Shareholders must know what changes need to be made to their company’s MOI to bring it in line with the new South African Companies Act. These changes are important, as the new Companies Act puts many new requirements on the MOI.
Your MOI under the old Companies Act
In 2008, the law of companies in South Africa was totally overhauled and updated. This was much needed and long overdue. Under the old legal framework, the relationship between shareholders was governed by:
- a shareholders agreement,
- its memorandum and articles, and
- the Companies Act of 1973.
If there was a conflict between any of the above documents, they prevailed in that order. The shareholders agreement was king, and trumped everything else. Because of this, shareholders often focused on the agreement and did not pay much attention to the other two. The memorandum and articles was less important, and the Companies Act least of all.
Your MOI under the new Companies Act
Under the new legal framework, the relationship between shareholders is governed by:
- the Companies Act of 2008,
- its memorandum and articles (renamed the “memorandum of incorporation” or MOI), and
- a shareholders agreement.
If there is a conflict between the documents above, they also prevailed in that order. The Act now overrides everything else. On 1 May 2013 the new Companies Act made huge changes to all companies’ MOIs and shareholders’ agreements by operation of law. The old memo and articles changed automatically. Some clauses no longer apply because they conflict with the Act, and some other clauses that never existed are assumed to be present.
Unfortunately, this can lead to many unintended consequences. So it really makes sense for most companies to amend or update their old memo and articles to bring it inline with the new Companies Act. It is not compulsory, but it is recommended. It is not that the new MOI will change the relationship, but rather the new Companies Act has already done so. An update to the MOI will simply clarify the situation, avoid confusion, and have all of the relevant information in one place.
It is not possible to compare the old memo and the new MOI, and make a list of what has changed. They are totally different documents operating under two different legal frameworks. To list the differences would be to write a summary of the old legal framework vs the new legal framework. An old textbook vs a new textbook.
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