The Companies Act was passed into law in 2008. What does this mean for you? And what do you need to do/think about?

Generally speaking, and in very simplistic terms, the Companies Act will change the way you govern your company. The Memorandum and Articles of Association will be replaced by a prescribed Memorandum of Incorporation (MOI) and rules. This must contain certain proscribed information and further more will comprise of alterable and unalterable provisions.

Any Shareholders Agreement and any rule must be consistent with the MOI and the Act itself. Any shareholders agreement, to the extent it alters the MOI must also have such alterable provision altered in the MOI. If the MOI and the Shareholders Agreement conflict, the MOI will prevail. To a great extent the relevance of a Shareholders Agreement is in many instances negated due to the fact that many of the standard provisions of a Shareholders Agreement must now be stated in the MOI anyway.

During the transitional period, a grace period of 2 years from the general effective date will be granted to companies. During that period existing provisions relating to the governance of a company will continue to apply as is. Post the 2 year grace period such provisions will continue to apply but only to the extent that they do not conflict with 2008 Act.

All companies will be deemed to have an MOI which will consist of:

  1. The Memorandum and Articles of Association; and
  2. Any other document by which the company is structured and/or governed.

Where to from here? All companies operating under a “trading as” name should amend their registered name as this will no longer be compliant with the Act. Companies should furthermore review the following documents:

  1. The Memorandum and Articles of Association;
  2. The Shareholders Agreement;
  3. Contracts with Directors; and
  4. Any other document by which the company is structured and/or governed.

Following this review the company should then either make note of or amend the following:

  1. Any conflicts with the unalterable provisions of the MOI or conflicts with the Act should be noted due to the potential voidability thereof and the inability to enforce these provisions;
  2. Any conflicts with alterable provisions of the MOI should be amended and reflected in the same manner in any Shareholders Agreement;
  3. The Shareholders Agreement’s provisions which should be reflected in the MOI must be reflected in the MOI, any provisions which need to be altered should be altered to mirror the MOI.