6.2 TRANSITIONAL ARRANGEMENTS
The commencement of the new companies act on the 1st May 2011 created a transitional period of 2 years whereby the old Memorandum of Incorporation and Articles of Association (MOI) took preference over any conflicts with the new act. This meant that on the 1st May 2013 the situation was reversed and the new act took preference. i.e. All articles in the old MOI that conflict with the new act are void. By 1st May 2013 each company should have in fact implemented a new MOI to avoid these conflicts, however it is not essential that this happened by the 1st May 2013 but it is highly recommended. Even now it’s not too late it is just going to cost the CIPC fee.
The MOI is in fact the constitution of the company and it sets out the rights, duties and responsibilities of shareholders, directors and others within and in relation to a company. All the parties mentioned above are bound by the articles in the MOI. The MOI will also bind new directors and shareholders after the company has been formed.
The new companies act is a one size fits all act that applies to the largest corporations right down to small companies. There is a great deal of flexibility which has been provided by the so-called alterable provisions. Alterable provisions can be modified by the articles in the MOI. It is because of this that each company should have the right MOI for their situation.
The new companies act has various provisions which are called unalterable provisions. These are provisions in the act that cannot be changed by the MOI, in other words they can be made stronger, but they can never be made weaker. The alterable provisions or flexible provisions of the act are subject to any negation, restriction, limitation, qualification, extension or other alteration that is required, but these changes must be specified in the MOI. It is theses alterable provisions that create flexibility for the one size fits all approach.
An alterable provision normally starts with “except to the extent that is otherwise provided in the MOI….”. This allows the MOI to modify the contents of the provision.