Difference between beneficial owners of shares and registered owners of shares in a company

South African company law distinguishes between beneficial owners of shares and registered owners of shares in a company. The beneficial shareholder is entitled to the rights attached to the share (eg. the right to receive dividends) while the registered shareholder is the person in whose name the share is registered. The South African Companies Act, 2008 defines a “shareholder” as the registered owner. 

To mitigate the potential risks arising from this distinction, private M&A transactions in South Africa typically require the seller to warrant that it is the beneficial owner of the sale shares, that it has valid title to the sale shares and that it has the power and authority to dispose of the sale shares. 

Further, as part of the closing of a share sale transaction, the seller is required to deliver an updated securities register to the purchaser reflecting the purchaser as the registered owner of the sale shares. 

In doing so, the purchaser ensures that it acquires both beneficial and registered ownership of the sale shares.

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