Issue Of Shares As Consideration

In order for the ownership of assets to pass from a seller to a buyer it is necessary that the parties agree three essential elements: price, terms and structure.  These three elements are interdependent in any transaction.  For instance, after agreeing the price of a transaction, i.e. the number of rands or rand value of other consideration the seller will receive, the parties will need to agree the terms such as whether the price will be paid by means cash, debt and/or shares as well as the timing of these payments.

Commercial transactions can be structured on the basis that instead of a cash payment for the acquisition of an asset, shares are issued by the purchaser in favour of the seller, usually referred to as an "asset for share" transaction.  The issue of shares as consideration will give rise to a number of tax consequences which should be considered carefully before implementing the proposed transaction.  Thus, after agreeing the price and the terms the