No Shareholders Agreement South Africa

Author: Georald Camposano | December 13th, 2020

Finally, I would like to say that a well-developed and thorough shareholders` pact is important, as it can be used by shareholders as a form of protection to protect their interests and to assert their rights. The fact that the agreement is available in writing means that the parties cannot later unilaterally amend the terms of such an agreement to escape their obligations. What is the interaction between the creation of the joint venture and the agreement between the parties to the joint venture? One of the best ways for shareholders to protect their interests is to enter into a shareholders` pact. Such an agreement defines the rights and obligations of each shareholder. These agreements also contain information and guidelines regarding the management of the company. It is no longer possible (as of May 1, 2011) to adopt a shareholders` pact that prevails over the Memorandum and Companies Act. You may need to amend your company`s memorandum before or at the same time as signing a new shareholder pact. In other words, you must first develop a memorandum for the company, then a shareholder contract, which is in accordance with both the shareholder law and the memorandum. You may find that the agreement is no longer necessary once you have drafted a memorandum. However, it is unlikely that an agreement will always play a very important role. South African companies do most of their business by a simple majority vote on the board of directors or by a majority vote of shareholders. In the absence of a contrary agreement, minority investors therefore have the opportunity, through their legal action, to exercise control over the decision-making of a joint venture, particularly in the case of a registered joint venture, in which a majority shareholder with a stake of more than 50% will be able to effectively control the joint venture. , also by the power to appoint and remove directors.

Therefore, it is customary for minority investors in these circumstances to seek additional means of blocking controls by a majority shareholder and for this additional protection to be included in the constitution agreement. However, the only additional issue that should be discussed in South Africa is the strengthening of the black economy. In general, there is no black law requiring companies to hold a stake in black shareholders, as defined in the legislation and codes of good practice on black economic empowerment. However, it is generally economically advantageous for companies to have a black interest and to be represented by blacks on the board of directors. In some sectors (for example. B in the mining industry), black participation is necessary. Investors in South Africa should keep in mind that black participation of between 26 and 30 per cent may be necessary or beneficial. If the joint venture is a company, shareholders are generally not liable beyond what is expressly provided for in the shareholders` agreement or the foundation agreement.

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