I am surprised how few business people seem to know that a company can issue new shares before those shares are actually created (or ‘authorised’, as this creation of shares is more properly referred to).
Being able to do this can sometimes be extremely helpful where deadlines are tight, and the company does not have time to authorise the shares first before issuing them.
Shares are authorised by passing shareholders resolution to agree to amend the company’s memorandum of incorporation (“MOI”) to increase the number of authorised shares in the company, and by lodging an amendment recording this change to the MOI at the Companies and Intellectual Property Commission (“CIPC”).
Section 38(2) of the Companies Act No. 71 of 2008 (“Companies Act”) allows shares to be issued before being authorised. That section says issued shares “may be retroactively authorised within 60 business days after the date on which the shares were issued”.
So there is no need to hold up a transaction while the amended MOI is being lodged at CIPC.