Company, shareholder and founding instruments · 02
Shareholders’ agreement
Governs the relationship between the owners — funding, control, deadlock and exit.
Governs the relationship between the owners — funding, control, deadlock and exit.
Shareholding and the funding obligation, including the consequence of failing to follow money; board composition and appointment rights; matters reserved at shareholder level; pre-emptive rights, tag-along and drag-along; deadlock resolution; good-leaver and bad-leaver provisions with the valuation mechanism; restraint and non-solicitation; dividend policy; and exit.
The valuation formula is where these agreements fail. “Fair value as determined by the auditor”, with no methodology, produces a dispute at precisely the moment relations have broken down. Specify the method, the valuer, who appoints them if the parties cannot agree, and whether minority and marketability discounts apply. And settle the MOI consistency point above before a word of the agreement is drafted.
The law it sits under
What governs this instrument.
Section 15(7) of the Companies Act 71 of 2008 makes any provision of a shareholders agreement void to the extent that it is inconsistent with the Act or the Memorandum of Incorporation. That is why the two documents have to be drafted together: the commercial bargain belongs in the agreement, but anything that changes how the company itself is governed has to be carried into the MOI or it will not survive being tested.
Related pages, tools and documents
Where this instrument sits in the wider set, and the engagement that produces it.
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