Share Subscription Agreement
Template — South Africa

This section records the fundamental terms of the share issuance — the number and class of shares to be subscribed for, the subscription price per share (including any share premium), and the mechanism for allotment and entry into the company's securities register under Section 50 of the Companies Act. It specifies whether the shares carry par value or are no-par-value shares (as permitted under Section 35(2)), and details the rights attaching to the subscribed shares including voting, dividend, and liquidation preferences. For multi-class structures, it defines the ranking of the new shares relative to existing classes.

Establishes the total subscription consideration, the payment method (cash, asset contribution, or conversion of shareholder loans), the payment schedule (lump sum on closing or instalments over an agreed period), and any escrow or trust account arrangements for holding funds pending fulfilment of conditions precedent. Where the subscription price includes a share premium, the allocation between par value and premium is specified. The section also addresses the consequences of late payment or non-payment, including forfeiture provisions and the company's right to cancel the allotment under Section 38(3) of the Companies Act.

Lists all conditions that must be fulfilled or waived before the subscription can be completed. Typical conditions include: board resolution authorising the share issuance, special resolution of shareholders where required under Section 41 (issuance to directors) or Section 44 (financial assistance), satisfaction of the solvency and liquidity test under Section 4, Competition Commission approval where merger thresholds are triggered under the Competition Act 89 of 1998, compliance with pre-emptive rights under Section 39 (including evidence that existing shareholders have waived or declined their rights), Exchange Control approval from the SARB for non-resident subscribers, and completion of due diligence to the subscriber's satisfaction.

Addresses the critical requirement under Section 39 of the Companies Act that existing shareholders be offered the right to subscribe for new shares pro rata to their existing holdings before shares are offered to external subscribers. The section sets out the process for issuing the pre-emptive rights notice, the acceptance period (typically 15-30 business days), the consequences of shareholders declining or failing to respond, and the mechanism for offering declined shares to the external subscriber. Where the MOI has excluded or modified pre-emptive rights under Section 39(2), this section records that exclusion and the relevant MOI provision.

Where the company or any related entity provides financial assistance for the purpose of the share subscription — including vendor financing, deferred payment terms, loan-back arrangements, or guarantees — this section ensures full compliance with Section 44 of the Companies Act. It documents the special resolution authorising the financial assistance (which must have been passed within the preceding two years), the board's confirmation that the terms are fair and reasonable to the company, the solvency and liquidity certification, and the 10 business days' written notice to shareholders and trade unions required under Section 44(2). Failure to comply with Section 44 renders the financial assistance void and exposes directors to personal liability under Section 77(3)(e)(iv).

Comprehensive warranties from both the company and the subscriber. The company warrants its valid incorporation, good standing with CIPC, accuracy of financial statements, absence of undisclosed liabilities, compliance with tax obligations, ownership of material assets and intellectual property, validity of material contracts, absence of material litigation, and compliance with applicable laws including B-BBEE, labour, and environmental legislation. The subscriber warrants its capacity to enter into the agreement, the legality and source of subscription funds (critical for FICA compliance), its investment experience and understanding of the risks, and (for non-resident subscribers) its compliance with Exchange Control Regulations.

Records the board of directors' formal certification that the company satisfies the solvency and liquidity test under Section 4 of the Companies Act both immediately before and immediately after the share issuance. The solvency limb requires that the company's assets (fairly valued) exceed its liabilities (fairly valued) after the subscription. The liquidity limb requires that the company will be able to pay its debts as they become due in the ordinary course of business for the 12 months following the allotment. This certification must be made by resolution of the board and is a personal obligation of each director who votes in favour — creating potential personal liability under Section 77 if the certification is made without reasonable grounds.

Imposes restrictions on the subscriber's ability to dispose of the subscribed shares for a specified lock-up period (typically 12-36 months), ensuring the subscriber remains committed to the company for a meaningful period after investment. The section also addresses non-compete and non-solicitation obligations where the subscriber is also a strategic partner or industry participant. Under South African common law (as confirmed in Basson v Chilwan), restraint of trade clauses are prima facie enforceable unless proved unreasonable, and this section ensures the restraint is proportionate in scope, duration, and geographic reach.

Protects the subscriber from dilution in subsequent funding rounds at lower valuations (so-called "down rounds"). The section provides for either full-ratchet anti-dilution (which adjusts the subscriber's effective price per share to the lower price in the subsequent round) or weighted-average anti-dilution (which adjusts the price based on the relative size of the subsequent issuance). It also includes the subscriber's pro-rata participation right in future issuances, ensuring the subscriber can maintain their percentage ownership by subscribing for additional shares on the same terms as any future subscribers.

Addresses the tax implications of the subscription for both the company and the subscriber. New share issuances are generally exempt from Securities Transfer Tax (STT) under Section 8(1)(a) of the Securities Transfer Tax Act 25 of 2007 — only transfers of existing shares attract STT at 0.25%. The section addresses the subscriber's base cost for capital gains tax purposes under the Eighth Schedule to the Income Tax Act 58 of 1962, the tax treatment of any share premium paid, and any deemed disposal or acquisition provisions that may be triggered under the Income Tax Act. For B-BBEE transactions involving notional vendor financing, the specific tax rules in Section 8C (restricted equity instruments) and Section 8EA (hybrid instruments) are addressed.

Sets out the post-closing filing obligations, including the company's obligation to file the prescribed notice of allotment with CIPC within 10 business days under Section 38(4) of the Companies Act, update the securities register under Section 50, and issue share certificates under Section 51. Where the subscription changes the company's B-BBEE ownership profile, the section addresses the obligation to update the B-BBEE certificate and notify relevant verification agencies. For listed companies, JSE Listing Requirements relating to share issuances (including the general authority to issue shares and specific authority for particular issuances) are addressed.

Specifies that the agreement is governed by the laws of the Republic of South Africa and establishes a structured dispute resolution process. The template provides for negotiation between the parties' principals as a first step, followed by formal mediation under the rules of the Arbitration Foundation of Southern Africa (AFSA), and finally binding arbitration under AFSA rules as the primary mechanism rather than litigation. Provisions for urgent interim relief through the courts are included where necessary to protect either party's rights pending arbitration. The costs provision follows the general South African principle that the unsuccessful party pays the successful party's legal costs on a party-and-party basis.