Issuing shares means the company creates new shares and the new shareholder pays the company for them — the money goes into the business and everyone's percentage dilutes. Transferring shares means an existing shareholder sells their shares and the money goes to that person, with no change to the total. Both require a board resolution and an update to the company's securities register, but they are entirely different transactions with different tax consequences.
Getting this distinction wrong is the single most common mistake small companies make when bringing someone in.
Issue or transfer? Decide this first
| Issuing new shares | Transferring existing shares | |
|---|---|---|
| Where the money goes | To the company | To the selling shareholder |
| Effect on total shares | Increases | Unchanged |
| Effect on existing holders | Diluted | Only the seller changes |
| Typical purpose | Raising capital, bringing in an investor | Buying someone out, succession |
| Tax on the recipient of the money | Generally none for the company on the share issue itself | Capital gains tax for the seller |
| Securities transfer tax | Not applicable to an issue | Generally applies to a transfer |
A worked example. A company with 100 shares held equally by two founders, bringing in a third person for 20%:
By issue: the company creates 25 new shares and sells them to the newcomer. Total becomes 125. The newcomer holds 25/125 = 20%. Each founder drops from 50% to 40%. The money paid goes into the company.
By transfer: each founder sells 10 of their shares to the newcomer. Total stays at 100. The newcomer holds 20/100 = 20%. Each founder drops from 50% to 40%. The money goes to the founders personally.
Same end percentages. Completely different outcomes. In the first, the business is capitalised. In the second, the founders have taken money off the table and will each face a capital gains calculation.
The right choice depends on what you are trying to achieve — funding the business, or paying the founders. Be explicit about which, because the paperwork and the tax follow from it.
How to issue new shares
1. Check the MOI and any shareholders' agreement. How many shares are authorised? Is there an unissued pool, or must the authorised share capital be increased first? Are there pre-emptive rights requiring existing shareholders to be offered the shares first?
Pre-emptive rights are the usual sticking point. Where they exist and are not properly waived, the issue can be challenged later.
2. Increase the authorised shares if needed. Where there are not enough unissued authorised shares, the authorisation must be increased first — generally by amending the MOI, which requires a special resolution and a filing with CIPC.
3. Determine the price. What is a fair value for the shares? This matters for tax and for the fairness of the transaction. Issuing shares at a nominal value where the business has real worth can create tax consequences — take advice where the amounts are meaningful.
4. Pass the board resolution approving the issue, the number of shares, the class, the price and the recipient. Shareholder approval may also be required — check the MOI, particularly where shares are issued to a director or a related party.
5. Receive the payment, into the company's bank account, properly recorded.
6. Update the securities register. The company's own register of securities is the legal record of who owns what. This is a statutory obligation and it is the document that actually proves ownership — not a spreadsheet, not an email.
7. Issue share certificates to the new shareholder.
8. Update beneficial ownership at CIPC within the required period after the change — generally 10 business days. See what happens if you don't file beneficial ownership.
The register that matters more than CIPC
Private company shareholding does not appear on the public CIPC register. People are consistently surprised by this.
What CIPC holds is beneficial ownership, which is about ultimate control and is filed separately.
What proves who owns shares is the company's own securities register, which the company must maintain and keep at its registered office. It records each shareholder, the number and class of shares, the dates of acquisition and disposal, and the certificate numbers.
In practice, most small companies do not have one, or have one that stopped being updated years ago. That is fine until the day it is not — a due diligence, a dispute, a bank query, or a shareholder death. At that point the absence of a proper register turns a simple question into an expensive reconstruction.
The tax you need to think about before you sign
On an issue of shares, the company receives the subscription amount and there is generally no income tax charge on the issue itself. Where shares are issued to an employee or director at below value, the discount can be taxable as remuneration, and specific rules apply to employee share schemes. Get advice before issuing shares to staff.
On a transfer, the seller disposes of an asset. Capital gains tax applies to the gain, and securities transfer tax generally applies to the transfer. Both need to be dealt with at the time, not discovered at year end.
Dividends subsequently paid to the new shareholder attract dividends tax, generally withheld by the company at 20%.
Loan accounts are not shares. Money a shareholder puts in as a loan is a liability repayable to them, not equity. Money put in as share capital is not repayable. Deciding which you intend, before the money moves, saves a great deal of argument later.
What to agree before you bring anyone in
The paperwork is the easy part. These are the questions that cause disputes when nobody answered them upfront.
What happens if they leave? Is there a buyback right? At what price, and who values it?
What happens on death or disability? Do the shares pass to an estate, and is the surviving shareholder comfortable with that?
Who decides what? Some decisions should require unanimity rather than a majority — new shareholders, borrowing, selling the business, changing what the company does.
Can they sell to anyone they like? Pre-emptive rights, tag-along and drag-along provisions.
Is anyone obliged to work in the business? A shareholder who stops contributing but keeps their shares is a common source of resentment.
How are profits distributed? Dividends by agreement, or at the board's discretion?
A shareholders' agreement covers this. It sits alongside the MOI and is where the commercial arrangement between the people actually lives. Put it in place at the start, when everyone is well disposed towards each other, rather than during the disagreement that makes you wish you had.
Frequently asked questions
What is the difference between issuing and transferring shares? Issuing creates new shares and the money is paid to the company, increasing the total and diluting all existing shareholders. Transferring moves existing shares from one person to another, with the money going to the seller and no change to the total.
How do I add a shareholder to a (Pty) Ltd in South Africa? Either issue new shares to them or arrange for an existing shareholder to transfer shares. Both require checking the MOI and any shareholders' agreement, a board resolution, payment, an update to the company's securities register, issuing share certificates, and updating beneficial ownership at CIPC.
Does CIPC record who the shareholders of a private company are? No. Private company shareholding is not on the public CIPC register. CIPC records beneficial ownership, which is about ultimate control. Legal proof of shareholding is the company's own securities register.
Do I need to update CIPC when shares change hands? You must update beneficial ownership where the change affects who ultimately owns or controls the company, generally within 10 business days. The shareholding itself is recorded in the company's securities register rather than at CIPC.
Is securities transfer tax payable when shares change hands? Generally yes on a transfer of existing shares. It does not apply to a fresh issue of shares by the company. Capital gains tax also applies to the seller on a transfer.
What is a securities register and do I have to keep one? It is the company's own statutory record of who holds which shares, with dates and certificate numbers. Companies must maintain it, and it is the document that actually proves ownership — not a spreadsheet or an email.
Can I issue shares to an employee? Yes, but take advice first. Where shares are issued below value to an employee or director, the discount can be taxable as remuneration, and specific rules apply to employee share schemes.
Do I need a shareholders' agreement? It is not legally required, but it is where the commercial arrangement between the people lives — exit, death, decision-making, sale restrictions and work obligations. Put it in place at the start rather than during the dispute.
Do the paperwork properly the first time
Bringing in a shareholder is a five-minute conversation and a set of documents that will be examined closely in ten years' time, during a sale, a dispute or a death.
Smartbook handles share issues and transfers, maintains the securities register, and updates beneficial ownership at CIPC so the record matches reality.
Last reviewed: 28 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Share issues, transfers, valuations, employee share schemes and shareholders' agreements have legal and tax consequences that depend on the specific facts — take advice before implementing. General guidance, not legal or tax advice on your circumstances.
Primary sources: Companies Act 71 of 2008 · CIPC · SARS · Securities Transfer Tax Act 25 of 2007