Shareholder Agreements in South Africa
KERN Advisory assists South African companies and their shareholders with the advice, review and drafting of shareholder agreements. A properly structured shareholder agreement helps establish clear rules governing the relationship between shareholders, decision-making, ownership interests and the management of important events that may arise during the life of the company.
What Is a Shareholder Agreement?
A shareholder agreement is a private agreement between the shareholders of a company that regulates their relationship with one another and establishes the framework within which important shareholder and business decisions are made. While a company's Memorandum of Incorporation (MOI) regulates important aspects of its corporate structure, a shareholder agreement can provide more detailed arrangements dealing with the rights, responsibilities and expectations of the shareholders. A carefully drafted shareholder agreement can provide greater certainty between shareholders, establish clear decision-making processes and address potential areas of disagreement before they develop into disputes.
What a Shareholder Agreement Can Regulate
1. Decision-Making & Governance
Establish clear processes for shareholder decisions, voting requirements and matters requiring special or unanimous approval.
2. Share Transfers & Ownership Changes
Regulate the transfer or sale of shares, including restrictions, pre-emptive rights and procedures where a shareholder wishes to exit the company.
3. Shareholder Rights & Responsibilities
Define the respective rights, responsibilities and expectations of shareholders and provide clarity regarding their relationship with the company and one another.
Key Provisions in a Shareholder Agreement
The provisions of a shareholder agreement should reflect the ownership structure, commercial objectives and particular circumstances of the company and its shareholders. Depending on the business, the agreement may address a number of important matters intended to provide certainty and manage potential areas of disagreement.
01
Deadlock & Dispute Resolution
Establish mechanisms for resolving disagreements between shareholders where the required decision-making threshold cannot be reached.
02
Funding & Financial Matters
Regulate how additional funding may be provided to the company and establish agreed principles relating to distributions and other financial matters.
03
Exit & Share Transfer Arrangements
Provide procedures for a shareholder wishing to sell or transfer shares, including applicable restrictions, rights and agreed exit mechanisms.
04
Protection of the Business
Address matters such as confidentiality, conflicts of interest and other appropriate protections designed to safeguard the company and its shareholders.
Shareholder Agreement Services in South Africa
KERN Advisory provides practical advice and guidance throughout the shareholder agreement process. Our assistance can be tailored to the circumstances of the company, whether shareholders require a new agreement, an existing agreement needs to be reviewed, or amendments are required following changes to the business or its ownership structure.
Shareholder Agreement Drafting
Drafting a shareholder agreement tailored to the company's ownership structure, commercial requirements and the relationship between its shareholders.
Review of Existing Agreements
Reviewing existing shareholder agreements to identify provisions that may require clarification, amendment or alignment with the current circumstances of the company and its shareholders.
Advice & Guidance
Providing practical guidance on shareholder rights, decision-making arrangements, share transfers, exit provisions and other matters regulated by the agreement.
Amendment of Shareholder Agreements
Assisting with amendments to existing shareholder agreements where the ownership structure, shareholder relationships or requirements of the business have changed.
Alignment with Corporate Documents
Considering the shareholder agreement alongside the company's Memorandum of Incorporation and relevant corporate arrangements to identify areas requiring appropriate alignment.
Shareholder Agreements and the MOI
A shareholder agreement should not be considered in isolation from the company's Memorandum of Incorporation (MOI). Both documents form part of the framework governing the company and the relationship between its shareholders.
In South Africa, the Companies Act and the company's MOI establish the legal framework within which a shareholder agreement operates. The shareholder agreement can then regulate more detailed commercial arrangements between the shareholders, provided those arrangements are consistent with the applicable legal and corporate framework.
KERN Advisory considers the shareholder agreement together with the company's existing corporate structure and incorporation documents. This helps identify potential inconsistencies and ensures that the agreement is drafted with proper regard to the company's broader governance arrangements.
Need Assistance With a Shareholder Agreement?
Whether you require a new shareholder agreement, a review of an existing agreement or guidance on particular shareholder arrangements, KERN Advisory can assist you with developing an agreement appropriate to your company and its shareholders.