Shareholders’ Agreements in Johannesburg: Drafting, Reviewing and Disputes

A shareholders’ agreement (SHA) is a private contract regulating the relationship between a company’s shareholders and, commonly, the company itself. It supplements the Memorandum of Incorporation (MOI) and the Companies Act 71 of 2008, but section 15(7) makes an inconsistent term void to the extent of the inconsistency.

Burger Huyser Attorneys assists Johannesburg shareholders with drafting, reviews, deeds of adherence, exits and disputes involving voting, transfers, deadlock, valuation, intellectual property and restraints of trade.

Why a Shareholders’ Agreement Matters in a Johannesburg Company

A South African company is not generally required to have an SHA. Without one, shareholders rely primarily on the Act and MOI, which do not record every commercial understanding between founders, investors or BEE participants. A carefully drafted agreement creates a route through events that often generate conflict, including deadlock, a proposed sale, a funding shortfall or a shareholder’s departure.

An SHA is not filed with CIPC, so valuation formulae, funding arrangements and remuneration principles can remain private. The MOI, by contrast, is filed with CIPC and governs the company constitutionally.

What the SHA Sits Alongside: The Companies Act and the MOI

The Act is the controlling statute. The MOI binds the company and its shareholders and may alter provisions of the Act only where the Act permits alteration. The SHA then records the parties’ private commercial bargain within those boundaries. Section 15(7) requires consistency between all three layers.

The Companies Act Sections That Matter Most for SHA Drafting

Provision	Why it matters
Section 15(7)	Permits shareholder agreements but voids a provision to the extent that it conflicts with the Act or MOI.
Sections 37 and 39	Section 37 addresses rights attached to share classes. Section 39 gives qualifying shareholders of private companies a pre-emptive right regarding certain new share issues; it does not itself regulate transfers of already-issued shares.
Section 65	An ordinary resolution ordinarily requires more than 50% of votes exercised and a special resolution at least 75%. An MOI may adjust permitted thresholds, subject to the required ten-percentage-point margin.
Sections 44 and 45	Regulate specified forms of financial assistance and require the relevant approvals, board findings and MOI compliance. These rules may affect a company-funded share acquisition or buy-out.
Sections 163 and 164	Section 163 provides broad relief against oppressive or unfairly prejudicial conduct. Section 164 creates appraisal rights for qualifying dissenting shareholders who follow its strict procedure.
Section 218	Preserves remedies and provides for liability for loss caused by a contravention of the Act, subject to how the section is applied in the circumstances.

An SHA may impose additional contractual approval requirements for reserved matters, but it cannot remove mandatory statutory rights. The MOI and SHA should therefore use compatible definitions, voting thresholds and procedures.

Clauses Every Johannesburg SHA Should Address

• Share structure and class rights: authorised and issued shares, rights attached to each class, and any founder-vesting arrangement that also requires MOI treatment.
• Voting and reserved matters: enhanced consent thresholds for new issues, material borrowing, budgets, senior appointments and major business changes.
• Dividend policy: the agreed approach, subject to directors’ duties and statutory distribution requirements.
• Transfer restrictions: pre-emption, permitted transfers, drag-along and tag-along rights, and a deed of adherence for each incoming shareholder.
• Deadlock and exit: escalation, mediation, buy-sell mechanisms, valuation, payment terms and consequences of death, insolvency or breach.
• Management: board composition, executive roles, delegated authority, reporting and shareholder-employee remuneration.
• Intellectual property: ownership and assignment of company-related IP, including obligations that continue after a founder leaves.
• Restraint of trade: a restraint linked to a legitimate protectable interest and tailored by activity, territory and duration. Enforceability depends on reasonableness in the circumstances.
• Dispute resolution: negotiation followed by mediation, arbitration or court proceedings, with governing law, seat, procedure and urgent-relief rights stated clearly.
• Funding and loan accounts: the distinction between debt and equity, interest, repayment priority and conversion. Trust-linked loans may require tax advice, including consideration of section 7C of the Income Tax Act 58 of 1962.

Common Pitfalls When Drafting or Signing an SHA

• No agreement: the shareholders have no tailored contractual route for common deadlock, exit or valuation problems.
• Conflict with the MOI: section 15(7) defeats the inconsistent term, even if every shareholder signed it.
• No workable 50/50 deadlock clause: unresolved paralysis may lead to oppressive-conduct proceedings, other court relief or, in qualifying circumstances, a winding-up application.
• An overbroad restraint: a worldwide, unlimited restraint is unlikely to be defensible merely because it appears in a signed document.
• Execution defects: every party should sign through a person with proper authority. Company or trust shareholders require particular attention to authorising resolutions and capacity.
• No deed of adherence: a transferee who never becomes party to the SHA may not be bound by its contractual obligations.

