Ryts acknowledges that many of the readers of Ryts run their own companies. We will therefore over a number of articles look at what you should know about regarding the Companies Act 71 of 2008. Even if you do not run a company you may want to still read these articles. They may still be of benefit.
We are going to start off by looking at where to do get your rights and obligations from as a company. There is a hierarchy to all of this. In order, you get your authority as a director from;
- Companies Act – Unalterable provisions.
- Companies Act – Alterable provisions
- Memorandum of Incorporation
- Rules
First off, if you run a company you are required to comply with the Companies Act, end of story. However, within the Act itself there are unalterable provisions and unalterable provisions. The unalterable provisions are self-explanatory. Again, just comply as stated in the Act. But there are also alterable provisions which gives you a certain amount of leeway. Those alterable provisions you can reference in your Memorandum of Incorporation (MOI) which we will get to just now. An example of an alterable provision can be found in shareholder resolutions, lets take an ordinary resolution
[S65(7)] For an ordinary resolution to be approved by shareholders, it must be supported by more than 50 percent of the voting rights exercised on the resolution.
[S65(8)] ….. a company’s Memorandum of Incorporation may require-
(a) a higher percentage of voting rights to approve an ordinary resolution; or
(b) one or more higher percentages of voting rights to approve ordinary resolutions concerning one or more particular matters, respectively, provided that there must at all times be a margin of at least 10 percentage points between the highest established requirement for approval of an ordinary resolution on any matter, and the lowest established requirement for approval of a special resolution on any matter.
So you can, within certain prescribed limits, play around with the percentages at your sole discretion.
What then is a Memorandum of Incorporation? The Companies Act defines it as the document, as amended from time to time that sets out rights, duties and responsibilities of shareholders, directors and others within and in relation to a company, and other matters as contemplated in section 15 and by which-
(a) the company was incorporated under this Act, as contemplated in section 13;
………..
(c) a domesticated company is structured and governed;
The MOI must be consistent with this Act and is void to the extent that it contravenes, or is inconsistent with, this Act. The MOI of any company may include any provision dealing with a matter that the Act does not address. Sections 15 to 18 of the Act deals with the MOI. There are many websites and AI programs which will guide you on what your particular MOI should contain. Remember, if it is already in the Act, you do not need to repeat it.
Finally Rules. Rules are subservient to the MOI. [S15(3)] Except to the extent that a company‟s Memorandum of Incorporation provides otherwise, the board of the company may make, amend or repeal any necessary or incidental rules relating to the governance of the company in respect of matters that are not addressed in this Act or the Memorandum of Incorporation. The publishing of Rules is covered further down S15. An example of a a Rule may be that the MOI allows for the company to appoint a General Manager. You may wish to use a Rule to set spending limits foe the General Manager. As you increase spending limits over time to keep pace with inflation you can amend the Rule without having to amend the MOI.
