Shareholders vs Directors
Directors vs Shareholders
When a company is formed it has to have at least one director and one shareholder within the company.
Without the two a company cannot be successfully registered.
The difference between a director and shareholder
Directors manage the day to day operations of a company
Shareholders own the company by the shares that the shareholder has.
A shareholder may be a director or a director may be a shareholder of the same company if agreed to. Should a director want to be a shareholder the director of the company will be issued with a share certificate to indicate that they are the shareholder of the company and it will indicate the number of shares they own in the company.
Should a shareholder wish to be a director they will be added to the company’s registration document with the CIPC.
Note that a shareholder does not have to be a director as is often mistaken for B-BBEE purposes however there is an obvious benefit from an Ownership and Management Control perspective.
The number of Directors
The maximum number of directors a company can have is unlimited as it all depends on what was initially decided amongst all those involved in the company. This requirement is only for a PTY (LTD) company. The number of directors varies depending on the type of company you wish to register as each type of company has a different amount of directors needed in order to be registered.
A company/trust as shareholder
A company or a trust can be a shareholder of another company. This is called a Juristic Shareholder. In order for a company to be a juristic shareholder the company needs to be registered with CIPC o Master of the high court (Trust) and have a registration number.
A Directors liability for company debts
A director is not personally liable for company debts. Should the company face a situation where the creditors are suing them for outstanding debt and the company cannot afford to pay the outstanding amount of debt the company assets are then at risk not the personal assets of the director(s). This however does not absolve the director if they have signed personal liability in terms of surety.
Par value vs non par value shares
Par value shares have a value per share whereas non par value shares do not have a value.
Since 2011 the new Companies Act requires that a PTY (LTD) company is registered and non par value shares are issued.
A value is given to the amount of shares that a shareholder has by determining the value of the company as a whole and then determining from that amount the value of the shares that the shareholder has and how much the shares are worth.
Transferring shares between shareholders
This process is called a share transfer. You can give shares to a brand new shareholder or to an existing shareholder. When doing a share transfer the new or existing shareholder will be issued with a new share certificate depending on the change.
A share register will then keep a record of all share changes that took place within the company. It will also state what share certificate numbers were cancelled and the date it was cancelled and the new share certificates were issued.
The CIPC does not keep track of share changes.
Shareholders as minors
A minor can be a shareholder of the company however it is not advisable.
A director of a company has to be 18 in order to be a director on the company as this is a requirement from CIPC.
Can a company own its own shares?
A company cannot own its own shares. The company can either have a natural person as a shareholder with an ID number or passport number or another company that is fully registered and has a company registration number (a Juristic Shareholder). The director of the company can also be the shareholder of the same company and own the full amount of shares that is within the company.