05 January 2021 - Blog Article #01
Written by Trevor Keyes
The Memorandum of Incorporation (MOI) is the founding document or “constitution” of a company. The document sets out the rights, duties and responsibilities of shareholders, directors and others and their relationship with the company.
Under the old Companies act (1973), a company would have two founding documents namely the memorandum of association and the articles of association. The new 2008 Companies act has abandoned the previous two documents and now provides only for one document, the Memorandum of Incorporation.
Broadly speaking the Memorandum of Incorporation deals with issues such as the powers of the company, the ability to create company rules, securities, debt instruments, shareholders meetings, the composition of the board of directors, the authority and powers of the directors and so forth.
Before a company can be registered, they must submit a Memorandum of Incorporation. The Companies and Intellectual Property Commission (CIPC) has some default Memorandums of Incorporation (CoR 15.1 A-E) that can be used. A company need not use one of the default Memorandums of Incorporation and can draft their own unique Memorandum.
An important aspect of the new Companies Act (2008) is that it provides for alterable and unalterable provisions. The unalterable provisions are mandatory requirements of every company and thus cannot be changed. A major part of all Memorandums of Incorporation are the recording of the alterable provisions of the Companies Act as agreed by the shareholders.
The new Companies Act provided for certain “Transitional Arrangements” from the old to the new Act (Schedule 5). The pertinent provision here is that all pre-existing companies ( those companies that were already in existence at the time of the commencement of the new Act) had until 30 th April 2013 to submit, without charge, a new or amended Memorandum to bring it in to harmony with the New Act.
The new Act specifically provides that if a provision of the Memorandum of Incorporation is in conflict with the Act then the provisions of the Act prevails. It is interesting to note that many companies to date have still not submitted their new or amended Memorandum of Incorporation. It is imperative that every Company submits a new or amended Memorandum of Incorporation as the administration of the Company could become very cumbersome or it is impossible to deal with certain issues in the Company. The Company may also be restricting its powers if they have not elected to alter some of the alterable provisions of the Act.
A good and simple explanation of some of the aspects discussed above and some other issues can be found on a short you tube video by Professor Mathew Lester at: