Business Enterprise Law - Memorandum of Incorporation

Study Notes

Memorandum of Incorporation (MOI)

The MOI sets out the rights, duties, and responsibilities of shareholders, directors, and others within and in relation to a company.
It determines the rights, powers, and duties of all stakeholders, as well as the nature of the company (public or private).
The MOI binds the company and each shareholder, director, and prescribed officer or person serving on the audit committee or a committee of the board.

Rules Made by the Board of Directors

The board of directors may make, amend, or repeal rules relating to the governance of the company.
Rules must be consistent with the Companies Act and the MOI, and will be void to the extent of any inconsistency.

Flexibility in the Memorandum of Incorporation

The Act allows a high degree of flexibility in the content of the MOI.
Each provision in the MOI must be consistent with the provisions of the Act.

Alterable, Unalterable, and Default Provisions

Unalterable provisions: cannot be changed or removed from the MOI.
Alterable provisions: can be changed by the company based on its needs.
Default provisions: apply automatically unless the MOI addresses the matter.

Amending the Memorandum of Incorporation

Amendment can be done in three ways:
1. By court order
2. By the board of directors in terms of Section 36(3) and (4)
3. By a special resolution proposed by the board of the company or shareholders entitled to exercise at least 10% of the voting rights

Ring-Fenced Companies

A company's name must end with "RF" if the MOI contains certain restrictive or procedural requirements that impede amendments to the MOI.

Alterations to Correct Errors

The board of a company or an authorized individual can alter the company's rules or MOI to correct errors in spelling, punctuation, references, or grammar.

Translation and Consolidation of a Memorandum of Incorporation

A translation of the MOI must be accompanied by a sworn statement confirming its accuracy and completeness.
A company may file a consolidated revision of its MOI as altered or amended at any time after filing the MOI.

Authenticity of Versions of the MOI

In cases of conflict, the MOI as altered or amended prevails.

Shareholders' Agreement

Shareholders may enter into an agreement concerning any matter related to the company, as long as it is consistent with the Companies Act and the company's MOI.

Pre-Incorporation Contracts

A company does not exist before registration, so it cannot perform juristic acts or enter into contracts.
A promoter can enter into a contract stipulating benefits in favor of the unformed company, which can accept the benefits once formed.

Capacity and Authority

A company has the legal capacity and powers of an individual, except to the extent that:
1. A juristic person is incapable of exercising such power.
2. The MOI provides otherwise.
At common law, a company must have legal capacity and directors must have authority to enter into a contract.

Ultra Vires Doctrine

Under the previous company laws, an ultra vires act was considered null and void, as it exceeded the company's capacity as defined by its objects clause.
The doctrine of ultra vires has been abolished by the Companies Act of 2008.

Turquand Rule

A bona fide third party is entitled to assume that the company has complied with its internal formalities and procedures as specified in its constitution.
The Turquand Rule has been codified in Section 20(7) of the Companies Act of 2008.

Description

This quiz covers the topic of Memorandum of Incorporation (MOI) and Pre-Incorporation Contracts in Business Enterprise Law. It focuses on the incorporation of a company and the role of MOI in binding the company and its shareholders.