Changing the shareholding structure of a private company is a very sensitive matter, which if not carried out properly, may raise issues between shareholders, the company and the regulators. Changes in shareholding of the company may triggered by allotment, forfeiture and transfer or transmission of shares, by the existing shareholder(s).
Allotment of shares is a process whereby new shares are issued to a person, in exchange for a consideration of either cash or non-cash consideration, such as conversion of a loan into equity. One can only allot shares once it is established that there are additional shares in the company that can be allotted – if not the company will have to increase its authorised share capital, in line with the Companies Act 2002 and create new shares, which can then be allotted. The legal process in this regard entails, inter alia, completion of prescribed forms and reporting to the Registrar of Companies within a prescribed period of time.
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