When attending to investing in a South African entity as an offshore shareholder, it is important to understand the requirements of the Exchange Control Regulations of 1961 (promulgated in terms of the Currencies and Exchanges Act, 9 of 1933), hereinafter referred to as “the Regulations” and its application as regards to any person or entity in South Africa. It is the function of the South African Reserve Bank (“SARB”) to maintain control and monitor the outward flow of funds from South African residents to non-residents, particularly when such outward flow of funds takes the form of a dividend or proceeds of a sale based on shares held by a non-resident entity or person in a South African entity.

The Regulations require that non-resident entities or persons need to obtain a “non-resident” endorsement stamped on the face of the share certificates representing their shareholding in South African entities.

This would apply if a non-resident entity or person acquires shares in a South African resident company by way of a transfer or a subscription of shares, and in order for such non-resident entity or person to receive dividends offshore or the share sale proceeds in the event of a prospective sale of those shares, such non-resident entity or person needs to have had the relevant share certificate representing such shareholding upon which the outward flow of funds is based, endorsed as “non-resident”.

Regulation 14(2)(b) provides that within 30 days of a person acquiring ownership of shares in a resident company, that person must submit those share certificates to an authorised dealer, along with the following information:

  • the full name and country of residence of the non-resident who owns or is interested in the shares, together with a declaration as to its non-residency
  • the name of the resident company in which the shares are held
  • the total number of shares held by the non-resident in the resident company
  • the full name and residential address of the non-resident in whose possession the shares are

Once the authorised dealer has received and assessed the above information and is satisfied with the findings, they will endorse the share certificate as “non-resident”.

In the event that the endorsement is not attended to, an application will need to be made to the SARB for regularisation of such oversight in order to allow for the remittance of funds to the non-resident shareholder.

Nicole Gomes

Legal Advisor, Johannesburg

Also read: South African Exchange Control Regulations