The Exchange Control Regulations of 1961 (“Regulations”) were promulgated in terms of the Currencies and Exchanges Act, 9 of 1933. This is to regulate the flow of funds into South Africa from external or foreign sources. As well as the outflow of funds from South African residents in South Africa to non-South African residents. In terms of the Regulations, natural and juristic persons acquiring ownership of shares in South African companies must obtain a ‘non-resident’ endorsement on their share certificates.
Submission for non-resident endorsement
The Regulations provide that within 30 days of a natural or juristic person purchasing or subscribing for shares in a South African company. Their share certificates must be submitted to an authorised dealer, along with the following information:
- the name and country of residence of the foreign acquirer, together with a declaration of non-residency;
- the name of the South African company in which the shares are being acquired;
- the total number of shares being acquired; and
- the name and residential address of the person in possession of the shares.
Once the authorised dealer has satisfied itself with its assessment of the submission, it will affix a ‘non-resident’ stamp to the relevant share certificate.
Consequences of non-compliance
The ‘non-resident’ endorsement is more of a formality than an ‘application’. However, failure to obtain this endorsement will mean that the non-resident shareholder will not be entitled to repatriate any sale proceeds or dividends (or other distributions) is in respect of the South African company until it has successfully been granted condonation from the South African Reserve Bank.
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