Shareholders Agreement Explained
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- Опубликовано: 25 окт 2022
- Please use the link below to purchase your own Shareholders Agreements for R950:
www.swiftreg.co.za/Swiftreg/p...
It is drafted by a Advocate with years of experience in Company Law
Compatible with the Companies Act and Standard MOI
Script to follow.....
This video has everything you need to know about shareholders agreements and highlights the most important clauses that should be in every shareholder agreement. For example, clear guidelines on resolving scenarios such as; what happens if a shareholder fails to contribute financially to their share of the investment. Or how to value your shares if you want to sell them to another shareholder. Disagreement on issues like these can dramatically increase the likelihood of conflict between the shareholders which could lead to either destruction of value, litigation or even business closure. This is why a shareholder’s agreement is so important as its primary function is to protect shareholders rights and provide clear guidelines for resolving disputes.
It goes without saying that a shareholders agreement is only required if there are two or more shareholders in a company. Some of our clients get confused between partnership agreements and shareholders agreements. Whilst they are similar in nature, they refer to different legal structures. A shareholder’s agreement is used for registered companies which has directors and shareholders while a partnership agreement is used if there is no legal entity. Therefore, partnership agreements are between sole proprietors and does not offer the benefit of limited liability protection; meaning each partner can be held personally or jointly liable.
It is always smarter to finalise a shareholder’s agreement from the start, as the business is unlikely to have been trading long enough to face any major challenges. In addition, the mood amongst the shareholders is usually enthusiastic and positive at the start of a business, which makes it so much easier for everyone to agree on the shareholder’s agreement.
To understand shareholders agreements, you need to be aware of the legal hierarchy in terms of the legislation which governs companies. The overarching legislation is the Companies Act which governs all companies, followed by the Memorandum of Incorporation which addresses the rights, duties and responsibilities of the directors and the shareholders and finally, the shareholders agreement which covers issues such as the management of the company and dispute resolution.
These three legal frameworks need to work in harmony with each other. However in the context of the legal hierarchy, if any clauses in the Shareholders agreements are in conflict with the MOI; then the MOI will take precedence over the shareholders agreement. The same will apply to the MOI and the Companies Act, where the Act will take precedence over the MOI.
Shareholders agreements can be long and complicated documents; I have seen shareholders agreement with over 150 pages with a multitude of clauses such as audit requirements, independent reviews and employee shareholders schemes which do not apply to the average South African private company. With this in mind, we have prepared a 12 page standard shareholder agreement which is suitable for most private companies and compliant with both the standard MOI and the Companies Act. The link is in the description.
The shareholders agreement should set out the usual rules and procedures of appointing and removing directors as well as their voting rights. For example, the chairman should have the casting vote in the event of a tied vote.
With most private companies the directors are usually also the shareholders. However, it is very important to differentiate between the roles of the directors and the shareholders. So, just to be clear the directors manage the company and the shareholders own the company.
The shareholders are required to have their own separate meetings and the agreement should set out the usual quorums and proxy requirements for these meetings. However, when it comes to shareholders voting rights, we do separate between voting by hand and voting by poll. Voting by hand is restricted to one person one vote while voting by poll equates the number of votes relative to the percentage shareholding. This is a very subtle but an important difference in terms of controlling the company..... 
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This was fantastically detailed, thank you. Also a great bit of advice in the comments mentioning how having 1200 shares helps as it is has many number factors
Glad it was helpful!
Highly informative 🇯🇲🇯🇲
Thank you! much appreciated.
Very Informative.. Thank you..
Glad it was helpful!
The explanation is simple and easy to understand
Thank you, I'm glad it helped
Very clear in the way you speak and pronounce. In the way you make the info concise and easy to remember. Thanks and please do make more such RUclips
Thank you, I will
Hi Douglas, hope you are well. I intend to incorporate asap. How do I allocate a specific amount of ordinary shares and voting rights stipulated on our shareholders' agreement onto the CIPC platform?
Hi there, the number, class and type of shares are stipulated in the Memorandum of Incorporation (MOI). You would need to customise the MOI to register anything other than ordinary shares (one share = one vote). CIPC only asks for the number of authorised share capital when registering online. Customised MOI's are manual applications. We recommend 1200 ordinary shares, because it is divisible by most numbers as you can't own a fraction of a share. The issuing of the shares from the authorised share capital to the shareholders is NOT done by CIPC and left for the directors to resolve. If you have more than one shareholder I would recommend that you register via our website www.swiftreg.co.za and the reason for this is that we issue the share certificates and you have the option of including our standard shareholders agreement which I explained in the video. I hope I have answered your question.
@@swiftreg Thank you very much Doug. I greatly appreciate it, will use Swift Reg.
if a C.C member wishes to sell their membership outside of the CC.can they set their own sale price?
Yes, however the existing members must still agree to the sale. Any membership change to a CC requires the signature of all the members.
What is MOI mentioned in the vid?
HI xy, the MOI stands for Memorandum of Incorporation and it is the rules which govern the company and it directors. The MOI can be customized, however most private companies use the standard default MOI as drafted by CIPC. This form is called the Cor 15.1A. I hope this answers your question.
Informative indeed. So my question is that as a shareholder, who is a foreigner, and may be still in another country can I have majority shares more than the other shareholder that is locally in South Africa and appointed them as a director so that they can open up the account because I will not have the 5 million at the moment. How could this work, please.
Yes, you can do this.
@@swiftreg great, thank you.