When having your company’s memorandum of incorporation (MOI) and, if applicable a shareholders’ agreement, drawn up, there are often assumptions made at the time of drafting about how the future of your company will look.
For example, how will you value it for key events (such as death of a shareholder or other forced sale?) Will you be employed by the company as well as being a director, or will you be a consultant who has only limited time spent at the office? And very importantly, what will happen if you decide to exit the company, or if one of the shareholders dies? Should you now consider key-man or buy / sell insurance?
Your shareholders’ agreement and MOI may also have initially been hastily drawn up when forming or starting up your company, and possibly not have reflected your wishes at the time they were signed by you and the other shareholders. In addition, the law may have changed since you incorporated your company. You may also perhaps plan on introducing new shareholders into your company, such as employees, in the near future. (The Companies Act 71 of 2008 provides that, notwithstanding any agreement to the contrary, your company’s MOI will prevail over, ie, will trump, any provision of a shareholders’ agreement in the event of a conflict between the two documents.)
All the issues raised above make a periodic review of the MOI and your shareholders’ agreement sensible and questions must be asked by shareholders in a company, such as whether these documents remain relevant, or need to be changed. A shareholders’ agreement is a document that may not always be able to cater for all eventualities and, in the same way as one should revisit one’s will, so too should a shareholders’ agreement be reviewed from time to time.
Of course the shareholders’ agreement can only be changed by agreement between all of the parties to the original agreement, but given a review as suggested above, it may well be that all parties would indeed welcome amendments.
So, whether you have had a change in your circumstances, or your company has moved on from being a start-up to a more mature business, or you anticipate a change in or introduction of new shareholders, it may be sensible to have these documents reviewed, and assess whether they are still relevant, or need to be changed.