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What is an MOI and what is meant by short form and long form MOI’s?

A Memorandum of Incorporation (“MOI”) can be described as the sole governing document of a company and is binding between the shareholders, directors and the company itself. Before implementation of the Companies Act No. 71 of 2008 (“the new Act”), all companies were required to have an Articles of Memorandum of Association, which was replaced by the MOI.

The purpose of an MOI is to set out the rights, duties and responsibilities of the shareholders, directors and other persons involved in the company structure. Another important role of the MOI is to indicate whether there are any limiting conditions which apply to the company. An MOI can also be an effective tool to hold persons involved in the company accountable by setting out clear guidelines.

During the registration process of a new company, a default MOI will be registered, which is prescribed by the Companies and Intellectual Property Commission (“CIPC”). This default MOI is often referred to as a “short form” MOI, which in effect refers to all the default provisions of the new Act. A short form MOI does not alter any alterable provisions of the new Act and ensures that the company complies all the minimum requirements, as set out in the new Act.

Although each company receives a default MOI during the registration process, the specific circumstances of the company setup and/or the shareholders may be of such nature that a customised MOI is required to properly provide for the needs of the company and its shareholders. As soon as it is decided that an MOI must be customised, it can be referred to as a “long form” MOI. This type of MOI is tailored to specifically apply to the company and is not based on the prescribed MOI as provided by CIPC. However, it is important to note that in terms of the Act there are certain minimum requirements which must be complied to. It is therefore not possible to tailor the MOI in such a manner that it does not comply with the minimum requirements of the Act.

In situations where parties are of the opinion that a long form MOI is required to make provisions to the needs of the company and the shareholders, it is important to ensure that your adviser has proper knowledge of the difference between alterable and non-alterable provisions. This would guarantee that the document is drafted in accordance with the provisions of the Act and all the needs of the parties involved are addressed and protected.