Question 1

What does our custom Shareholders Agreement include?

Accepted Answer

• Sets out the rights and obligations of the shareholders;
• The initial contributions required of the shareholders;
• Proposed nature of the business;
• Future financial arrangements of the company;
• Key roles and responsibilities of the shareholders;
• Regulates the ownership and voting rights of the shares in the company;
• Describes how the company should be controlled and managed;
• Specifies the methods which govern the sale of any shares in the company;
• Sets out any protection which may apply to minority shareholders;
• Sets out how future disputes between shareholders should be resolved;
• Protects competitive interests of the company, such as prohibiting the shareholders from partaking in competing businesses, or poaching staff members.

Question 2

What does this service comprise?

Accepted Answer

Once you have checked out and purchased the custom Shareholders Agreement service, we'll get in contact with you and analyse the needs specific to your company in order that we may draft a custom fitted Shareholders Agreement for it.

Question 3

What is a Shareholders Agreement's relationship with a company's Memorandum of Incorporation?

Accepted Answer

Under the 1973 Companies Act, the provisions of a company's Shareholders Agreement could override the constitutional documents of the company. Since the 2008 Companies Act, this position has changed, as the new Act provides that the company's Memorandum of Incorporation will override a company's Shareholders Agreement to the extent that the Shareholders Agreement conflicts or contradicts the MOI.

Why then would you want both?

• A company's MOI is available for public inspection, whereas a Shareholders Agreement is confidential between the parties;
• Shareholders Agreements are cheaper and less formal to revise, as MOI amendments must be filed with the CIPC; and
• A Shareholders Agreement provides greater flexibility for arrangements that may need regular changes.

We also offer [Memorandum of Incorporation](/southafrica/southafrica-custom-memorandum-of-incorporation) drafting if you need both documents.

Question 4

How long does delivery take?

Accepted Answer

Standard delivery is 3 business days from when we receive your completed questionnaire. If you need your Shareholders Agreement sooner, we offer an Express Delivery option which guarantees delivery within 1 business day. You can select Express Delivery as an add-on during checkout.

Question 5

What if I need changes to my agreement?

Accepted Answer

Your order includes 2 rounds of revisions at no additional cost, which must be requested within 1 week of receiving your draft. This ensures you have ample opportunity to review the document and request any adjustments. Additional revision rounds beyond this can be arranged at a nominal fee.

Question 6

Who will draft my Shareholders Agreement?

Accepted Answer

Your Shareholders Agreement will be prepared by a qualified South African attorney with a minimum of 12 years of post-qualification experience in corporate law. Our attorney has extensive experience drafting shareholders agreements for companies across various industries and ownership structures.

Question 7

What information will I need to provide?

Accepted Answer

After purchase, you'll receive a detailed questionnaire asking about the company details, shareholder information and shareholdings, voting arrangements, dividend policy, share transfer restrictions, decision-making thresholds, exit mechanisms (tag-along, drag-along rights), and dispute resolution preferences.

Question 8

Will my agreement comply with the Companies Act?

Accepted Answer

Yes. Your Shareholders Agreement will be drafted to work alongside your Memorandum of Incorporation in compliance with the Companies Act 71 of 2008. Our attorney ensures the agreement complements rather than conflicts with your MOI and applicable law.

Question 9

When do I need a Shareholders Agreement?

Accepted Answer

You should have a Shareholders Agreement in place whenever a company has two or more shareholders. It's especially important when: starting a business with partners, bringing in investors or new shareholders, family members hold shares together, shareholders have different roles (some active, some passive), or when significant capital is being invested. The best time to put one in place is at the start—before any disputes arise—when all parties are aligned and cooperative.

Question 10

What happens if a shareholder wants to leave the company?

Accepted Answer

A well-drafted Shareholders Agreement will include exit mechanisms that govern how a shareholder can sell their shares. Common provisions include: pre-emption rights (existing shareholders get first right to buy), tag-along rights (minority shareholders can join a sale), drag-along rights (majority can compel minority to sell), put and call options (rights to sell or buy at specified triggers), and valuation methods for determining fair share price. Without these provisions, exiting can become contentious and legally complex.

Question 11

What are tag-along and drag-along rights?

Accepted Answer

Tag-along rights protect minority shareholders by allowing them to 'tag along' and sell their shares on the same terms if a majority shareholder sells to a third party. This prevents minorities from being left behind with new, unwanted co-shareholders. Drag-along rights protect majority shareholders by allowing them to 'drag along' minority shareholders in a sale, compelling them to sell on the same terms. This prevents minorities from blocking a beneficial sale of the entire company. Both provisions are crucial for a balanced agreement.

Question 12

What happens if shareholders reach a deadlock?

Accepted Answer

Deadlock occurs when shareholders cannot agree on a significant decision and voting is tied. A good Shareholders Agreement includes deadlock resolution mechanisms such as: escalation to senior representatives, mediation or arbitration, a casting vote for the chairperson, 'shotgun' or 'Russian roulette' clauses (one party offers to buy or sell at a stated price), or ultimately, winding up the company. Without deadlock provisions, disputes can paralyse the company and lead to expensive litigation.

Question 13

Is a Shareholders Agreement legally binding and enforceable?

Accepted Answer

Yes, a properly drafted Shareholders Agreement is a legally binding contract enforceable between the parties who sign it. However, it only binds the shareholders who are parties to it—not the company itself (unless the company also signs). If a shareholder breaches the agreement, other shareholders can seek remedies including damages, specific performance, or injunctive relief through the courts. It's important that all current shareholders sign, and that new shareholders are required to sign a deed of adherence when they acquire shares.

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