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Section 48 of the South African Companies Act, 2008

Writer: Priyesh ModiPriyesh Modi

Section 48 of the South African Companies Act, 2008 states that the board of a company has the authority to decide that the company will acquire a certain number of its own shares, subject to specific requirements, also known as a Share Buyback. A Share Buyback is considered a distribution to shareholders, similar to a dividend.


Unlike the 1973 Companies Act, the approval of shareholders is no longer necessary for a Share Buyback, except in cases where the buyback involves shares held by a director or prescribed officer, in which case a special resolution is required. There is also no obligation to inform shareholders about the advantages or disadvantages of the Share Buyback.


It is worth noting that it appears that Section 48 is not a provision that can be altered, meaning that additional safeguards cannot be included in the Company's Memorandum of Incorporation (MOI). However, it has been argued that additional safeguards for shareholders are necessary to prevent abuse of this process by the board, where shares not owned by directors/prescribed officers are involved.


 
 

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