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Shareholders` Agreement

Our 13 page Shareholders Agreement has been drafted by an Advocate with many years of experience in company law. It is ideal for dispute resolution and set the rules to ensures the smooth management of the company. All companies with two or more shareholders should have a signed Shareholders Agreement.

We recommend that all the authorised shares are issued to the respective shareholders leaving no unissued shares in the company. If you have not already done so we recommend you first use ShareVault.co.za to issue all the shares before you capture the information for this agreement. 

Good to know

Our Shareholders Agreement is compatible with both the Companies Act and the Standards Memorandum of Incorporation (MOI) as drafted by CIPC and is exclusively for South African (Pty) Ltd`s



Price :  R990
How long does it take?   1 Day


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Frequently Asked Questions

What is a Shareholders Agreement?

It is a contract between the shareholder (owners) of the company which set out the rights and responsibilities of the shareholders. 

What are the advantages of a Shareholders Agreement?

It prevents disputes and protects the shareholders rights which bring stability to the company.

When is the best time to draw up a Shareholders Agreement?

The best time to draw up a shareholders agreement is at inception. This is when all the shareholders agree beforehand how to deal with disputes which will avoid a lot of unpleasantness. 

Can a Shareholder Agreement be changed?

Yes, however all parties must agree in writing.

Is a Shareholders Agreement legally binding?

Yes, all the signatories to the agreement are legally bound by it. 

Does an NPC have a Shareholder Agreement?

No, NPC’s do not have shareholders, they only have directors and in some cases members

Partnership Agreement vs a Shareholders Agreement.

Shareholders agreements are used for shareholders of companies which are registered legal entities while a partnership agreements are used for partnerships which are not a registered legal entities and therefore do not have the benefit of limited liability protection, furthermore the partners are jointly and severally liable for claims against the partnership.  

Is a Shareholders Agreement compulsory?

No, you could have a verbal agreement, but this is not recommended as disputes will be one person’s word against the next which never ends well as there is no written agreement.

How do new Shareholders join a private company?

There are two ways for a new shareholder to join a private company. The first is to buy shares from an existing shareholder. This is called transferring of shares and the second option is for the company to issue new shares to the shareholder. This is called issuing shares which does dilute the value of the individual shares as there are now more shares in circulation. 

What is the right of first refusal?

The right of first refusal is when any shareholder wishes to sell their shares they must first offer it to the existing shareholders at the same terms as the offer made to the outside third party. This right of first refusal can prevent competitors investing in the business.

What is a Pre-emptive Right?

A pre-emptive right allows existing shareholders to buy newly issued shares in the company to maintain the same percentage ownership.

What is the Drag along and Tag along clause?

This is a clause in the shareholders agreement which deals with a buyer wanting to buy the entire company. The agreement can state that if for example 75% of the shareholders agree to the terms and conditions of the sale then the remain 25% of the shareholders are obliged to also sell their shares at the same terms and conditions. This is referred to as the Drag along clause. The tag alone is the opposite meaning the minority shareholders say 25% can block a sale if they are not offered the same terms.

What is a Deed of Accession?

This is a document that binds a new shareholder which joined at a later stage to the same terms of the existing shareholders agreement.

What are classes of shares?

A class of share is a type of share differentiated by the number of voting rights associated with that share. For example, 1 Class A share can have 5 votes while 1 Class B share can have only 1 vote. This is done to protect the company from take overs. There are also other categories that deal with dividend pay-outs namely ordinary and preferential shares. 

Can a company issue additional shares?

Yes, the board of directors can issue additional authorised share capital which can them be issued to the shareholders. This will dilute the value of an individual share as there are now more shares in circulation. 

Can a Shareholder be forced out of the company?

There is no rule that forces a shareholder to sell their shares. However, a shareholders agreement can address this issue. For example, forfeiture of shares for non-performance of an agreed funding requirement.

What happens if a shareholder dies?

This depends on what is agreed to in the shareholders agreement. If there is no shareholders agreement the shares will be transferred to the beneficiaries of the deceased estate.

How are disputes resolved?

The most preferred method of dispute resolution is mediation. This is where the parties arrange for a facilitated negotiated solution. Arbitration is where an independent third party gets involved and makes a binding decision on both parties. 

How do you terminate a shareholders agreement?

Depends on the clause in the agreement of when all parties agree to the terminating the agreement. This usually done when there is a new investor or when one shareholder purchases all the shares. 

What takes precedent the Companies Act,MOI or the Shareholder Agreement?

If ever there is a conflict between the Act, the MOI or the shareholders agreement, the Companies Act takes precedent of the MOI and the MOI precedent over the Shareholders Agreement. 
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