1. Unclassified shares
There is a new concept introduced by the companies Act called unclassified company shares which must be stipulated in the MOI – Section 36(3)(c). The purpose of having unclassified shares is to allow the directors to set up the requirements of the company when they wish to raise more share capital, without having to go to shareholders. As a rule, it is very unlikely that smaller owner managed companies will ever make use of unclassified shares as they would quite easily be able to pass a special resolution to make the necessary changes to the MOI. Large companies may need to make changes quickly if they come across an opportunity like an acquisition and they have to change share capital and raise cash quickly or to issue shares for an acquisition. If they have to go to shareholders, they may lose out on the opportunity because of the time it takes.
In this case please note the following; the authorisation and classification of shares, the change of rights and preference rights etc. must be set out in a company’s MOI;
a. These rights may only be changed by an amendment of the MOI by special resolution of the shareholders; or
b. By the Board of Directors unless the company prohibits or restricts the board from doing so, except to the extent that the MOI does not allow it, the Companies Board may increase or decrease the number of authorised shares of any class of shares or re-classify any shares that have been authorised but not issued.
If a Board acts in terms of its authority, the company must file a notice of amendment of its MOI by using a form CoR 15.2 setting out the changes effected by the Board together with the director’s resolutions.
This is a very interesting point as we are now seeing that if the Directors have the authority which has been given to them by the MOI, they can change the share capital by filing an appropriate Directors Resolution and the necessary paperwork to the CIPC. When we discuss the MOI in more detail, we will go through some of these clauses.