Abstract

Section 15(7) of the Companies Act 71 of 2008 radically altered the way in which the constitutional documents of a company — the memorandum of incorporation (‘MOI’) and the shareholders’ agreement — interact. Section 15(7) provides inter alia that any provision in the shareholders’ agreement that is inconsistent with a company’s MOI is void to the extent of the inconsistency. This article examines the interplay between the shareholders’ agreement and the MOI and offers recommendations for resolving any conflicts between the two. This article critically evaluates how the courts have interpreted s 15(7). The analysis reveals that our courts do not always interpret s 15(7) consistently or correctly. Where s 15(7) is applied correctly, it can lead to efficiencies in corporate governance, reaffirming the majority-rule doctrine that our corporate law embraces. Even when s 15(7) is not applied correctly, it can lead to absurd outcomes in which the provisions of a shareholders’ agreement are ignored despite all the shareholders consenting to them. Section 15(7) should ideally recognise unanimous shareholders’ agreements over the MOI in certain contexts. Given that legislative reform is not always realistic, I make practical recommendations to legal practitioners about navigating s 15(7).