Topic 3: MOI and pre-incorporation contracts

Question 1

Amending the MOI

Question 2

Ring-fenced companies:

Answer 2

When the amendments to the MOI will influence stakeholders decision and a such must be RF behind their name.

Question 3

Shareholders Agreements:

Answer 3

• the means whereby parties who intend to carry on a business using a company, agree on their rights and obligations between themselves.
  Typical examples included:
• provisions that provide that the shareholders will be, or will appoint the directors of the company.
• provisions relating to decisions that will require the consent of shareholders.
• provisions relating to the incurring of debt or the sale of assets.
• provisions relating to decisions critical to the strategic direction of the company.

Question 4

Definition and need for pre-incorporation contracts:

Question 5

Who can represent a company?

Question 6

The Turquand Rule

Question 7

The common law rule:

Question 8

Section 20(7) of Companies Act:

Question 9

MOI and company rules:

Question 10

Legal relationships flowing from the MOI:

Question 11

Alterable/non-alterable provisions:

Answer 11

Unalterable terms: a company’s MOI cannot abolish or modify those provisions.

Alterable Provisions: an MOI can change

Default provisions: which automatically apply if an MOI does not have specific terms for that provision.

Question 11

s 71(1):

Answer 11

This term is unalterable and allows shareholders to remove a director at any time by ordinary resolution.

Question 12

Define ‘securities’:

Answer 12

• any shares, debentures or other instruments, irrespective of their form or title, issued or unissued by a profit company.

Question 13

Define a ‘securities register’:

Answer 13

a register required to be established by a profit company in terms of s 50.

Question 14

Define ‘share’:

Answer 14

one of the units into which the proprietary interest in a profit company is divided.

Part of ‘securities’ of a company.

Question 14

Define ‘shareholder’:

Answer 14

the holder of an issued share who is entered as such into the certified or uncertified securities register of a profit company.

Question 15

Define ‘shareholders meeting’:

Answer 15

meeting of those holders of a company’s issued securities who are entitled to exercise voting rights in relation to that matter.

Question 16

Define ‘shareholders meeting’:

Answer 16

meeting of those holders of a company’s issued securities who are entitled to exercise voting rights in relation to that matter.

Question 17

S 36(3):
alterable provisions

Answer 17

The board of directors may do the following:
(a) increase or decrease the number of authorised shares of any class of shares.
(b) reclassify any classified shares that have been authorised but not issued.
(c) classify any unclassified shares that have been authorised as contemplated on subsection (1)(c) but are not issued
(d) determine the preferences, rights, limitations or other terms of shares in a class contemplated in subsection (1)(d).

Question 18

Define ‘quorum’:

Answer 18

The minimum number of members who must be present at the meeting before the meeting can commence.

Question 19

Record date may be set by board of directors:

Answer 19

The Act provides that the board of directors may set a record date for determining which shareholders are entitled to the following:
- receive notice of a shareholders meeting
- to participate and vote at a shareholders meeting.
- to decide any matter by written consent or electronic communication.

Such a date may not be earlier than the date on which the record date is determined or not more than 10 business days before the date of the meeting, must be published to the shareholders in a manner that satisfies any prescribed requirement.

Question 20

Notice of meeting:

Answer 20

First step to convene a meeting is to send out a notice:
- a notice convening shareholder’s meeting must be in writing.
- notice must include the date, time and place of the meeting.
- Where the company sets a record date for the meeting, the notice will then have to include the record date.
- The notice should explain the general purpose of the meeting and any other specific purposes.
- With regard to a public company or NGO’s that has voting members, notice should be given within days before the date of meeting and all other companies must do so within 10 days before.
-notice should indicate the percentage of voting rights required for the resolution to be adopted.
- notice should indicate the meeting participants that will be required to complete a satisfactory proof of identity at the meeting.

Question 21

Postponement and adjournment of meetings for a week:

Answer 21

• within one hour after the appointed meeting time, quorum is not present.
• when a quorum is not present at the postponed or adjourned meeting, the members present will become the quorum.
• if there is other business on the agenda, consideration of that matter may be postponed to a later time in the meeting without motion or vote.

Question 22

Define ‘proxy’:

Answer 22

A person who is appointed to represent a shareholder at a meeting. Anyone can be appointed as a proxy.

Question 23

Appointment of proxy:

Answer 23

• it may be in writing
• valid for a year after signage
• a copy of the signed appointment of the proxy must be handed to the company before the meeting commences.

Question 24

Decisions of shareholders and others:

Answer 24

Ordinary resolution:
- a resolution adopted with the support >50% of voting rights exercised on a resolution.
- must be a margin of 10% between the required for ordinary resolution and special resolution.
- for a removal of a director more than 50% voting in favour of such a resolution is required

Special resolution:
- a resolution adopted with the support of atleast 75% of the voting rights exercised at the shareholder’s meeting

• amendment of MOI
• ratification of a consolidated revision of a company’s MOI.
• loans and financial assistance
• remuneration of directors
• MOI extra requirements