OAK Law has published new guidance for business owners on using preference shares to fund a partial exit, and the tax rule that can change the outcome entirely.
PRETORIA, South Africa — OAK Law has published a new guide addressing an option many business owners overlook when planning an exit, a staged transaction rather than a full sale. The article explains how this is structured, and precisely where it can go wrong.
Full disposal isn’t always the right fit for a business owner who wants to extract value now while retaining control, or bring in growth capital without giving up equity outright. Preference shares offer a more flexible route, but few owners understand the mechanics well enough to ask for them, let alone structure them correctly from the outset, long before a transaction is even on the horizon.
The article explores how preference shares work alongside ordinary equity, a specific tax provision that can turn an intended dividend into taxable income if the structure isn’t right, and where this same funding tool shows up in BBBEE transaction structuring. It also looks at what investors scrutinise during due diligence before a deal closes, and why documentation matters as much as the commercial terms themselves.
One detail changes the entire outcome: a single redemption term, set too early, can strip a carefully planned preference share structure of the tax benefit it was built for.
For the full breakdown, read Maximising Exit Value Through Strategic Corporate Structure.
About OAK Law OAK Law is a commercial and corporate law firm based in Pretoria, South Africa, advising business owners, entrepreneurs and professional practices across corporate structuring, mergers and acquisitions, B-BBEE transactions and broader business law matters. The firm’s corporate structuring team works with clients to prepare businesses for investment, restructuring and exit.
Contact OAK Law, Route 21 Corporate Park, 59 Regency Dr, Irene, Pretoria, 0174, 012 345 3761.
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OAK Law Publishes Guide on Structuring a Partial Business Exit
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