Aarya Legal

#Startup101 Do I HAVE to go through the expense and stress of audit my company?   One of the major changes introduced by the new Companies Act of 2008 was to do away with the requirement that a small company has to be audited.   This means you save a lot of money and admin. You can, however, choose in your Memorandum of Incorporation (“MOI”) to voluntarily comply with chapter 3 of the Companies Act which deals with audits if you want to set a higher level of compliance and oversight.   The following companies do need to do an audit by law: ·   A public company; ·   A state-owned company; ·   A company with a public interest score higher than 350; ·   A company with a public interest score of at least 100 if its financials are prepared internally; ·   a non-profit or other company if it holds at least R5 million in assets for others in a trust capacity.   A review as opposed to an audit may be needed by a registered auditor or a professional member of an accredited body where: ·   The public interest score is at least 100; ·   The public interest score is below 100 by the persons above or a person qualified to be appointed as an accounting officer for a closed corporation.   If you have a public interest score of less than 100 points you need not be audited or reviewed but you must still prepare financial documents. For SARS income tax purposes you still need your financials to be compiled if you are a small company with less than 100 points. Look out for our next post on the #publicinterestscore. #startup #companylaw #companiesact #audit #MOI

#Startup101 What are the rights of shareholders?   In terms of the Memorandum of Understanding and the Companies Act of 2008 shareholders have a right to a vote for every share held, a right to distributions of profits when declared i.e. dividends and the right to distribution of any value left in the business after it has been wound up.   Shareholders (and holders of any securities in the company) also have the right to inspect and copy a number of documents including:   1) The company’s MOI and any amendments to it; 2) Records relating to the company’s directors; 3) Reports to annual meetings and annual financial statements; 4) Notices, minutes and resolutions of annual meetings and communications of shareholders and directors; 5) the securities register of a company.   Security holders include mortgage bond, notarial bond holders and surety holders i.e. your bank, holders of debentures and secured loan accounts.   It is for this reason that you want to think carefully before awarding shares to persons, including employees in employee share schemes.    Bringing on new shareholders, investors or creating an employee incentive scheme? We can help. #startuplaw #companiesact #commerciallaw #techlaw

#Startup101 What are the rights of shareholders?   In terms of the Memorandum of Understanding and the Companies Act of 2008 shareholders have a right to a vote for every share held, a right to distributions of profits when declared i.e. dividends and the right to distribution of any value left in the business after it has been wound up.   Shareholders (and holders of any securities in the company) also have the right to inspect and copy a number of documents including:   1) The company’s MOI and any amendments to it; 2) Records relating to the company’s directors; 3) Reports to annual meetings and annual financial statements; 4) Notices, minutes and resolutions of annual meetings and communications of shareholders and directors; 5) the securities register of a company.   Security holders include mortgage bond, notarial bond holders and surety holders i.e. your bank, holders of debentures and secured loan accounts.   It is for this reason that you want to think carefully before awarding shares to persons, including employees in employee share schemes.    Bringing on new shareholders, investors or creating an employee incentive scheme? We can help. #startuplaw #companiesact #commerciallaw #techlaw

#startup101 Proxy votes at shareholder meetings   A proxy is written authorisation from one person to another to vote on their behalf. You can appoint a proxy or someone to vote on your behalf at shareholder meetings.    The Companies Act allows you to make this appointment at any time so provisions like “24 hours before the meeting” in the Memorandum of Incorporation or board rules do not prevent a shareholder from exercising their rights if they cannot make the meeting in an emergency.  That provision in the MOI or rule would be inconsistent with the Companies Act and would be invalid.   It’s important to note that under the new Companies Act the proxy is entitled to make a decision they consider best and are not obliged to merely act on your instructions 🤯 You may also appoint more than one proxy to exercise a portion of your vote.  You should think carefully about using a proxy if you have a firm view on a decision.    You can still attend the meeting and vote personally  - in which case the proxy will be suspended. You can also revoke a proxy at any time.   #startuplaw #companiesact #Commerciallaw #techlaw

