How to transfer shares in a Pty Ltd in South Africa

What do I need to transfer shares?

• An agreement between the seller and buyer (a sale of shares agreement, or a donation)
• A securities transfer form signed by both parties
• Approval as required by the company's Memorandum of Incorporation (MOI)
• The original share certificate of the seller, to be cancelled

Private companies must restrict the transfer of their shares, so check the MOI and any shareholders' agreement for pre-emptive rights (other shareholders may have the first right to buy).

How do I transfer shares step by step?

1. Agree the price and terms and sign the agreement.
2. Offer the shares to existing shareholders first if the MOI or shareholders' agreement requires it.
3. Sign the securities transfer form.
4. The board approves the transfer.
5. The company cancels the seller's certificate and issues a new share certificate to the buyer. If the seller keeps some shares, they get a new certificate for the balance.
6. Update the securities register with the transfer and the new certificate numbers.
7. Pay securities transfer tax to SARS.
8. File the beneficial ownership change with CIPC if the ultimate owners changed.

What is securities transfer tax (STT)?

STT is a tax of 0.25% on the transfer of shares. For shares in an unlisted company, the company that issued the shares is liable for the tax and may recover it from the person who received the shares. The new holder must tell the company about the transfer within 30 days. The company declares each transfer on SARS eSTT (through eFiling) and pays within two months from the end of the month in which the transfer happened.

Do I need to tell CIPC about a share transfer?

CIPC does not record shareholders the way it records directors. But companies must keep their beneficial ownership information up to date with CIPC and file a change within 10 business days. If the transfer changes who ultimately owns or controls the company, file it.

If the new shareholder is also becoming a director, that is a separate director change at CIPC.

Common mistakes

• Transferring shares by agreement only, without new certificates or a register update
• Forgetting STT, which leads to penalties and interest
• Not filing the beneficial ownership change
• Ignoring pre-emptive rights in the MOI or shareholders' agreement

Step by step

1. Sign the agreement. Seller and buyer agree the price and terms.
2. Check pre-emptive rights. Offer the shares to existing shareholders first if required.
3. Sign the transfer form. Both parties sign the securities transfer form.
4. Board approval. The board approves the transfer as the MOI requires.
5. New certificates and register. Cancel the old certificate, issue new ones and update the securities register.
6. Pay STT. Declare and pay 0.25% securities transfer tax on SARS eSTT.
7. File beneficial ownership. File the change with CIPC within 10 business days.