A consideration of the binding effect of section 15(6) of the Companies Act 71/2008

Abstract

It is trite law that a company is an artificial being, existing only in contemplation of law and, being a creature of law, it possesses those properties which the constitution of its incorporation confers on it. It follows that the company’s existence is endorsed by the contractual binding force its constitution has over its incorporators, members (shareholders) and third parties. The Companies Act 71/2008 (hereinafter, the Act) introduced the Memorandum of Incorporation (hereinafter, MOI) as the company’s most important founding document and scholars considers it as the company’s constitution.1 This new development makes the company’s MOI the only document governing the affairs of the company.2 Yet, this does not mean that the new Act has removed the possibility of a shareholders’ agreement. Rather, the shareholders’ agreement must be in line with both the MOI and the Act.3 Thus, the shareholders’ agreement, though a private contract,