#startup101 🔴 Shareholders beware! It may shock you to know your business partner could legally sell their shares to a third party without offering them to you first. Neither the Companies Act nor the standard Memorandum of Incorporation(MOI) you get when registering your company with the CIPC provide for pre-emptive rights on sales of shares. Let's delve more deeply into the concept of pre-emptive rights.   Logically you would want to restrict the free transfer of shares in a company you start in the MOI and/or shareholders agreement. It is important to you who you got into business with and you would not necessarily want just anyone as a shareholder. One of the ways you restrict transfer of shares is with pre-emptive rights.  A pre-emptive right is a fancy word for having the first bite at the cherry sometimes called a right of first refusal in other jurisdictions.    The Companies Act has "weak" pre-emptive rights for shareholders for the ISSUANCE of new shares.  This means that if the Company issues new shares out of its authorised shares (have a look at our article on authorised shares) the existing shareholders have a pre-emptive right to them i.e. they have first dibs on the new shares issued. This allows shareholders to avoid being diluted when new shareholders are offered shares.  The shares will be offered to the shareholders in proportion to their existing shareholding and only if they decline to purchase the shares will the shares be offered for issue to a third party.   The Companies Act and standard short form MOI (Cor15.1A) from the CIPC don’t provide pre-emptive rights for SALES of shares by shareholders to third parties. This is an important issue to deal with by creating a bespoke MOI and shareholders agreement.  If you don’t take these steps then shareholders are free to sell their shares to any third party without offering them to you first 🤯 .  That is not ideal.  We can assist you with a custom MOI which includes pre-emptive rights, so you have right to be offered the shares of an exiting shareholder before they make an offer to an outsider.  You may even want to include clauses requiring the disclosure of the third party’s identity and a higher than usual voting threshold to permit sales to third parties i.e. above 75% of the shareholders.   We can help. Note: In order to qualify as a private company, aka a Pty (Ltd), a company must state that the shares may not be offered to the general public and that transfer of its shares is restricted in its MOI. This is in contrast to public/listed companies that may offer their shares for subscription to the general public. We will cover public companies in a different post.

#startup101 What are the rights of shareholders? 📚   In terms of the Memorandum of Understanding and the Companies Act of 2008 shareholders have a right to a vote for every share held, a right to distributions of profits when declared i.e. dividends and the right to distribution of any value left in the business after it has been wound up.   Shareholders (and holders of any securities in the company) also have the right to inspect and copy a number of documents including:   1) The company’s MOI and any amendments to it; 2) Records relating to the company’s directors; 3) Reports to annual meetings and annual financial statements; 4) Notices, minutes and resolutions of annual meetings and communications of shareholders and directors; 5) the securities register of a company.   Security holders include mortgage bond, notarial bond holders and surety holders i.e. your bank, holders of debentures and secured loan accounts.   It is for this reason that you want to think carefully before awarding shares to persons, including employees in employee share schemes. 💡

#Startup101 What are shares?   The Companies Act 71 of 2008 defines a share as “one of the units into which the proprietary interest in a profit company is divided”.   The basic rights that every shareholder (unless they have been changed in the Memorandum of Incorporation (“MOI”) are: ·   dividends when declared; ·   going to and voting at shareholder meetings; ·   getting back capital on winding the company up.   These rights can be differentiated according to the class of share and the different rights that accrue to that class of shares.  In other words classes of shares might have different or no voting rights, different preferences upon liquidation and different rights to dividend flow.  Every share will be guaranteed, by the Companies Act 71 of 2008, the right to vote on any amendment to the rights attaching to their share. #companiesact #companylaw #shares #startuplaw #entrepreneur

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Are you ready for the EU AI Act? #artificialintelligence #AI #EUAIAct #startuplaw #techlaw #aaryalegal #summary #legislation

Amending your constitutional documentation, or even knowing when its necessary can be tricky. Our #startup101 article explains the basics. #startup #startuplaw #companiesact #memorandumofincorporation #moi #shareholdersagreement #SHA #CIPC