All companies which existed before 1 May 2011 may lodge a new Memorandum of Incorporation with the CIPC by no later than 1 May 2013 at no cost. The new Memorandum of Incorporation can take one of 3 forms: A ‘standard’ Memorandum of Incorporation which incorporates the default provisions of the Act; an ‘altered’ Memorandum of Incorporation which incorporates the alterable provisions of the Act; or a unique Memorandum of Incorporation which is specifically tailored towards the company’s specific needs and requirements
Standard forms have been issued in terms of the Regulations and, although tempting to use, it is not recommended because these forms contain errors and omissions. Most significantly, the standard short form for private companies does not restrict the transferability of the securities of the company. Thus even though the company is intended to be a private company, it may be treated as a public company and will have to be audited, hold an AGM and have at least three directors. This is clearly an error in the drafting.
A Company’s current Articles of Association may require the company to be audited even though this may not be required by the new Act. Private companies who score less than 100 public benefit points and whose shareholders also serve on the board of directors do not need to have their annual financial statements audited or subjected to independent review. However, the Company will still need to be audited until a new Memorandum of Incorporation has been lodged.
As from 1 May 2013, the Act will take precedence over the Memorandum of Incorporation to the extent that it is inconsistent with the Act. Any existing shareholders agreement must also be consistent with the company’s Memorandum of Incorporation because if any provision in a shareholders agreement is inconsistent with the 2008 Act or the company’s Memorandum of Incorporation , that provision will be void to the extent of its inconsistency with the Act or the Memorandum of Incorporation, or until changed until by the shareholders. It is therefore also important to amend any shareholders agreement, or any agreement with directors or shareholders, once the Memorandum of Incorporation has been amended.
We highly recommend that you contact our offices for professional advice and assistance with drafting your new Memorandum of Incorporation, updating or changing your shareholders agreement or with any other questions you may have regarding this topic.