Shareholders Agreement Contract Template – 2 Shareholders – South Africa

A shareholders agreement template South Africa companies can use where two shareholders own the business and there is no tie-breaker.

Shareholders Agreement Contract Template – 2 Shareholders – South Africa

 Short Standard Form MOI for Profit Companies

Summary A Shareholders’ Agreement may be considered for the mutual protection of shareholders in a private company incorporated for profit, and strives to ensure that both the shareholders understand their respective rights and obligations in relation to each other.

This Shareholders’ Agreement is intended to be used in conjunction with the Short Standard Form of the Memorandum of Incorporation for Profit Companies.

See also: Shareholders’ Agreement – long form MOI

Why do I need a Shareholders’ Agreement? A Shareholders’ Agreement, amongst other things, strives to set out the procedure to be followed in respect of the appointment of Directors, Board and Shareholder meetings, the sale of shares, the commission of a breach, policies regarding loan accounts, and other company-related issues.

What does the agreement say? The Agreement consists of: Definitions and Interpretation; Introduction; Articles of Association; Working Capital; Loan Accounts and Indebtedness; Guarantees; Directors; Shareholders; Matters requiring Unanimous Consent; Value of Shares; Sale of Shares; Come Along; Tag Along; Transfer of Shares to Family; Forced Sales; Notices; Confidentiality; General.

What does the agreement look like? The template agreement can be printed onto eleven pages.

What do you need to do to use the agreement?

• Read the template Shareholders’ Agreement to ensure that it suits your requirements. Complete the requisite sections, making changes as required.
• Ensure both the shareholders sign with each shareholder getting a copy of the final, signed agreement.

Also viewed: Sale of Shares Agreement

When preparing a Shareholders’ Agreement, a working knowledge of the Companies Act is recommended and accordingly a specialist’s advice should be sought.

Why a shareholders agreement matters

Your Memorandum of Incorporation sets out how the company works. A shareholders agreement sets out how the two of you work with each other, and that is a different question.

With two shareholders it matters even more, because there is no third party to break a tie. A 50/50 split with nothing written down is the most common way a good business ends up stuck.

Who this template is for

Two shareholders in a South African private company who want the ownership arrangements recorded in short form, alongside the MOI.

What you get

• An editable document in Microsoft Word, plus a PDF copy
• Wording drafted and reviewed by a lawyer
• A short-form structure built for two shareholders, to sit with the MOI
• Instant download after purchase

The clauses that earn their keep

• Pre-emptive rights, so neither of you can sell to an outsider without the other getting first refusal
• What happens on death, disability or one shareholder wanting out
• How shares get valued when someone exits
• How a deadlock gets broken, which is the clause two-shareholder companies most often wish they had
• Restraint of trade and confidentiality

Good to know

A shareholders agreement is a template for you to adapt, not legal advice on your company. Under the Companies Act a shareholders agreement must be consistent with the Act and the MOI, and anything inconsistent is void, so it is worth having an attorney check your final version against your MOI before you both sign.

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