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MOI: COMPANY RULES & SHAREHOLDER AGREEMENTS

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Article by listed AttorneyNanika Prinsloo

The Companies Act, Act 71 of 2008, determines that each Company that is incorporated, must have a Memorandum of Incorporation (“MOI”).  The MOI is a prescribed form and must contain certain information which can be found in the regulations.  A Company will also make rules that will determine how the Company will be run and general rules on the existence of the Company.  This article will briefly discuss the MOI and the rules of the Company.

Read AlsoAlterations of a Company’s Memorandum of Incorporation (MOI) 

Each Company’s MOI must comply with the requirements of the Companies Act, and if it doesn’t, it will be void. The MOI may also includes matters that the Companies Act doesn’t deal with.  It will also contain any contain any special conditions applicable to the Company, and any requirement for the amendment of any such condition.  The MOI can also prohibit the amendment of any particular provision of the MOI.

If the MOI does not prohibit it, the board of a Company may make, amend or repeal any necessary or incidental rules relating to the governance of the Company in respect of matters that are not addressed in the MOI.  The amended MOI and new rules must be published by the Company in the manner that the MOI or the rules of the Company prescribes.

RULES OF THE COMPANY

Rules that the Company makes must be consistent with the Company’s MOI and if it isn’t, that rule is void.

The rules of the Company takes effect on a date that is the later of 20 business days after the rule is published or the date specified in the rule, if there is a rule specified.  The rule is binding on an interim basis from the time it takes effect until it is put to a vote at the next general shareholders meeting of the Company; and on a permanent basis only if it has been ratified by an ordinary resolution at a general meeting. (To ratify something means to confirm it and accept it).

If a rule that has been published is not ratified, the Company’s board may not make a substantially similar rule within the ensuing 12 months, unless it has been approved in advance by ordinary resolution at a shareholders meeting.

COMPANY RULES ARE BINDING

A Company’s MOI, and any rules of the Company, are binding between the Company and each shareholder, between or among the shareholders of the Company; and also between the Company and each director or prescribed officer of the Company; or  any other person serving the Company as a member of the audit committee or as a member of a committee of the board in the exercise of their respective functions within the Company.

SHAREHOLDER AGREEMENTS

The shareholders of a Company may enter into any agreement with one another concerning any matter relating to the Company, but any such agreement must be consistent with this Act and the Company’s MOI, and any provision of such an agreement that is inconsistent with the Companies Act or the Company’s MOI is void to the extent of the inconsistency.