Buying property through a company – taking up shares

While many of us are more familiar with situations where a property is purchased by an individual or individuals (classified as natural persons), it is also possible for a property to be purchased in the name of a legal entity, most commonly a company.

May 6, 2019

A company is incorporated or “brought into life” in terms of the South African Companies Act, 71 of 2008 (the Act). Registration and incorporation of a company is done with the Registrar of Companies whose office is with the Companies and Intellectual Property Commission (CIPC) situated in Pretoria.

There are various forms of companies that exist, such as Public (Ltd), Private (Pty Ltd), State owned (SOC) and Non-profit (NPC) companies. The most popular form of company to use when deciding to buy a house is the Private Company (Pty Ltd).

All the statutory company registration documents (CoR Forms) required in terms of the Act are lodged with the CIPC on registration of the company, the most important of which is the Memorandum of Incorporation (MOI). At the time of its incorporation the company must decide and indicate the amount and type of shares it wishes to “authorise (to be issued)” and “issue”.

In terms of the Act, a share is defined as “one of the units into which the proprietary interest in a… company is divided” and a shareholder is defined as “…the holder of a share issued by a company, and who is entered as such in the … securities register.” If the company at any time after its incorporation wishes to increase its shareholders or increase the number of shares held by existing shareholders, it can issue more shares and prospective shareholders can subscribe to these. This, however, must be done in accordance with and strictly conform to the provisions of the Act. In addition, the number of shares may not exceed the authorised amount as per the MOI.

There are many reasons why one would choose to buy a house in the name of a company, for example to ensure continuity and accommodate more than one owner. This simply means that the company will be the “owner” of the property and more than one individual can own shares in the company. The shares can then be transferred between parties as and when necessary and subject to the provisions of the Act.

Written by Wessel de Kock

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