GUIDE TO THE MEMORANDUM OF INCORPORATION
GUIDE TO THE MEMORANDUM OF INCORPORATION GUIDE TO THE MEMORANDUM OF INCORPORATION
NOTESPURPOSE AND STRUCTURE OF THE GUIDEThe Act requires all companies to convert their existing Memorandum andArticles of Association to a Memorandum of Incorporation (MOI).This guide is intended to serve as a guideline to the drafting of a new MOI asrequired by the Act (read together with the Companies Amendment Act andCompanies Regulations).The Act gives companies a two year “transitional” or “grace” period – in whichto comply with the new Act. The contents of a Memorandum and Articles ofAssociation of a pre-existing company may thus remain unchanged for twoyears calculated from the effective date of the Act, being 1 May 2011 until1 May 2013.Pre-existing companies (see definition on page 39) can during the twoyear period, comply with the new Act by lodging their new MOI with theCommission.New companies formed after 1 May 2011 will need to comply with the newAct – which creates new rules for incorporation, registration, organisation andmanagement of companies in SA.The guide is structured in such a way as to provide the reader with an overview of:●●●●●●●●●●●●the transitional arrangements over the two year grace period for pre-existingcompanies;the legal status of pre-existing shareholders agreements, rules of acompany, and the Memorandum and Articles – both before and after thetwo year grace period has expired;the new rules for incorporation of a new company under the new system,and conversion of pre-existing close corporations to companies;the doctrine of constructive notice and ring-fencing;the MOI and how to draft it so that it meets a company’s requirements andyet remains compliant with the Act. To this end, we have taken the FormCoR 15.1B – Long Standard Form for Profit Companies – (as published inthe Companies Regulations, 2011), as an example of an MOI – see pages14 to 35, and have provided commentary and extracts from the Act oneach Article;The second half of the guide deals, inter alia, with anti-avoidanceprovisions and civil actions.Please note that the information contained herein is a summary of some of thekey sections of the legislation, as they relate specifically to the MOI.It does not purport to cover every aspect relating thereto, and is issued toclients as a general overview.IMPORTANT NOTEDue to fundamental reforms brought about by the Act we recommend thatprofessional advice be sought before making any decisions based on thisguide’s contents or when dealing with any matters relating thereto.While every care has been taken in the compilation of this guide, noresponsibility of any nature whatsoever shall be accepted for any inaccuracies,errors or omissions.2
1. OVERVIEW OF LEGISLATIONThe Act was signed by the President on the 9th April 2009 and gazetted inGazette No. 32121 (Notice No. 421) and came into operation on 1 May 2011.The Companies Regulations, 2011 were published on the 20 April 2011. Theydeal with the functions of the Commission, the Takeover Regulation Panel andthe Companies Tribunal, qualifications of Business Rescue Practitioners andFinancial Reporting standards for the various categories of company.The Companies Amendment Act, 2011 purports to rectify certain provisionsof the Act so as to ensure its improved administration, and establish aproper foundation for certain necessary regulations. In addition it attemptsto address significant errors and ambiguities that could have resulted in themisapplication of the Act.The Amendment Act and Companies Regulations came into effect on thegeneral effective date of the Act. The Act should thus be read together with theAmendment Act and Regulations.Throughout the text, specific reference is made to the sections of “theAmendment Act” or “the Regulations” where applicable, otherwise anyreference to a section in general means that it is in reference to the CompaniesAct, 2008, or “the Act”.Definitions and Abbreviations:● ● “previous Act” – Companies Act no 61, 1973● ● “Act” – Companies Act no 71, 2008● ● “Amendment Act” – Companies Amendment Act no 3, 2011● ● “Regulations” – Companies Regulations, 2011● ●● ●“MOI” – Memorandum of Incorporation“CC’s” – Close Corporations● ● “CC’s Act” – Close Corporations Act, 1984● ●● ●● ●● ●“Members” – Members of Close Corporations or of a non-profit company(as the context indicates)“JP” – Juristic Person“AFS” – annual financial statements“AGM” – annual general meetingRegulatory Bodies●●●●●●●●The Commission – the Companies Intellectual Property Commission(CIPC, previously CIPRO)Tribunal – the Companies TribunalThe Panel – the Take-Over Regulation PanelFRSC – the Financial Reporting Standards Council3
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- Page 41 and 42: pre-existing company means a jurist
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NOTESPURPOSE AND STRUCTURE <strong>OF</strong> <strong>THE</strong> <strong>GUIDE</strong>The Act requires all companies to convert their existing Memorandum andArticles of Association to a Memorandum of Incorporation (MOI).This guide is intended to serve as a guideline to the drafting of a new MOI asrequired by the Act (read together with the Companies Amendment Act andCompanies Regulations).The Act gives companies a two year “transitional” or “grace” period – in whichto comply with the new Act. The contents of a Memorandum and Articles ofAssociation of a pre-existing company may thus remain unchanged for twoyears calculated from the effective date of the Act, being 1 May 2011 until1 May 2013.Pre-existing companies (see definition on page 39) can during the twoyear period, comply with the new Act by lodging their new MOI with theCommission.New companies formed after 1 May 2011 will need to comply with the newAct – which creates new rules for incorporation, registration, organisation andmanagement of companies in SA.The guide is structured in such a way as to provide the reader with an overview of:●●●●●●●●●●●●the transitional arrangements over the two year grace period for pre-existingcompanies;the legal status of pre-existing shareholders agreements, rules of acompany, and the Memorandum and Articles – both before and after thetwo year grace period has expired;the new rules for incorporation of a new company under the new system,and conversion of pre-existing close corporations to companies;the doctrine of constructive notice and ring-fencing;the MOI and how to draft it so that it meets a company’s requirements andyet remains compliant with the Act. To this end, we have taken the FormCoR 15.1B – Long Standard Form for Profit Companies – (as published inthe Companies Regulations, 2011), as an example of an MOI – see pages14 to 35, and have provided commentary and extracts from the Act oneach Article;The second half of the guide deals, inter alia, with anti-avoidanceprovisions and civil actions.Please note that the information contained herein is a summary of some of thekey sections of the legislation, as they relate specifically to the MOI.It does not purport to cover every aspect relating thereto, and is issued toclients as a general overview.IMPORTANT NOTEDue to fundamental reforms brought about by the Act we recommend thatprofessional advice be sought before making any decisions based on thisguide’s contents or when dealing with any matters relating thereto.While every care has been taken in the compilation of this guide, noresponsibility of any nature whatsoever shall be accepted for any inaccuracies,errors or omissions.2
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