Abstract
It is generally accepted that the overarching functional purpose of issuing shares in a company is to raise the share capital, therefore, such transactions should be permitted and facilitated by law. Conversely, it is also accepted that such transactions could raise potential conflicts of interest among stakeholders. For example, some conflicts may arise, among other things, between majority and minority shareholders; and/or between directors and shareholders. This article exposes some of the conflicts of interest instances between minority and majority shareholders and/or between shareholders and directors against the backdrop of CDH Invest NV v Petrotank South Africa (Pty) Ltd and Others [2019] JOL 41627 (SCA). In this case, it was held that directors misrepresented facts and unduly issued unauthorised shares ten times more than what was supposed to be issued. Such a misrepresentation had serious repercussions for the minority shareholders since it would have significantly altered the ownership structure from a 60 per cent to 40 per cent ratio to a 74.89 per cent to 25.11 per cent ratio. Another negative implication was giving a financial burden to the minority shareholder, who in the circumstances was both illiquid and unwilling to buy the shares. It is against the above backdrop this note seeks to assess the current law that regulates the authorisation and issuing of shares in suggesting the law reform to mitigate conflicts of interest. Notably, CDH Invest NV v Petrotank (SCA) reaffirms the position that when issuing shares directors are bound by fiduciary duties.