Technology has come into our lives to embetter our conditions. It has easily and evidently improved our lifestyle. From our cellular phones, we get limitless access to all sorts of information on how its presence has advanced our infrastructure, transportation, and science. In the world of finance, the adoption of Financial technology has fostered a digital economy of easy, on-demand transactions and transfers, transforming business communication and reducing administrative costs.

Beyond efficiency AFRICA TRADE AND INVESTMENT HUB has also arrived with new models for finance and investment such as equity financing and other share related methods of raising capital . These models leverage on crowd capital to fund all manner of projects, including for Small micro and Medium-Sized Enterprises (SMMEs) and startups . Our Equity financing plan helps issuers (companies and entrepreneurs who are seeking capital) by matching them to investors who are seeking investment opportunities. Since our platforms are online and serve communication and transaction purposes to mitigate the process, this matching is done with great efficiency and transparency, and potentially on a large scale . At a deeper level, our equity financing plan has brought a multitude of significant benefits that may be apparent to the casual observer.

As an enterprenuer you need to understand that if you need an investor you must be willing to give away a certain number of shares ( giving away shares does not necessarily mean you are giving away ownership of your company you will learn more about this in the next section of explaining shares ) in exchange of that investment value. It happens everywhere whether with angel investors or venture capitalists, and in most cases they will need a larger number of shares since they provide full or large investment value and sometimes you end up loosing ownership of your business. With our equity financing model we make use of available legal instruments to see to it that we protect both the subscriber and the issuer .

Financial Inclusion

Financial inclusion is a central approach towards a sustainable financial system and a vital factor for healthy socio-economic development. Today, there is an acute shortage of funding for SMMEs and startups. On the other hand, the high minimum ticket sizes and requirements for those seeking investments have resulted in the exclusion of a large portion of society from actively participating in the capital markets. The ordinary investor is typically only able to invest through unit trusts and the likes, which limit funds circulation to the financial and stock markets, not to the real world of small and medium businesses, and almost never to micro-businesses and startups.
More impactful investments outside of listed stocks are usually made through fund managers and investment houses, which serve large sophisticated investors and other institutions, with a minimum investment out of the reach of most people. Such fund managers, although with a wider and more open appetite for alternative investments, do not commonly allocate much investment in SMMEs or new businesses. Our Equity financing platform has a major role to play in changing this status quo. The online and decentralized nature of our Equity financing platforms creates wide reach, potentially bringing funds to those who had been left out. Since the decision on where the money goes to is now in the hands of the many, there is a greater propensity for it to go to businesses that are familiar or attractive to the masses, from social enterprises to innovative startups. Popular equity financing campaigns by SMEs and startups can raise enough capital to kick start new businesses or provide funds for important projects, giving a chance for these businesses to grow and reach a scale where they can compete confidently in the open market. the same time, Equity financing is characterized by its open and democratic nature, allowing virtually anyone with some extra money to invest, as long as they reach the minimum threshold which is in most cases just a few rands.

Job Opportunities

The advancement in technology has rendered many jobs from across every industry obsolete. The finance industry is also hard-hit, where digital or mobile-only financial services disrupt the traditionally infrastructured-heavy brick-and-mortar financial institutions. For almost every traditional job, there is a digital counterpart, for sure, post-graduation employment is not what it used to be. New companies, especially SMMEs, represent the most important source of new employment. ” In Africa researches also demonstrates that almost all net job creation is accredited to startups and new businesses. What these SMMEs and start-ups depend on to grow is funding which is not readily accessible through banks and other traditional avenues. Equity financing comes into the picture to fund these companies, to support their vision, leading to growth and more employment. The nature of equity financing platforms being flexible and open to new ideas and in many cases new models increases the survival rate of such business and averages their growth rates. Addition of more jobs, also creates variety of jobs in the market.

