A lot of people want to know: what is a MOI? The term “MOI” is an abbreviation for “Memorandum of Incorporation”. It is a document that sets out the rights, duties and responsibilities of shareholders, directors and other persons involved in a company. Every company registered in South Africa needs to have an MOI.
What is a MOI?
A company’s MOI is the sole governing document of the company. It is binding between the shareholders themselves (if there are more than one), and between the company and each director or prescribed officer.
Before 1 May 2011 (when the new Companies Act became law), the shareholders agreement was the most important founding document. The shareholders agreement could contain provisions that overruled the company’s constitution (the MOI) as well as regulate the rights, duties and responsibilities of the shareholders. Today, what is a MOI? It is the company’s most important founding document. An MOI can be changed, but it must be filed with the Companies and Intellectual Property Commission (CIPC). This costs time and money, so MOIs should be drafted carefully to make sure they do not have to be changed in the future. A shareholders agreement, which is also binding between shareholders, but is easier to change than an MOI. The shareholder’s agreement must not conflict with the MOI or the Companies Act.
There are many different types of MOI, almost an unlimited number. But they can, to an extent, be categorised as default, altered or unique.
A default memorandum (or a “short form memorandum”) is often based on the CIPC-prescribed, standard form CoR15.1a. Sometimes the actual prescribed form is used, but this is not compulsory. You do not have to use the CIPC-prescribed or standard form. We do not use them. You will use a default MOI if the default provisions from the Companies Act apply. It does not alter any of the alterable provisions of the Companies Act, 2008. In many ways it is just an account of the alterable provisions in the Companies Act.
An altered memorandum (or a “long form memorandum”) is often based on the CIPC-prescribed or standard form CoR15.1b. Again, the prescribed form is sometimes used, but this is not compulsory. You do not have to use the standard form. You will use an altered MOI if you want to alter the alterable provisions of the Companies Act. You should always consider whether you want to alter any of these provisions.
A unique memorandum is unique to the company. Is is not based on the CIPC prescribed or standard forms. It is always tailored for the specific circumstances, and is one of a kind. They can be drafted in many different ways depending on various factors, including shareholder protection or the need to inform shareholders.
You will use a unique MOI if you wish to draft a MOI unique to your company. This usually alters some of the alterable provisions of the Companies Act. It doesn’t follow the standard form and checkbox approach of the CIPC prescribed forms. This makes it easier to read and is often popular for companies looking to attract investors.