Good drafting does more than list protections: it makes each trigger, notice, deadline, valuation step and consequence capable of being followed under pressure.

What the Service Engagement Covers at Burger Huyser

1. Intake: review the MOI, share register, existing SHA, side letters and proposed ownership.
2. Issue identification: compare the deal with the Act and MOI; identify approvals, amendments, tax questions and negotiation points.
3. Drafting or review: prepare a bespoke agreement or mark up a counterparty draft.
4. Completion: align execution copies, corporate approvals and related documents.
5. Disputes and exits: advise on deadlock, valuation, restraints, buy-outs and section 163 proceedings, instructing counsel when required.

A straightforward two-shareholder agreement is often completed within two to four weeks after complete instructions; multi-party negotiations, BEE structures, international elements or MOI amendments take longer. Indicative South African market guidance is R8,000–R20,000 excluding VAT for a straightforward agreement and R25,000–R60,000 or more excluding VAT for complex work. These are not fixed Burger Huyser fees: the firm quotes after reviewing scope and complexity.

Choosing a Johannesburg SHA Attorney: What to Look For

• Working knowledge of the Companies Act provisions governing the proposed structure.
• A method for checking every negotiated clause against the MOI and share rights.
• Ability to identify when BEE, tax, trust, IP or exchange-control input is needed.
• Dispute experience, so exit and enforcement provisions are drafted for real use.
• A clear scope, cost discussion and explanation of what the quoted fee excludes.
• Johannesburg availability for stakeholder consultations and completion meetings.

Burger Huyser Attorneys’ Commercial Law & Contracts practice provides access to litigation capability if an arrangement becomes disputed.

Frequently Asked Questions

Does a Johannesburg (Pty) Ltd legally need a shareholders’ agreement?

No. South African law does not generally require a private company to have an SHA. The Act and MOI govern the relationship without one, but an SHA can add private mechanisms for deadlock, exit, transfer restrictions, dividends and dispute resolution.

How much does a shareholders’ agreement cost in Johannesburg?

The outline’s indicative South African market guidance is R8,000–R20,000 excluding VAT for a straightforward two-shareholder SHA and R25,000–R60,000 or more excluding VAT for complex multi-party, BEE, vesting or international work. Burger Huyser quotes per file after intake; contact Sandton on 011 253 3080 or Randburg/Linden on 011 888 0246.

What is the difference between an SHA and an MOI?

The MOI is the company’s constitutional document, filed with CIPC and binding in terms of the Act. An SHA is a private contract recording additional commercial arrangements. Section 15(7) makes any inconsistent SHA term void to the extent of the inconsistency.

Can a departing Johannesburg shareholder be restrained from competing?

Yes, potentially. South African courts assess whether the restraint protects a legitimate interest and is reasonable in its context, including the restricted activity, duration and territory. The clause should match the company’s actual market and protectable interests.

What happens to a 50/50 Johannesburg company if the shareholders deadlock?

The outcome depends on the SHA, MOI and circumstances. A suitable clause may require escalation, mediation, expert determination or a buy-sell process. Without an effective contractual mechanism, shareholders may require court relief, including section 163 relief or winding-up where the statutory requirements are met.

Can the SHA override the Companies Act?

No. The SHA supplements the Companies Act and MOI; it does not replace either. Section 15(7) voids an inconsistent contractual provision to the extent of the inconsistency, while statutory remedies such as sections 163 and 164 remain available when their requirements are satisfied.

Which Burger Huyser branch handles Johannesburg shareholders’ agreement work?

Johannesburg shareholders may contact the Sandton branch at Block 3, 1st floor, Northdowns Office Park, 17 Georgian Crescent East, Bryanston, Sandton, 2191 on 011 253 3080, or the Randburg/Linden head office at 49 First Avenue, Linden, Randburg, 2194 on 011 888 0246.

If you need an SHA drafted, reviewed or enforced, contact Burger Huyser Attorneys’ Commercial Law & Contracts practice through Sandton on 011 253 3080 or Randburg/Linden on 011 888 0246. Bring the MOI, share register, existing agreements and a short summary of the proposed commercial deal. Burger Huyser Attorneys has a 4.8/5 average from 250+ Google reviews and was named Commercial Law Firm of the Year 2025 – South Africa in the 5 Star Lawyers Awards.