SHAREHOLDERS AGREEMENT (PRIVATE COMPANY)

Shareholders Agreement Precedent (private company)

A Shareholders Agreement, is an agreement between the shareholders of the company and between the shareholders and the company itself, and regulates the rights and obligations of the shareholders to each other and to the company, as well as the rights and obligations of the directors appointed by the shareholders.

In South Africa, the Companies Act 2008 regulates all matters relating to companies, shareholders and directors. In 2008, the Companies Act was amended and now includes provisions which are mandatory and cannot be contracted out of.  Further, a Memorandum of Incorporation (“MOI”) was introduced, which now substitutes the old Memorandum of Association and Articles of Association.  An MOI is a public document and can therefore be inspected by any member of the public at any time.

The effect of the aforesaid, is that that shareholders should have both an MOI and a Shareholders Agreement. The MOI will regulate all matters which are mandatory and are not private as between the parties, for example funding, dividends, breach and disputes. These provisions will be included in the Shareholders Agreement.

It is recommended that this Shareholders Agreement be purchased, together with the Memorandum of Incorporation Precedent.

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