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ARTICLES OF ASSOCIATION OF A COMPANY HAVING A SHARE CAPITAL NOT ADOPTING SCHEDULE 1- share block company

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Fast FREE share block of company download.

The detailed clauses of the articles specifically applicable to a share block company.



A combination of certificates relevant for shares:
1. Certificate for ordinary share
2. Certificate for preference share
3. Certificate for unsecured debenture
4. Certificate for options
5. Certificate for units in a property unit trust
6. Advertisement of lost certificate

Shareholders Agreement

A shareholders’ agreement governs and formalises the relationship between the shareholders and directors of a company. It is an invaluable document for any business as it provides the foundation for how a company will be run.

Under the previous Companies Act (No 61 of 1973) (the ‘Old Act’), provisions contained in shareholders’ agreements prevailed over the provisions of the Articles of Association and Memorandum of Association of a company, to the extent that any such provisions in the shareholders’ agreement did not conflict with legislation.

The Act now provides that any provision of a shareholders’ agreement that is inconsistent with the Act or with the company’s Memorandum of Incorporation (MOI), being the primary constitutional document of a company under the Act, is void to the extent of such inconsistency: (Section 15(7) of the Act).

The provisions of shareholders’ agreements are thus now subject to the provisions of a company’s MOI and the Act, and as a result, may no longer be used to vary the provisions contained in a company’s primary constitutional document. This fundamental change may well have an adverse impact on the practical utility and value of shareholders’ agreements.

Under both the previous dispensation as well as under the current Act, South African law does not prescribe any specific formalities regarding the form and content of shareholders’ agreements, save for the limitation, as already mentioned, that the shareholders agreement may not be in conflict with the company’s MOI or the provisions of the Act.

Shareholders’ agreements are contracts between the shareholders of a company and, as such, are primarily regulated by the principles of South African contract law. As a general principle, contracts need not be reduced to writing and need not, subject to certain exceptions, comply with any formalities in order to be of force and effect.

The parties may, however, provide in the contract that their agreement must be reduced to writing. In such an event, the agreement only becomes binding upon signature of the contract by all of the parties thereto.

While every shareholders agreement differs, there are several key provisions every shareholders agreement should have:

• Board of Directors
A shareholders’ agreement needs to set out the maximum number of directors and the percentage of shares required to appoint a director. It should also contain provisions on when and how a director can be removed, what their duties are, how meetings are called and how they will vote (that is, will each director have one vote, or will they have as many votes as the shareholder who appointed them).

• Shareholder Economics
The agreement should clearly stipulate the shareholding of the shareholders, the different authorised share classes (if the company has shares other than ordinary shares), the rights attached to each share class, the voting rights of shareholders and any possible rights awarded, or restrictions imposed and tied to specific shareholders (that is, call options / vesting of shares / restraints of trade and so on).

• Issue of New Shares
Generally, the agreement will stipulate that any issuance of new shares is first offered to existing shareholders on a pro rata basis. This is the so- called ‘pre-emptive rights’ of shareholders and business owners should be aware of this right.

• Sale of Shares
The shareholders’ agreement should detail how a shareholder can sell his shares (how they exit). This should be clear in terms of process, notices, time-lines, valuation and method. The valuation of shares is extremely important and should be carefully considered.

• Deadlocks and Disputes
Disputes happen, and the possibility of opposing views will always be relevant. Where shareholders cannot agree on the running of the company, a deadlock provision resolves this. The agreement should clearly set out how to resolve disputes, and what actions will be taken.

• Minority Shareholder Protection
A carefully considered shareholders’ agreement will not only protect majority interests but also that of the minority. The goal is to prepare an agreement which promotes trust and creates shared value. Incorporating terms, for example, that unanimous shareholder approval (or the approval of a specific minority shareholder) is required for certain company decisions, is quite common.

• Anti-dilution Protection
You may also want to consider including provisions regulating the raising of capital to avoid diluting existing shareholders. This is especially relevant when you are a significant capital investor.

Memorandum of Incorporation
It is important to remember that the Memorandum of Incorporation (MOI) is the higher ranking of the two documents. The MOI is however a public document and if there are matters that the shareholders want to govern more privately, same should be included in the shareholders agreement.

It is important to note that any matter in the shareholders agreement that conflicts with the MOI will be null and void. It is therefore prudent that the two documents be prepared simultaneously.

In addition to the terms discussed above, your agreement should reflect the unique culture and purpose of your business. On this basis, if you are getting ready to draft a shareholders’ agreement for your company or you are reviewing an existing shareholders agreement, it is recommended that you seek legal advice to ensure that your agreement aligns with your business goals and that you understand the consequences of the provisions contained in the agreement.

The rationale for executing shareholders’ agreements is to provide a means for shareholders to protect their interests in the company and to regulate their relationship with the company and the relationship amongst the shareholders themselves. A shareholders’ agreement regulates the specific interest provided for by the Act or the company’s MOI, provided of course that the shareholders’ agreement does not conflict with any of the provisions of the Act or the company’s MOI.

There are many reasons for shareholders to elect to enter into a shareholders’ agreement over and above the MOI of a company, most notably in order to address and regulate matters which are not dealt with either by such MOI or the Act. Examples include matters such as the management of a company, the funding of a company, restrictions on the transfer of shares, or voting agreements (in which shareholders undertake to vote in a particular manner under specific circumstances).

Shareholders may also elect to enter into shareholders’ agreements in order to elaborate on provisions of the company’s MOI which are drafted in terms which allow for amplification.

Shareholders’ agreements are not public documents, which means they are not filed with the Companies Commission, and are not open for inspection by the public.

The binding power of shareholders’ agreements stems from contract law, as opposed to specific company law legislation, and for shareholders’ agreements to be valid, they have merely to comply with the general requirements of contract law, one of which is naturally that nothing in the agreement contravenes applicable legislation (such as the Act).















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