In terms of South Africa’s Companies Act 71 of 2008 (“the Act”), every registered company must have a Memorandum of Incorporation (“MOI”) in place. This foundational document governs the internal structure of the company, defining the rights and duties of shareholders, directors, and other stakeholders. As a company evolves, amendments to the MOI may become necessary. For example, to reflect shifts in governance, to accommodate operational needs, to respond to changes in legislation, or to adjust share capital arrangements.

When and Why to Amend an MOI

Companies may be required to amend their MOI for several reasons, including:

• Reorganising the company’s governance or control structure;
• Bringing the MOI in line with updated statutory or regulatory frameworks;
• Altering authorised share capital (e.g., increasing or decreasing the number of shares, classifying or reclassifying unissued shares);
• Introducing or revising specific rights and obligations attached to different share classes;
• Customising or deviating from certain provisions of the Companies Act that are expressly alterable.

Because the MOI is the only document through which a company can override specific default provisions of the Act, it plays a critical role in shaping the legal and operational landscape of the business.

How an MOI May Be Amended

The Act provides for two primary methods of amending an MOI:

1. Replacing the MOI entirely by adopting a new version; or
2. Altering specific clauses in the existing MOI, for instance, by changing the company name, deleting or updating provisions, or adding new terms.

In general, amendments require the approval of shareholders by special resolution. However, in certain limited circumstances, the board of directors is permitted to make changes without shareholder approval. These include:

• Correcting clerical or typographical errors in the MOI, such as mistakes in punctuation, grammar, or references;
• Altering authorised share capital, including increasing or decreasing the number of authorised shares, classifying unclassified shares, reclassifying authorised but unissued shares, or determining the specific rights associated with a share class;
• Implementing amendments ordered by a court, which must be actioned by board resolution following the court’s directive.

After adopting the relevant resolution, the company must file the amended MOI, together with all required supporting documentation, with the Companies and Intellectual Property Commission (CIPC) and pay the applicable fees.

When Do Changes Take Effect?

• If the amendment involves a change to the company’s name, the change becomes effective on the date reflected on the new registration certificate issued by CIPC.
• For all other amendments, the effective date is either the date of filing the amendment with CIPC or a later date specified in the filing. Importantly, the Act prohibits retroactive changes, amendments cannot take effect from a past date.

Legal Considerations and Limitations

While companies have flexibility in modifying their MOIs, all amendments must remain consistent with the mandatory provisions of the Act. Invalid amendments, those that contradict unalterable provisions or the company’s own MOI, will be legally unenforceable.

Nonetheless, the Act permits:

• The inclusion of governance mechanisms on matters not expressly covered by the Act;
• Alterations to default rules, where permitted by the Act’s alterable provisions;
• The imposition of stricter standards or longer timeframes than those required by the Act;
• The insertion of restrictive conditions that can only be amended in terms of elevated requirements set within the MOI itself.

It is vital to ensure that proposed amendments comply not only with the Companies Act but also with the procedural and substantive requirements of the existing MOI. The case of Allen v Gold Reefs of West Africa Ltd (1900) remains instructive: amendments must be made in good faith, with regard to the general principles of law and equity.

Risks of Non-Compliance

Improper amendments, such as those adopted without the required approvals or filed incorrectly, may be rendered void. This can expose directors to personal liability for failing to act in accordance with a valid MOI, potentially amounting to a breach of fiduciary duties.

Legal certainty in governance documents is crucial for protecting both the company and its stakeholders.

Final Thoughts

Amending or replacing a company’s MOI should never be approached lightly. Given the MOI’s central role in defining corporate structure and authority, any proposed changes must be carefully considered and correctly implemented.

At VDMA, our corporate advisory team is well-placed to assist with drafting new MOIs, reviewing proposed amendments, and ensuring full compliance with the Companies Act.