A Memorandum of Incorporation (“MOi”) is the founding document required for the formation of a company in terms of the new Companies Act 71 of 2008 (“Act”).
There are virtually no bounds when it comes to what to include in an MOI and MOIs often vary in degree from company to company. Any provision may be included in an MOI which is not provided for in the Act. Each provision of an MOI, however, must be consistent with the Act, unless the Act expressly allows for a deviation therefrom.
The contents of an MOI determine amongst others things, the type of company, the objects, powers and restrictions of a company, the rights and obligations of the shareholders of the company and the powers and duties of the directors of a company. An MOI is binding as between:
- the company and its shareholders
- the shareholders
- the company and each director
- the company and each prescribed officer.
The Act provides that there are certain unalterable provisions, alterable provisions and default provisions which apply to an MOI. A company is unable to alter the substance or effect of an unalterable provision unless the provision in its MOI is more restrictive than the unalterable provision in the Act. A company may, however, alter an alterable provision of the Act in its Memorandum of Incorporation to suit its specific requirements.
Any MOI may be amended either in part or replaced in full. The amendment must be proposed by either the board of directors of a company or the shareholders of a company entitled to exercise at least 10% of the voting rights, or alternatively in accordance with the manner set out for such amendment in the moi.