Shareholders Agreements South Africa Law

By 12 april 2021Niet gecategoriseerd

The Court held that the existence of a non-variation clause in a shareholder agreement would not invalidate a foundation declaration, otherwise legally accepted. The Court also found that, even if the shareholder contract was not terminated in its entirety, it would in any case no longer have regulated relations between the parties, since substantial parts of it were either nullity or non-effective and effective (contrary to the provisions of the Law on Society and the MOI). On this basis the appeal was dismissed with costs. A shareholder pact, also known as a “shareholders` pact,” is an agreement between the shareholders of a company that describes how the company should be operated. A shareholder pact can be prepared at reasonable prices and will save a considerable amount of legal fees and litigation on the line. According to De Freitas/Chamdor Meat Packers [2015] JOL 33940 (GJ), when a company proposes to its shareholders the adoption of a new founding agreement, shareholders should carefully consider the provisions of the new creation memorandum, in conjunction with their current shareholder agreements. In the event of an objection between the two documents, shareholders should endeavour to align the provisions of these documents before the adoption of the new constitution agreement, since this acceptance may lead to the involuntary termination of the existing shareholder contract (or at least the repeal of the contrary provisions contained in the shareholders` pact). Under Section 15 (7) of the Companies Act 71 of 2008 (“Companies Act”), a company`s shareholders are entitled to enter into an agreement on each matter, provided that it complies with the Corporations Act and the company`s constitution memorandum and that any provision of such an agreement inconsistent with the company`s law or the company`s founding memorandum is not inconsistent. The above judgment gives an indication of the important consequences for a company by the adoption of a new creation agreement and confirms that any existing shareholders` pact may be considered null and void and that the parties are not binding retroactively from the date of the adoption of the new foundation agreement.

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