Shareholders Agreement South African Law

Before the new Companies Act, people entered into an agreement that included a clause along the following lines: If you want us to help you quickly and easily create a new shareholders` agreement, simply send us an email with your contact information and we will get back to you. The following international models may also be useful if you are currently involved in drafting a shareholders` agreement: A shareholders` agreement is used to govern the relationship between the different parties in their capacity as shareholders and often also as directors of a company. This includes the money that each shareholder must deposit as seed capital, with additional money coming in if necessary, and the sharing of profits among shareholders. If the company splits and the principles of taking over the company and the remaining shareholders in the company have not been established, the company could be destroyed by the withdrawal of the parties. If the company is bought by a third party, there must be rules for shareholders who do not want to sell and how they can stay in business and keep their shares. If no valuation method has been established in the agreement, it is often impossible to get two parties to agree on a value at a later date. This is particularly relevant when an existing party sells to another existing party because the buyer and seller are on opposite sides. Disputes between shareholders with various experts involved in determining value are unfortunately common. The best advice is to assist a lawyer in drafting this agreement. If you share a company that acts as an owner company with one or more business partners, it is important to have a clear shareholders` agreement. Would you like to sign a new shareholders` agreement relevant to South Africa? There are good reasons for this. It is important that the shareholders of each company sign an agreement – preferably at the beginning of the relationship.

The real estate community (like many people who own shares in a company) is the mother of all litigation. Essentially, a shareholders` agreement prevents disputes and conflicts in the future. It records the answer to the questions that each shareholder must answer. A shareholders` agreement is used for a registered company (a Pty Ltd) and protects the rights and interests of shareholders. It also defines how the business should be managed. A shareholders` agreement is an internal document that is not mandatory and does not need to be submitted to the CPTC. The two should align as the MOI prevails over a shareholder agreement when the two are in conflict. The agreement ensures that all shareholders are on the same page before the company`s operations begin, so theoretically there can be no litigation later. The golden rule when entering into a business relationship is that you should always remain objective when entering into business agreements. Due to the initial excitement and enthusiasm, this is rarely the case. A shareholders` agreement is a contract that is concluded between all the shareholders of the company or that can only be concluded by some of them (for example, between two shareholders, each holding a significant stake in the company). They must cover the rules for issuing shares.

Typically, new shares are initially offered to existing shareholders on a pro rata basis. Each company`s shareholders` agreement is slightly different, but it should all cover the following basic considerations. Any aspect not covered by the Incorporation Protocol (MOI) must be covered by the shareholders` agreement. Any aspect that has not been agreed in this way often has to be settled by a legal dispute that becomes very costly and delayed – something that could have been avoided. The MOI is the higher rank of the two documents. However, it is a public document, so there are some issues that shareholders want to address more confidentially need to be addressed in the shareholders` agreement. Any point in the shareholders` agreement that conflicts with the MOI is null and void. Therefore, it is important that both documents are created at the same time. Starting a new business is one of the most exciting events for any entrepreneur.

Due to their overwhelming nature, most people tend to seal business relationships with a simple verbal agreement and handshake and without due regard to how the relationship might dissolve in a few years. It is well known that prevention is better than cure – which is why most disputes between trading partners could have been avoided if they had entered into a shareholders` agreement before doing business. Common misthrafts that cause delays in entering into shareholder agreements are as follows: Under the new Companies Act, many people wonder whether a shareholders` agreement is now necessary because it cannot prevail over the new Companies Act or the company`s founding memorandum. Does it make sense to sign one? Will all the issues previously addressed in the shareholder agreements now be addressed in the memorandum? It describes how a company is managed and describes the responsibilities, rights and obligations of each shareholder. We have helped many clients with a shareholders` agreement and developed many smart ways to make it quick and easy. For example, with questionnaires and templates. Ours are written in plain language and include the final alternative dispute resolution clause. Some of the aspects to be addressed in the shareholders` agreement should include the following: It can be argued that since a shareholders` agreement cannot take precedence over the Companies Act 71 of 2008 or the protocol of incorporation of the company, a shareholders` agreement is not important. However, it is useful to know the basics of drafting a shareholders` agreement themselves. This allows you to negotiate with business partners.

You can decide which terms are best for your situation. If so, it can also help you tell a lawyer what you really expect from the deal. .