5.7 SHORT FORM MOI
There were quite a few problems with the original short form MOI released with the ACT. Despite the inherent problems of the short form MOI and the fact that it has been widely used there was never a need to panic. Many parts of the short form might be quite adequate especially where the shareholders and directors are common. I will deal with the inherent problems below as there may still be many of these old short forms in circulation. If in your firm, you have any of these original inadequate short form MOI’s it would be a good idea to fix them by doing a Special Resolution!
The issue about supplying a short form MOI is that it might be absolutely perfect right now for a smaller business’s early requirements, but what happens when down the line the business grows and more shareholders get involved because the company needs capital, will it then be suitable at that point in time. Based on past experience of the old act one never looked at Table B, we just left it as it seemed to be fine because as a rule everyone knew exactly what it contained and they were mostly all the same. In a situation where there was a big share transaction lawyers normally prepared a Shareholder’s Agreement to cover the inadequacies of Table B.
Another important aspect of changing the MOI is what do we do about existing Shareholders Agreements as they don’t seem to be as important as they used to be? All Shareholder’s Agreements prior to April 2011 need to be checked for validity and that they conform to the requirements of the new act. It is suggested that you involve the company’s legal advisor to make sure that the original shareholders agreements are up to date and meet with the requirements of the shareholders, that’s if they want them or need them.
There is a problem when new shareholders are introduced in that a shareholder’s agreement does not apply to the new shareholder unless the new shareholder actual signs the agreement together with everyone else. Each time there is a transaction there needs to be a new shareholders agreement which everyone has to sign.