Market Growth

In times of economic slowdown or recession, small businesses and entrepreneurs are most vulnerable, equity financing comes in with fresh capital, injecting funds into a drowsy economy from non- typical sources and generating new revenue. For investors, it features diversified investments in asset classes beyond the conventional ones, allowing them to own equity in exclusive and unique businesses. For businesses, it is easily accessible, global and markedly effective, helping themstay afloat, stay motivated and compete with larger corporations. This does not only apply to early-stage businesses but also includes well-established companies for expansion, increasing reach and identifying potential customers. Furthermore, Our equity financing platform is transparent and centralized and is great in reducing fraud. As there are no funds that directly go through our platforms, we make sure that we connect the investor to the enterprenuer before any transaction is made . Yes it is an obvious fact the more quality businesses come on board, creating a virtuous cycle of growth. It is likely that fraudulent projects may also seek to take advantage of this platform , posing a threat to this thriving funding ecosystem. To safe guard investors,our platform performs screening and verification of projects before they are featured, ensuring high levels of transparency and disclosures which will scare off the " would- be fraudsters". There is also the ‘wisdomof the crowd’, where out of a large number of investors, there will be those who can sniff out and spot dubious projects.

Equity financing allows SMMEs and start-ups to quickly raise capital in an easier manner other than through Venture Capitalists and bank loans. Additionally, issuers get capital from issuing shares while still maintaining management of their own business. Raising funds through our equity financing platform serves these companies by assisting them attract new investors to increase their probability of business success. A successfully funded and concluded campaign gives great validation and proof of concept for the company, eventually opening up follow-on investments from Venture Capital and institutional investors.

On the other hand and beyond the money, equity investors are characterized by their passion and selectiveness in choosing business. This means that once a business i chosen, it is more than just about making money but also about supporting and believing in the cause, gaining the business a community of avid supporters.

In summary, equity financing brings significant benefits to the society. Central to this is the ability of equity financing being an attractive proposition for investors, by giving investors a range of new investment choices allowing for active selection and diversification of their investment portfolios. The best part is that it is done through the internet, reducing the hassle of traditional investing. Investors can join a community of like-minded individuals from around the world to assist the growth of a project that they support.
Additionally, there are no criteria for investing and low minimums for investors which makes it available for all income levels.




Section 39 of the companies act 71 of 2008 deals with the subscription of shares and states vividly in subsection one article (b) that the said section applies to the private companies and personal liability companies in respect to the issue of shares .
Subsection 2 that if a company proposes to issue shares each shareholder of that company has the right before any other person to be offered and within reasonable time subscribe to the percentage of shares issued.

Subsection 4 read together with article (b) states that except to the extent that the private company's memorandum of incorporation states otherwise (b) shares not subscribed by shareholders within reasonable time may be offered to other person(s) to the extent permitted by the memorandum of incorporation And the article 2 of a memorandum of incorporation of private companies deals with the securities of the company and section 2 of it read together with paragrath (e) states that the company must not make offer to the public ( public markets e.g JSE and the likes ) any of its securities and an issued share must not be transfered to any person other than another person approved by the company before a transfer is effected . So in condlution yes private companies are also allowed to sell share to raise capital even though they are not allowed to trade in public markets, this is because every potencial shareholder has to be known before subscription is effected



A company can have different types of shares depending on its capital requirements. All companies will have ;/ a type of ordinary shares, which are non-redeemable (sometimes referred to as irredeemable) shares with full voting rights. Companies may then have other types of ordinary share, preference shares which give a preference to the holders – usually in respect of dividends . Though there are different types of shares available, the only types of shares we are going to deal with in this article are ;

• Authorised ordinary shares
• Authorised preference shares

It is worth noting that under every type of shares you can create different classes of shares and denote alphabets to distinguish each class .(see companies act 71 of 2008 section 36 subsection 1 article(b)) And for every class you can prescribe preferences , rights ,limitation and other terms associated with that particular class of shares



Ordinary shares, also known as common shares, are defined as shares of a company that give shareholders the right to vote in the company's meeting and also an income in the form of dividends from the corporation's profits.

Understanding Ordinary Shares

Odinary shares are one of the most common types of shares. The number of ordinary shares an investor owns is proportional to the percentage of ownership he/she has in a company. For example , if a company has 50 shares and out of all of its 50 shares and you own 30 of them. You would have a 60% ownership of the company

Ordinary shares come with a wide array of benefits. Not only do you have the right to vote in the company's meetings on various matters concerned with the shareholders, but you can also claim a proportional income in the form of dividends depending on the company's performance. Also, common shares do not carry a maturity date. Meaning your ownership in the company remains unaffected until the company decides to close down or until you choose to sell them.

