South Africa: Does A Change Of The Terms Of A Share Constitute A New "Date Of Issue" For Purposes Of Section 8E Of The Income Tax Act?

Last Updated: 6 February 2017
Article by Carmen Gers and Chris de Bruyn

Most Read Contributor in South Africa, July 2017

In terms of section 8E of the South African Income Tax Act, 1962 (the "Act"), dividends received by or accrued to a person in respect of certain shares and "equity instruments", as defined, must be deemed in relation to that person to be an amount of income if that share or equity instrument constitutes a "hybrid equity instrument" at any time during that year of assessment.

The term "hybrid equity instrument" is defined in section 8E, inter alia, as:

(a) "any share, other than an equity share, if –

i. the issuer of that share is obliged to redeem that share in whole or in part; or

ii. that share may at the option of the holder be redeemed in whole or in part,

within a period of three years from the date of issue of that share."

Paragraph (b) of the definition deals with shares other than those contemplated in paragraph (a) (and thus, broadly speaking, equity shares), contains similar provisions, but with an additional requirement should paragraph (i) or (ii) above be met.

(a) "Date of issue" is defined in section 8E of the Act, in relation to a share in a company, as the date on which:

(b) "the share is issued by the company;

(c) the company at any time after the share has been issued undertakes the obligation to redeem that share in whole or in part; or

the holder of the share at any time after the share has been issued obtains that right to require that share to be redeemed in whole or in part, otherwise than as a result of the acquisition of that share by that holder."

It is submitted that the object of paragraphs (b) and (c) is to ensure that shares, the terms of which when issued did not result in that share qualifying as a hybrid equity instrument, will qualify as such if there is a subsequent undertaking by the issuer to redeem, or acquisition of a right by the holder to require the redemption of that share within a period of three years from the date of issue.

In practice, to ensure that a share does not qualify as a "hybrid equity share", the redemption date is typically more than three years from the date on which the share is issued by the company.

Where a share is issued with a scheduled redemption date more than three years after the date of issue, and the term of that share is subsequently varied to extend such redemption date, the question arises whether such variation of the terms of the share (other than a variation that introduces an obligation or right to redeem the share as contemplated in paragraph (b) or (c) of the definition of "date of issue") after the date on which the share was issued will constitute a new "date of issue" for purposes of section 8E of the Act.

By way of example, if shares are issued on 31 January 2017 and the terms provide for a scheduled redemption date of 1 February 2020, such shares should not constitute a hybrid equity instrument as there is no obligation or right to redeem the shares within a period of three years from the date of issue (assuming any "redemption events" which may trigger an earlier redemption are objectively defined and outside of the control of the issuer).

However, should the terms of the shares be varied before the redemption date, say on 20 January 2020, to extend the redemption date of the shares by one year, ie the shares are only redeemable on 1 February 2021, and thus within three years from the date of change of the rights and obligations attaching to the share, the question is whether that variation constitutes a new "date of issue".

If the date of the variation constitutes a new date of issue, such share should constitute a hybrid equity instrument from 20 January 2020, as the issuer would be obliged and the holder would have a right to require the redemption of such shares within three years from the new "date of issue".

To constitute a new "date of issue", the company must, after the share has been issued, undertake the obligation to redeem that share or the holder of the share must, after the share has been issued, obtain the right to require that share to be redeemed.

The question is therefore when the obligation or right to redeem the shares come into existence. Does such obligation or right arise when the shares are first issued and carry forward to the extended period of the shares, or does a new right or obligation come into existence when the period is extended?

In terms of the original agreement between the parties, there was a right or obligation to redeem the shares more than three years from the date of issue (at the scheduled redemption date, the company would be obliged and the holder would have the right to require the shares to be redeemed). These terms are then varied to provide that the right or obligation to redeem is extended for a further period. In our view, this is distinguishable from the issues that paragraph (b) and (c) of the definition of "date of issue" attempt to address, a situation where there is no obligation or right to redeem, and such obligation or right is subsequently introduced.

The South African Revenue Service has previously stated that the "date of issue" is defined not with reference to a fixed date, but with reference to the date on which an obligation or right to redeem come into existence. Further, the Explanatory Memorandum on the Revenue Laws Amendment Bill, 2004 provides that: "Importance is placed on the redemption features added after the initial date of issue of the share. For instance, a company originally issued a non-redeemable preference share and subsequent to the original date of issue the terms of the share are altered to make the share redeemable within three years."

While an explanatory memorandum does not have the force of law, it provides an indication of the legislature's intention with regard to the legislation in question. Therefore, in our view, where a share has been issued and the issuer has an obligation or the holder a right to redeem after more than three years, and the parties subsequently agree to extend such redemption date (and such extended redemption date is within three years from the date of the variation), the obligation or right to redeem arises on the date that the shares were originally issued and no new "date of issue" should arise upon this variation of the terms.

Chris de Bruyn in a candidate attorney in ENSafrica's tax department.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.