The costly consequences of backdated share transactions
The South African legislative framework regards backdated shares as a suspicious and illegal practice, as it arises when a share issue or transfer is recorded as having occurred on an earlier date than the actual transaction. While backdating may be viewed as an administrative oversight, the consequences may constitute compliance risk, serious misconduct on directors, beneficial owners and compliance officers who authorise the backdating of share transactions. This is because backdated shares may manipulate the timing of funds, obscure the source of funds, and distort a company’s beneficial ownership structure.
