In recent years, there has been quite a bit of discussion about the impact of the new Companies Act on Shareholders Agreements. Whether you are planning to enter into a Shareholders Agreement or have an existing Shareholders Agreement, it’s important to educate yourself on the Companies Act, as it can still affect both you and your company.
The vast majority of companies have a Shareholders Agreement, as this contract is typically introduced when the company is first formed. A Shareholders Agreement is a contract made between shareholders, or members, of a company. This contract aims to protect shareholders and typically details rights and obligations of shareholders in relation to company management and stock.
Both minority and majority shareholders should have these agreements. Regardless of the type of company you own- or who you own it with- a Shareholders Agreement is crucial. It’s always nice to think that you can fully trust other shareholders and that nothing will go wrong in the company, but it’s always better to be safe than sorry.
In the past, a Shareholders Agreement was legally binding in South Africa without any exceptions.
However, in May of 2011, a new Companies Act was put into place that changed this fact. The new Companies Act states that no Shareholders Agreement can legally prevail over the new Companies Act or the Memorandum of Incorporation of the company. However, if a Shareholders Agreement was put into place prior to 1 May 2011, it is still legally binding. All Shareholders Agreements that were put into place after 1 May 2013 are only legally binding to the extent that they do not contradict the new Companies Act or Memorandum.
When it comes to Shareholders Agreements in light of the new Companies Act, the details can be a bit complex. However, experts at TAT Accountant we add value to your business and can help walk you through the process of drafting a purposeful and effective Shareholders Agreement. Don’t hesitate to reach out with any questions!
You might also be interested in
Financial Risk management purpose and its role in Business
Financial Risk management is the primary objective of internal controls in an organisation, and the reason for in-depth internal audits of those controls. All organisations face risk, but this is especially the case with large, complex, corporate structures,...
Audits or Independent reviews, what is the difference?
Independent financial reviews and audits are essential and required for the purpose of assurance and are both ultimately aimed at establishing the accuracy of financial statements. Financial reviews and audits both rely on the supply of financial information and...
SARS Tax Assessment dispute can be done
Can I dispute a SARS Tax Assessment? If you are wondering if you can dispute a SARS tax assessment, the answer is, ‘yes, you can!’ You have a right to dispute, and you have the right to know exactly how SARS have come their figures. The question you should really be...
With over 23 years of unwavering expertise, I am a seasoned Chartered Accountant committed to financial excellence. My journey in the realm of finance has been marked by astute strategic insights, meticulous attention to detail, and an unyielding dedication to precision. Over the years, I've navigated the complexities of financial landscapes, providing invaluable counsel to diverse clients. My proficiency extends across auditing, taxation, and financial management, coupled with a profound understanding of regulatory frameworks. As a registered professional, I have consistently upheld the highest standards of integrity and ethics, earning a reputation as a trusted advisor in the dynamic world of finance.
