Business Entities Notes 2020
Lecture: The Constitution of a company (MOI)
Section 15: The Memorandum of Incorporation and Company rules
Definition s1: sets out rights, duties and responsibilities of shareholders, directors and
others within and in relation to a company, and other matters contemplated in s 15.
The MOI is the Founding document for a formation of a company.
The MOI can be tailored made or you can use a template. Thus allows for flexibility.
Flexibility: the act allows a large degree of flexibility with regard to the content of the MOI.
Consistency: The MOI must be consistent with the act, and provisions that aren’t will be
void.
Provisions: the MOI may deal with the following;
i. Deal with a matter that is not addressed in the act
ii. Alter the effect of any alterable provisions in the act
iii. Contain any special conditions applicable to the company
iv. Prohibit the amendment of any provision contained therein
The corporate constitution binds the parties in their capacity as functionaries of the
company. Must be subordinate to the companies act.
Legal status
→ Section 15(6) determines the binding nature of the constitution of the company (i.e. the
MOI and the company rules).
Binding from its effective date but only on an interim basis until it is put to a vote at the
next general meeting.
If ratified binding permanently. If not then it lapses/ has no effect. (MCQ).
1|Page
, Business Entities Notes 2020
Lecture: The Constitution of a company (MOI)
The Lapse doesn’t affect validity of anything done during the interim period. Those
contracts entered into will still be valid. (MCQ).
Within 5 days after meeting and vote the Co must file with Commission a notice of
ratification or non-ratification.
If not ratified, Board of directors may not make a substantially similar rule within the
ensuing 12 months.
NB! The corporate constitution binds the parties in their capacity as functionaries of the
company. (See Table Below)
→ Creates a legal relationship between the company and the following;
i. The shareholders
ii. The directors and prescribed officers
iii. The members of the audit committee and members of any
committee of the board
→ In their capacities as functionaries of the company:
→ 2 outstanding features:
1. Unalterable provisions-mandatory. Aimed at protecting shareholders, creditors, etc.
May not be altered in any Companies MOI.
Unalterable provisions of the Act may be made more onerous (not less) under
the MOI (higher standards, longer periods of time etc than would generally
apply).
Therefore a co cant contract out of such provisions of the Act.
Anti-avoidance provisions allows the court to declare any provision of the MOI or
rules (transactions, resolution, agreement, etc) to be meant to defeat or reduce
2|Page
Lecture: The Constitution of a company (MOI)
Section 15: The Memorandum of Incorporation and Company rules
Definition s1: sets out rights, duties and responsibilities of shareholders, directors and
others within and in relation to a company, and other matters contemplated in s 15.
The MOI is the Founding document for a formation of a company.
The MOI can be tailored made or you can use a template. Thus allows for flexibility.
Flexibility: the act allows a large degree of flexibility with regard to the content of the MOI.
Consistency: The MOI must be consistent with the act, and provisions that aren’t will be
void.
Provisions: the MOI may deal with the following;
i. Deal with a matter that is not addressed in the act
ii. Alter the effect of any alterable provisions in the act
iii. Contain any special conditions applicable to the company
iv. Prohibit the amendment of any provision contained therein
The corporate constitution binds the parties in their capacity as functionaries of the
company. Must be subordinate to the companies act.
Legal status
→ Section 15(6) determines the binding nature of the constitution of the company (i.e. the
MOI and the company rules).
Binding from its effective date but only on an interim basis until it is put to a vote at the
next general meeting.
If ratified binding permanently. If not then it lapses/ has no effect. (MCQ).
1|Page
, Business Entities Notes 2020
Lecture: The Constitution of a company (MOI)
The Lapse doesn’t affect validity of anything done during the interim period. Those
contracts entered into will still be valid. (MCQ).
Within 5 days after meeting and vote the Co must file with Commission a notice of
ratification or non-ratification.
If not ratified, Board of directors may not make a substantially similar rule within the
ensuing 12 months.
NB! The corporate constitution binds the parties in their capacity as functionaries of the
company. (See Table Below)
→ Creates a legal relationship between the company and the following;
i. The shareholders
ii. The directors and prescribed officers
iii. The members of the audit committee and members of any
committee of the board
→ In their capacities as functionaries of the company:
→ 2 outstanding features:
1. Unalterable provisions-mandatory. Aimed at protecting shareholders, creditors, etc.
May not be altered in any Companies MOI.
Unalterable provisions of the Act may be made more onerous (not less) under
the MOI (higher standards, longer periods of time etc than would generally
apply).
Therefore a co cant contract out of such provisions of the Act.
Anti-avoidance provisions allows the court to declare any provision of the MOI or
rules (transactions, resolution, agreement, etc) to be meant to defeat or reduce
2|Page
