
Uncertificated securities are managed electronically through systems like STRATE, which facilitate seamless trading and settlement processes. The registration of uncertificated securities involves maintaining electronic records of ownership details in the company’s register. Transfer of uncertificated securities occurs without physical documentation, providing legal protection to bona fide purchasers.
Security by Cession in Securitatem Debiti
Shares can be used as security for debts through cession, either as a pledge or an out-and-out cession. In the case of uncertificated securities, electronic entries indicate the pledge or cession, with restrictions on subsequent transfers without consent.
Liability and Disclosure
Unlawful actions related to securities registers may result in liability for loss or damage. Instructions for transferring securities must be legal and correct, with individuals warranting their accuracy. Disclosure of beneficial interests in uncertificated securities is essential for transparency and regulatory compliance.
In conclusion, understanding the registration and transfer of securities in South Africa involves navigating intricate legal frameworks outlined in the Companies Act and the Financial Markets Act. By adhering to these regulations, companies and investors can ensure integrity, transparency, and legal compliance in their securities transactions. Contact an expert at Schoemanlaw for your commercial needs.
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