One of the most important aspects of your emigration is financial planning. It’s essential to have a plan in place to ensure the smooth transition of your finances from one country to another, which includes knowing what to do with your unlisted shares in a private South African company. Let’s break it down for you.

If you’ve already formally emigrated through the South African Reserve Bank a number of years ago, or you’re still in the process of completing your tax emigration through the South African Revenue Service (SARS), and you’re considering your options as to what to do with your shares, here’s the deal. Whether listed or unlisted, you are allowed to export your shares overseas. This means you are essentially taking them with you, in lieu (this is a fancy way of saying ‘instead’) of the exchange control allowances that South Africans can use to move money out of the country. You are permitted to take your unlisted South African shares overseas, without having to liquidate (sell) them beforehand.

Shares in lieu of cash: the exchange control rules

• 13 years ago, exchange control rules were amended to permit emigrants to export their listed shares in South Africa, in lieu of cash.
• Shortly thereafter, the Minister of Finance gave emigrants permission to export their unlisted shares instead of selling them.

Benefits of exporting unlisted shares in lieu of cash

As the shareholder in private South African companies, there are a number of clear advantages to exporting your shares from South Africa instead of cashing them in.

• With unlisted shares it can be near impossible to find a buyer who is willing to pay a market-related price, given that the seller is pressed to liquidate and buyers are usually looking to take advantage of that fact.
• In many cases, the shareholder is simply unwilling to liquidate, because this usually means selling their stake (and diluting control) in a family business, or company in which the seller is financially (and usually emotionally) invested.
• By exporting unlisted shares in a South African private company, however, the individual gets to retain their stake in the business while removing their shares from the volatility of the South African Rand.

Shares in lieu of cash: tax treatment in South Africa

So, what are the implications for someone planning to emigrate? As part of your emigration, you are permitted to externalise the holdings in your shares without having to liquidate first. Exporting your shares in lieu of cash can be done through the South African Reserve Bank (SARB), who is responsible for the oversight of the South African exchange control administration by means of your foreign capital allowance, to which all South Africans are entitled. However, you will need to obtain the necessary tax clearances and exchange control approvals where the value of your unlisted shares exceeds R1 million.

How do I export unlisted shares in lieu of cash from South Africa?

To externalise your shares from South Africa, you’ll need to have them endorsed by an Authorised Dealer (i.e., a local commercial bank) as “non-resident”.

This gives you the authority to deal with your shares as you choose, once you have left the country. Once your shares have been endorsed as non-resident shares, this places your assets outside of the control of the bank, like it does with your other assets because those shares are now beyond the exchange control jurisdiction. Should you later decide to sell your shares, you would be free to transfer the proceeds from the sale of your shares overseas.

What you need to know about exporting unlisted South African shares in lieu of cash:

1. You must submit a valuation certificate that verifies the value of the unlisted shares that you hold in South Africa.
2. The export of your unlisted shares is granted on the condition that the company remains a South African tax resident, which means it cannot be re-domiciled at a later date.
3. Your shares must be endorsed as ‘non-resident’ within 30 days of ceasing your South African tax residency.
4. Without this non-resident endorsement you will not be able to transfer any dividends abroad, and you will not be able to dispose of your shares in the future.

Read more: Don’t overlook share endorsement: vital requirement for non-resident shareholders in South Africa.

Let FinGlobal help with the smooth transition of your assets

Exporting unlisted shares in lieu of cash when leaving the country can be a stressful task. That’s why we’re here to help reduce the headache. FinGlobal is a licensed financial services provider and a SARB approved foreign exchange intermediary. This means we can handle all the exchange control processes for you – from having your unlisted shares correctly endorsed as non-resident, to walking you through the process of tax emigration and obtaining the necessary SARS approvals, we can ensure that your assets are seamlessly transitioned abroad. We can also assist you with your South African retirement annuity encashments, and international money transfers.

Contact FinGlobal today, and let’s discuss a relocation plan tailored to safeguard your assets according to your preferences. Your peace of mind is waiting!