Abstract

Shareholders’ agreements are a common feature of limited liability trading and investing. That was the case under the Companies Act, 1973, and it remains the case under its successor, the Companies Act, 2008. Under the former, shareholders’ agreements generally took precedence over the company’s articles of association in cases of conflict. Under the latter, the position is different. This is captured in section 15(7) of the Companies Act, 2008 which provides that a shareholders’ agreement that is inconsistent with the company’s Memorandum of Incorporation is void to the extent of the inconsistency. A recent Western Cape High Court judgment dealing with section 15(7) provides an opportunity to take stock of the jurisprudence. An analysis of the case law and academic writing reveals the ambit and operation of section 15(7) to be more nuanced and complex than may at first blush appear to be the case. The exact extent to which section 15(7) marks a departure from the previous regime remains, in important respects, yet to be decided on an authoritative basis.