Equity for expertise

Ask a South African founder what is holding the business back and the first answer is usually money. The 2025 SA MSME Access to Finance Report, from Finfind with African Bank and Experian, puts the small business funding gap at roughly R350 billion. Businesses turning over less than R1 million a year find it hardest to get funded at all.

But money is rarely the real bottleneck on its own. What founders usually need the money for is people and systems: a developer to build the online store, someone to sort out the books, a proper way to take bookings instead of a WhatsApp group. Those are exactly the things a partner can bring directly.

That is the idea behind equity for expertise: instead of paying cash you do not have for work you need, you give a partner a share of the business they help build.

When it makes sense

It works best when:

• The work is the growth. The thing you need built (a platform, an app, a sales system) is what unlocks the next stage, not a nice-to-have.
• The partner is committed to the outcome, not the hours. Someone who owns part of the business has every reason to build it properly and keep it running.
• You would struggle to fund it any other way. A loan you cannot comfortably repay is a worse deal than a fair share given to the right partner.

It works badly when the work is small or one-off. Giving away 10% of your business for a website you could have paid R30,000 for is an expensive way to save cash.

How it is done properly in South Africa

The legal mechanism already exists. Section 40(5) of the Companies Act allows a company to issue shares in exchange for an agreement to provide future services, not just for cash.

The important protection is what happens to those shares while the work is being done:

1. The company issues the shares straight away.
2. They are transferred to an independent stakeholder to hold, under a stakeholder agreement.
3. They are released to the partner only once the agreed work is delivered. Until then, the partner cannot vote those shares or receive distributions on them, unless the agreement says otherwise.

Before 27 December 2024 the Act described this as shares held “in trust” under a trust agreement. The Companies Amendment Act of 2024 changed the wording to a stakeholder and a stakeholder agreement. The protection for you, the founder, is the same: the partner earns the shares by doing the work, not by promising to.

What to agree upfront

Put these in writing before anything is built:

Agree this	Why it matters
A clear scope, broken into milestones	Shares can be released in tranches as each milestone is delivered
What “done” means for each milestone	Avoids arguments about whether the work is finished
The stake per milestone	You can see what each piece of work costs in equity
What happens if the partner does not deliver	Undelivered shares should not be released
Who owns what is built	The company should own what was built for it
Who keeps it running afterwards	Software needs looking after; agree who does it

The tax side

Shares given for services can have tax consequences for both sides, and the answer depends on how the deal is structured. This is one area where an hour with a good accountant before you sign is worth far more than it costs.

A worked example

A Durban furniture maker sells through Instagram and a WhatsApp catalogue. Orders are growing, but quotes, deposits and delivery dates live in three notebooks and the owner’s phone.

A partner agrees to build an online store with deposits and booking, plus a simple order system, in three milestones over six months. In return, 15% of the shares are issued and held by a stakeholder: 5% released when the store goes live, 5% when the order system replaces the notebooks, and 5% after three months of the partner supporting both.

If the partner walks away after the first milestone, they keep 5% and the rest is never released.

This example is illustrative, not a real deal or a standard Serelis offer.

Questions to ask before you agree

1. What exactly will be built, and by when?
2. How are the shares held until the work is done?
3. What happens if a milestone is late or never delivered?
4. Who owns the code, designs and data?
5. Who looks after it once it is live, and is that part of the deal?

If you want a partner who brings the team as well as the capital, that is the core of what Serelis does. Start with the free Growth Check to see where the business is stuck.

This guide is general information, not legal, tax or financial advice. Every deal is different: speak to your own attorney and accountant before you sign anything.