Further About Ordinary Shares

Ordinary or common shares are generally issued to raise capital for the private companies Even if the company wishes to issue more shares in the future, shareholders are first given the option to purchase the issued shares in proportion to your prevailing ownership through the rights issued. This ensures that the holders' shares in the company remains undiluted. Ordinary shareholders are often referred to as unsecured creditors as the se shareholders are the last in line to receive dividends if any. The company first distributes the dividends among its preferred shareholders. Only then are the dividends, if any, made available to the ordinary shareholders. Despite the high financial risk, ordinary shareholders are rewarded greater when compared to preferred shareholders. Unlike the preference share holders whose dividends are fixed or limited, ordinary shareholders are entitled to a greater chunk of the profits if the company performs well.



Preference shares commonly known as preferred stocks, are those shares that enable shareholders to receive dividends announced by the company before the equity shareholders. If the company has decided to pay out its dividends to investors, preference shareholders are the first to receive payouts from the company. Preference shares are released to raise capital for the company, which is known as preference share capital. If the company is going through a loss and winding up, the last payments will be made to preference shareholders before paying to equity shareholders. Preference shares that can be easily converted into equi shares are known as convertible preference shares. Some preference shares also receive arrears of dividends, which are called cumulative preference shares.

Types of Preference Shares

There are nine different types of preference shares given below:

• Preference Shares
• Convertible Preference Shares
• Non-Convertible Preference Shares
• Redeemable Preference Shares
• Non Rdeamable Preference Share
• Participating Preference shares
• Cumulative Preference Shares
• Non-Cumulative Preference Shares
• Adjustable Preference Shares

These shares do not benefit the shareholders the additional option of earning dividends fromt he surplus profits earned by the company, but they receive fixed dividends offered by the company.

Convertible preference shares are those shares that can be easily converted into equity shares.

Non-Convertible preference shares are those shares that cannot be converted into equity shares.

Redeemable preference shares are those shares that can be repurchased or redeemed by the issuing company at a fixed rate and date. These types of shares help the company by providing a cushion during times of inflation.


Non-redeemble preference shares are those shares that cannot be redeemed or repurchased by the issuing company at a fixed date. Non-redeemable preference shares help companies by acting as a lifesaver during times of inflation.

Participating preference shares help shareholders demand a part in the company’s profit at the time of the company’s liquidation after the dividends have been paid to other shareholders. However, these shareholders receive fixed dividends and get part of the profit of the company along with equity shareholders.

Cumulative preference shares are those type of shares that give shareholders the right to enjoy cumulative dividend payout by the company even if they are not making any profit. These dividends will be counted as arrears in years when the company is not earning profit and will be paid on a cumulative basis the next year when the business generates profits.

Non - Cumulative Preference Shares do not collect dividends in the formof arrears. In the case of these types of shares, the dividend payout takes place fromthe profits made by the company in the current year. So if a company does not make any profit in a single year, then the shareholders will not receive any dividends for that year. Also, they cannot claim dividends in any future profit or year.

In the case of adjustable preference shares, the dividend rate is not fixed and is influenced by current market rates

"Several features of preference shares have made normal investors superior earners even during low phases of economic growth"

The most attractive features of preference shares are given below:

They Can Be Converted Into Common Stock

Preference shares can be easily converted into common stock. If a shareholder wants to change its holding position, they are converted into a predetermined number of preference stocks. Some preference shares inform investors that they can be converted beyond a specific date, while others may require permission and approval fromthe company’s board of directors to be converted.

Dividend Payout

Preference shares allow shareholders to receive dividend payouts when other stockholders may receive dividends later or may not be receiving dividends.

Dividend Preference

When it comes to dividends, preference shareholders have the major advantage of receiving dividends first compared to equity and other shareholders.

