Registration and Transfer of Securities – Mercantile Law 292 (Topic 12)

These flashcards cover key definitions, statutory references, procedures, and practical implications related to registration and transfer of securities, including certificated vs. uncertificated shares, the securities register, nominee holdings, beneficial interests, STRATE’s role, and voting rights.

Which two statutes make a securities register compulsory for every company?

Section 24(4)(a) and Section 50(1) of the Companies Act mandate that a company must establish and maintain a securities register.

What is the difference between a transfer and a registered transfer of securities?

A transfer is the underlying transaction changing ownership; a registered transfer is the entry of that change in the company’s securities register.

Name the two common ways in which a person can become a shareholder.

(1) Acquire shares directly from the company (issue). (2) Acquire shares from an existing shareholder (transfer).

How does Section 49(2) classify securities?

Securities may be certificated (with a physical certificate) or uncertificated (without a certificate, recorded electronically).

Does the existence of a share certificate create the shareholder’s rights?

No. The rights exist independently of the certificate; the certificate merely evidences ownership and is not a negotiable instrument.

What is the primary proof of ownership for uncertificated securities?

Electronic entries in the uncertificated securities register maintained by a Central Securities Depository participant.

Which organisation is South Africa’s licensed Central Securities Depository (CSD)?

STRATE (Share TRAnsactions Totally Electronic).

Can certificated shares be converted to uncertificated shares and vice-versa? Cite the section.

Yes. Section 49(5)–(6) permits conversion between certificated and uncertificated forms without affecting the rights attached to the shares.

What constitutes sufficient proof of the facts recorded in a securities register?

Section 50(4) states that the securities register or uncertificated securities register is sufficient proof in the absence of evidence to the contrary.

Who keeps the official record for uncertificated securities?

A participant of the CSD; that record forms part of the company’s securities register under Section 50(3).

Define “shareholder” according to Section 1 of the Companies Act.

A shareholder is the holder of a share issued by a company whose name is entered in the certificated or uncertificated securities register.

What is a nominee in the context of shareholding?

A nominee is the registered holder of shares who holds them on behalf of the true (beneficial) owner.

Which provision allows the use of nominees, and can a company restrict it?

Section 56(1) permits nominee holdings, but a company’s Memorandum of Incorporation (MOI) may exclude or restrict this practice.

What must nominees of a public company disclose under Sections 56(3) and 56(4)?

The identity of the beneficial holders, and the class and number of shares they beneficially own.

Within what time must a nominee disclose beneficial ownership after receiving a notice from the company under Section 56(6)?

Within the period specified in the notice (the Act allows the company to set a reasonable deadline).

What register must a regulated (public) company keep regarding nominee disclosures?

A register of all disclosures, including every person with a beneficial interest of 5 % or more in any class of securities (Section 56(7)).

Give two examples when a person is ‘deemed’ to hold a beneficial interest under Section 56(2).

(1) A spouse married in community of property to the person with the interest. (2) A parent of a minor child who has the interest.

When may a beneficial owner vote on shares registered in a nominee’s name?

Under Section 56(9), the beneficial owner may vote if (a) entitled to vote and (b) their name appears in the company’s register of disclosures or they hold a proxy from the registered holder.

What duty does Section 56(10) place on the registered holder regarding meetings?

The registered (nominee) holder must inform the beneficial owner of upcoming shareholder meetings so the beneficial owner can decide to act as proxy.

Do Sections 56(9)–(11) apply to securities subject to CSD rules (e.g., JSE-listed shares)?

No. Section 56(8) excludes securities governed by CSD rules from the voting and proxy provisions of Sections 56(9)–(11).

Why might investors choose to hold shares through a nominee? Name one advantage and one disadvantage.

Advantage: Privacy and administrative convenience. Disadvantage: The beneficial owner relies on the nominee to exercise shareholder rights and communicate information.

Is there any difference in shareholder rights between certificated and uncertificated shares?

No. Section 49(3)(a) states that holders of certificated and uncertificated securities have identical rights and obligations.

How can an outsider inspect details of uncertificated holdings recorded by a CSD participant?

The outsider must make the inspection through the company, as required by Section 52(2).

What website provides information about STRATE’s operations?

https://www.strate.co.za/