Does payment for shares have to be in cash?

Does payment for shares have to be in cash?

March 26, 2019

Subject to the provisions of the CAMA, the shares of a company and any premium on them shall be paid up in cash, but where the articles so permit, shares can be paid for by a valuable consideration other than cash or partly in cash and partly by a valuable consideration other than cash.

For cash payments, shares shall not be deemed to have been paid for in cash except to the extent that the company shall actually have received cash for them at the time of, or subsequently to, the agreement to issue the shares, and where shares are issued to a person who has sold or agreed to sell property or rendered or agreed to render services to the company or to persons nominated by him, the amount of any payment made for the property or services shall be deducted from the amount of any cash payment made for the shares and only the balance (if any) shall be treated as having been paid in cash for such shares notwithstanding any exchange of cheques or other securities for money.

Where a company agrees to accept payment for its shares otherwise than wholly in cash, it shall appoint an independent valuer who shall determine the true value of the consideration other than cash and prepare and submit to the company a report on the value of the consideration.

The valuer shall be entitled to require from the officers of the company such information and explanation as he thinks necessary to enable him to carry out the valuation or make the report.

The company shall, not more than three days after the receipt by it of the valuer’s report, send a copy of it to the proposed purchaser of shares, and indicate to the proposed purchaser whether or not it intends to accept the consideration as payment or part‐payment for its shares.

A company shall not accept as payment or part‐payment for its shares consideration other than cash unless the cash value of the consideration as determined by the valuer is worth at least as much as may be credited as paid up in respect of the shares allowed to the proposed purchaser.

NOTE that ‘’valuer” means an auditor, a valuer, a surveyor or engineer or an accountant not being a person in the employment of the company nor an agent or associate of the company or any of its directors or officers.

Reference- S.137 CAMA

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