Can a Shareholders Agreement Override Companies Act? A Legal Guide
Navigating corporate governance in South Africa often raises a crucial legal question: can a shareholders agreement override the Companies Act? For many business owners and shareholders, understanding the relationship between these two documents is essential to ensure both compliance and effective company management.
At Burger Huyser Attorneys, we guide clients through the complexities of company law, helping them structure shareholder agreements that support their goals without breaching statutory boundaries.
Understanding the Companies Act vs Shareholders Agreement
The Companies Act 71 of 2008 is the principal legislation governing companies in South Africa. It provides the legal foundation for the operation, management, and regulation of companies, including provisions relating to shareholder rights, directors’ duties, governance structures, and dispute resolution.
A shareholders agreement, on the other hand, is a private contract between shareholders that outlines how the business will be run, how shares may be transferred, and how disputes will be handled. It typically supplements the company’s Memorandum of Incorporation (MOI), adding tailored terms that align with the shareholders’ specific intentions.
Can a Shareholders Agreement Override Companies Act Rules?
The short answer is no, a shareholders agreement cannot override the Companies Act. Where a shareholders agreement contradicts the Act or the company’s MOI, the provisions of the Act will always prevail.
The Legal Hierarchy
In South African company law, there’s a clear legal hierarchy:
- Companies Act – Supreme authority.
- Memorandum of Incorporation (MOI) – Must align with the Act.
- Shareholders Agreement – Must not conflict with either the MOI or the Act.
If a provision in the shareholders agreement breaches any part of the Companies Act, it will be deemed invalid to the extent of the inconsistency.
Example of a Conflict
If a shareholders agreement tries to limit a director’s powers beyond what is permitted in the Companies Act, such a clause would have no legal effect. Similarly, any attempt to modify statutory rights such as minority protections, notice periods for meetings, or fiduciary duties would be legally unenforceable.
How to Align a Shareholders Agreement with the Companies Act
It is crucial to ensure that any shareholders agreement is carefully drafted in line with the Act and the MOI. At Burger Huyser Attorneys, we assist clients in:
- Drafting legally sound agreements
- Reviewing existing shareholder agreements
- Amending agreements to align with the Companies Act
- Ensuring enforceability and clarity
Tailored Legal Guidance
By working with experienced corporate attorneys, you ensure your shareholders agreement provides real value while staying compliant with South African law. We draft agreements that protect your interests without introducing unenforceable terms.
Why Legal Advice Matters
Incorrectly assuming that a shareholders agreement can override the Companies Act can lead to legal disputes, governance issues, or financial losses. Legal advice from professionals who understand the Act is vital to safeguard your business and shareholder relationships.
Protect Your Business with Legal Precision
Don’t let a poorly structured shareholders agreement compromise your company’s future. Burger Huyser Attorneys is here to provide expert guidance on aligning your business agreements with the Companies Act. Let us help you navigate the law and draft enforceable, effective shareholder agreements.
Contact Burger Huyser Attorneys, and book a consultation.
To speak to one of our experienced attorneys in South Africa for immediate assistance, contact us on the numbers below:
Randburg call 061 516 6878; Roodepoort call 061 516 0091; Sandton call 064 555 3358;  Pretoria call 064 548 4838;
Centurion call 061 516 7117; Alberton call 061 515 4699; Bedfordview call 061 536 3223
DISCLAIMER: Information provided in this article does not, and is not intended to constitute legal advice. READ MORE
