In setting up this scheme property owners and developers need to take heed of the following:
- The share block company may not issue shares which confer a right to or an interest in the use of land or buildings thereon to the public before it has been incorporated in accordance with the Companies Act No 71 of 2008 as a share block company; and
- No compensation may be accepted by the developer, owner or share block company in respect of the share block company’s shares until a certificate of practical completion in respect of the buildings forming part of the share block scheme has been issued by an architect. One of the exclusions to this requirement is the receipt of compensation by a share block developer. The developer’s main source of finance for the development of a share block scheme will usually be a loan from a financial institution secured by a mortgage bond over the land and buildings forming part of the share block scheme. The share block company is dependent on contributions from its shareholders to discharge its obligation to repay the loan and it is therefore important that the memorandum of incorporation obligates shareholders to make a monthly cash contribution to the share block company for it to use in discharge of that loan obligation.