What is a Memorandum of Incorporation?

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Forming a company includes a lot of legal processes. A company has a number of benefits and is also subject to certain restrictions and requirements in the legal sense. As a business owner, it’s important to keep track of the legal aspects of the business. This helps you avoid encountering any legal problems.

According to the Companies Act 71 of 2008, companies in South Africa have to create a Memorandum of Incorporation (MOI).

This document sets out the rights and responsibilities of shareholders, directors and others within a company. The MOI is important because it specifies how a pre-existing company was structured and governed before the Act was introduced. Essentially, it specifies how a company has been incorporated and also specifies company rules.

What is the purpose of the MOI?

It is created to protect shareholders’ interests in the company and to promote transparency and to increase corporate efficiency.

It includes a set of rules that companies may accept, change or supplement to suit the particular needs of the company.

What is the process of creating the MOI?

  • When a new company is created, the MOI must be completed and filed by way of a notice of incorporation.
  • The company then represents a juristic person.
  • The MOI is the shareholders’ control document which defines the company’s authority levels and the respective roles and rights of shareholders and directors. It serves as the company’s internal code of corporate governance.
  • It’s always advisable to compile a tailor-made MOI which meets the needs and preferences of your company, its shareholders, directors and stakeholders, thereby decreasing the commercial and legal risk of directors.
  • The MOI facilitates the simple and cost-effective registration of a new company.

Key factors to consider:

  • The new Companies Act binds prescribed officers and members of the audit committee.
  • Non-profit companies are no longer required to hold Annual General Meetings.
  • Requirements for the passing of certain resolutions have changed.
  • The Act contains unalterable provisions. If found to be in contravention by the courts, the provision will be considered null and void.

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