In lieu of the Companies Act No. 71 of 2008, the first question typically asked is, “Is my Company’s Memorandum of Association and Articles of Association” still valid? The simple answer is, yes; however, cognisance should be given to the below as one cannot rely on this in special scenarios, specifically where any obligation in the Memorandum of Association and Articles of Association (“MOA”) directly stands in conflict with Companies Act No. 71 of 2008 (“the Act”).
Gone are the days when a Shareholder’s Agreement would trump the Memorandum of Incorporation (“MOI”). The MOI, in terms of the Act, has become the sole governing document of any Company. Hypothetically put, should any dispute around authority or validity in a decision by a Company end in a court of law, the court will be obliged to refer first to the Company’s MOI, and not any other agreement entered into.
In terms of Schedule 5 of the Act, it follows that any conflict should have been amended by no later than 30th April 2013 (2 years after the promulgation of the Act). Should this not have happened, the applicable provisions of the Act would apply and the conflicting provision in the MOI would no longer have any force or effect.
Noting that each Company is its own unique entity, a question often asked is, should a Company use a specialised MOI drafted by either a Commercial Attorney or Chartered Secretary? Or, would the CIPC Standard MOI suffice? The CIPC MOI does not specify the type of Company (Public, Private, State-Owned etc), and only differentiates between a For Profit and a Non-Profit Company. The moment a Company caters for specific rights, relationships, risks and responsibilities it will be recommended that a specialised MOI be drafted. Furthermore, the CIPC MOI does not prohibit or restrict the transferability of shares. In addition to the above there are other key considerations not taken into account. You are welcome to contact Resolve Corporate Services (Pty) Ltd for a detailed list.
It is of the utmost importance to ensure that your Company has a valid, secure and all-encompassing MOI that covers the requirements for the specific industry that your Company operates in.