Let’s say that you own 50 shares and they represent 50% of a company’s share capital.

They cost you R1 000. The net Asset Value of the company has grown to R200 000, so your 50% is worth R100 000.

Then the directors issue another 100 shares and sell them for R100 000.

You now have 1/4 of the share capital and the Net Asset Value is R200 000 + R100 000 = R300 000.

So, your shares are now only worth 1/4 x R300 000 = R75 000.

Have you suffered a Capital Loss of R25 000 in tax law?

No, partly because you have not sold your shares, so there has been no disposal. But also because, if you did sell your shares at current value, you would make a Capital Gain of R75 000 – R1 000 = R74 000.