Voting Rights

Preference shareholders are entitled to the right to vote in case of extraordinary events. However, this happens in only some cases. Generally, purchasing a company’s stock does not give one voting rights in the company’s management.

Preference In Assets

While discussing a company’s assets in the case of liquidation, preference shareholders have priority over non-preferential shareholders.

What are Redeemable Shares of Stock?

Redeemable Shares are shares of stock that can be repurchased by the issuing company on or after a predetermined date or following a specific event. These shares have a built-in call option that enables the issuer to exchange the shares for cash at a predetermined point in future on predetermined terms .

Maturity Date Shares - A share may carry a maturity date when the company is obligated to redeem the shares. The company pays the shareholders the par value that was predetermined when the share holder subscribed for that class of shares on thats fixed date and the share then ceases to exist. It is worth noting that the par value is static, unlike market value, which fluctuates with marketdemand and interest rate fluctuations. The par value is assigned at the time the security is issued.

Call Date Shares - Another type of redeemable shares may carry a call date. The company is allowed to exchange those shares for cash on or after the call date. However, they are not obligated to do so. The companies may issue mandatorily redeemable shares to its employees as sort of a compensation kicker. The company issues such shares to its employees with a call option. If an employee holding the share decides to leave the firm, the employer exercises the call option and buys back the shares from the leaving employee. The employee is obliged to sell their share in the exchange of cash. The companies often exercise this right if the share is a restricted share or the company is a closely-held company with a small number of shares in the market.

The redemption terms will have been set out in the share issue documents, the prescribed particulars for the shares and, potentially be included in the company’s articles of association. The redemption terms will include the redemption date or dates and the basis for the redemption price.
The redemption date may be: a fixed date (eg redeemed on a set date or a set number of years after issue); at the directors’ discretion; at the company’s option; or at the shareholder’s option.
The redemption price will generally be a fixed amount or calculated in a fixed way. This can be the same as the nominal value, the issue price or any other price.

Why issue redeemable shares?

Companies will issue redeemable shares for a variety of reasons. The main is to provide a third party investor (eg a venture capitalist) with an agreed exit strategy albeit subject to the company having sufficient distributable reserves.

What to consider before issuing redeemable shares

Acompany, before issuing the shares, should ensure that its articles of association allow redeemable shares to be issued. If not, then the company can either amend its MOI or pass an ordinary resolution giving authority to the directors to issue redeemable shares. See section 16 (1)of companies act . Provided that the directors have the right to issue redeemable shares they need to agree to the terms and conditions of the redeemable shares and include these in the share issue documents, the prescribed particulars for the shares and, if considered appropriate, in the company’s articles of association.
Once the above has been completed the redeemable shares can be issued.

What needs to be done to complete a redemption of shares?

The procedures to follow to redeemshares will depend on a number of factors including:
The company’s articles of association; The prescribed particulars of the shares; How the redemption is to be financed; Any shareholders’ agreement; and whether or not the company is following the terms of the redemption set out in the share issue documents or in the articles of association. Where the shares are redeemed in line with the articles of association then, unless required by them, the shareholders do not need to approve the redemption. The directors then, provided the company has sufficient distributable reserves or is issuing new shares with sufficient proceeds, just need to pass a board resolution approving the redemption. If, however, the articles of association or any shareholders’ agreement require the redemption to be approved by the shareholders then the appropriate ordinary or special resolution, as applicable, of the shareholders will be required in addition to a board's resolution.

Where the redeemable shares are being purchased other than in accordance with the articles of association then the buyback of the shares should be treated as a purchase of own shares and the requirements for doing this is followed. There are certain statutory restrictions on the redemption of shares. The main requirement, as for a purchase of own shares, is that the company may only redeemthe shares out of distributable reserves (basically accumulated profits) or the proceeds of a new issue of shares. However, if the company is a private limited company then it can potentially finance the redemption in part or in full out of capital. But all available distributable reserves and the proceeds of any new share issue must be used first.

Is it possible to increase the number of shares in my company or change the rights and limitations of shares ?

Section 36 subsection 2 & 3 states clearly that rights, terms ,limitations and restrictions of shares can be changed and number of shares can be increased or decreased and it provide guidance to that.