Shareholder Agreement Attorneys for Clear Ownership and Governance
Aligning founders on control, funding and exit before pressure arrives.
Percentage ownership alone does not answer how a company will be funded, governed or exited. We help founders, shareholders and companies draft, review and update shareholder agreements that allocate decision rights and create workable processes for transfers, exits, deadlock and change — aligned with the MOI and current company law.
Overview
Agree the Rules Before
the Business Is Under Pressure
Shareholders often begin with shared optimism but different assumptions about work, money, control, growth and exit.
A written agreement makes those assumptions visible and gives the parties defined processes when circumstances change — clarifying decision rights, funding expectations, transfer control, and an exit process. It cannot promise to prevent every dispute; its value also depends on lawful terms, MOI alignment and consistent implementation.
Offices in Durban and Johannesburg. Assistance is subject to conflict and client-identification checks.
Company Law Framework
The Shareholder Agreement
Must Be Checked Against the MOI
The Companies Act 71 of 2008, as amended, permits shareholders to enter into agreements concerning company matters. Section 15 requires those agreements to be consistent with the Act and the company's Memorandum of Incorporation — a provision inconsistent with either is void to that extent. The shareholder agreement and MOI should always be reviewed together; the work may require changes to one or both documents and appropriate company approvals or filings.
Before Drafting Begins
Timing and Who Is the Client?
Timing
When Should Shareholders Put an Agreement in Place?
Common triggers include forming a company with multiple owners, a co-founder or investor joining, issuing or transferring shares, changing funding commitments, a board or voting structure that no longer fits the business, a major transaction, or an existing agreement that no longer aligns with the MOI.
Existing rights, approvals, tax consequences and transfer mechanics must be assessed before implementing an ownership change.
Who Is the Client?
The Company and Its Shareholders May Have Different Interests
The company is a separate legal person. Acting for the company does not automatically mean acting for every shareholder, director or founder personally. Before substantive advice, we identify who is instructing the firm, who the intended client is, and whether interests already diverge.
Where a conflict exists or may arise, separate representation may be required.
Ownership & Governance
Getting the Basics Right
Share Rights
Define the Ownership Structure Accurately
The agreement should use the company's verified securities and ownership records rather than informal percentages — classes of shares, voting and economic interests, dilution, and pre-emptive rights all need clear treatment. A contract alone does not create or transfer shares without the required company actions.
Board & Management
Separate Shareholder Rights From Board Responsibilities
Shareholders and directors exercise different functions. Nomination rights, board size, quorum and voting can be addressed, but a shareholder cannot require a nominee director to ignore statutory duties or act only in the nominating shareholder's interest.
Control and Capital
Governance and Control
Reserved Matters
Which Decisions Require Additional Approval?
Reserved matters can protect against significant decisions being made without a specified level of approval — issuing shares, taking on significant debt, related-party transactions, or a sale or winding-up. Too few controls exposes legitimate interests; too many can paralyse routine operations.
Funding
Agree How the Business Will Be Funded
The agreement may address initial contributions, future equity, shareholder loans and third-party finance, distinguishing mandatory commitments from optional participation and the consequences if a shareholder does not participate.
Ownership Change
Transfers and Exits
Share Transfers
Control How Ownership Can Change
Pre-emptive rights, offer procedures, valuation mechanics and accession to the agreement all need to align with the MOI and actual share rights — a transfer restriction does not operate identically in every MOI.
Tag, Drag & Valuation
Plan for a Future Sale or Exit
Tag-along, drag-along, put and call mechanisms each need clear thresholds, notice, price and timing. Ambiguous "fair value" wording can create a new dispute — valuation should be coordinated with valuation and tax advisers.
When People Leave
Departure and Succession
Founder Departure
What Happens When a Founder or Working Shareholder Leaves?
Leaver provisions connect departure from an operational role with an option or obligation concerning shares. Labels like "good leaver" and "bad leaver" need precise definitions — a departure may involve separate employment, director and IP consequences.
Death & Incapacity
Plan for Personal Events That Affect the Company
The agreement may address death, incapacity or insolvency-related events. It does not replace a will, estate plan, insurance policy or trust advice — all documents should be checked for consistency.
Money and Information
Distributions and Reporting
Dividends
Separate Profit Expectations From Lawful Distributions
A contractual expectation cannot bypass the Companies Act, board responsibilities, or solvency and liquidity requirements. The agreement may set principles or decision processes rather than promise an automatic dividend.
Information Rights
Define Useful Access to Company Information
Rights to management accounts, budgets or material-event notices should be proportionate and coordinated with confidentiality and POPIA — a shareholder is not automatically entitled to every internal or privileged document.
Resolving Disagreement
Create a Process for Decisions
the Shareholders Cannot Resolve
Deadlock clauses should first define what counts as a deadlock, then escalate through named representatives, facilitated negotiation, expert determination, a buy-sell mechanism and finally litigation where appropriate. A mechanical buy-sell clause can have major funding and fairness consequences and should not be copied into every agreement.
Our Process
How a Shareholder Agreement
Is Prepared
Conflict & Client ID
We identify the company, shareholders, proposed investors and related parties.
Document Review
We collect the MOI, securities register, existing agreements and resolutions.
Commercial Alignment
We discuss ownership, roles, control, funding, transfers and exits.
Issues & Structure Advice
We identify statutory, tax, valuation and specialist dependencies.
Drafting & Negotiation
We prepare the agreement and support individual review where needed.
Approval & Implementation
We execute, amend the MOI if necessary, and update company records.
The exact sequence depends on whether the shareholders are aligned, whether an investor is involved, and whether company documents are complete.
Why Sarah Alison Attorneys
Shareholder Arrangements
Built Around the Company
Client & Conflict Clarity
Identification of client and conflicts before substantive advice begins.
MOI Alignment
The shareholder agreement always reviewed together with the MOI.
Plain-Language Governance
Ownership and decision rights explained clearly, not buried in jargon.
Specialist Coordination
Work coordinated with tax, valuation or other advisers where needed.
FAQ
Shareholder Agreement FAQs
Is a shareholder agreement required by law?
The Companies Act permits shareholders to enter into agreements about company matters, but not every company has the same need. Companies with multiple shareholders should assess the benefit. The MOI remains essential regardless.
What is the difference between a shareholder agreement and an MOI?
The MOI is the company's constitutional document filed with CIPC. A shareholder agreement is a contract among its parties, and under section 15 must be consistent with the Act and the MOI.
Can a shareholder agreement override the MOI?
It should not be described that way. If the intended arrangement conflicts with the current MOI, advice may include an MOI amendment rather than relying on the conflicting term.
Can one attorney draft the agreement for all shareholders?
Potentially, where interests are sufficiently aligned, but not automatically. Conflict checks and separate advice may be required, particularly during investment or an existing disagreement.
Does a shareholder agreement transfer shares?
Not necessarily. It may create rights and procedures for a transfer, but the transfer must also comply with the Act, MOI, approvals and company records.
What happens if a shareholder leaves the business?
Leaving employment, resigning as a director and ceasing to own shares are separate events. The agreement may provide a transfer option, but the trigger, valuation and legal steps must be assessed.
How is a shareholder deadlock resolved?
The agreement may define escalation, mediation, expert determination, a buy-sell mechanism or final proceedings. A poorly designed mechanism can create further unfairness or liquidity problems.
When should an agreement be updated?
Review it after material ownership, investment, funding or MOI changes, and before relying on an important trigger event.
Get in Touch
Discuss a New or Existing Shareholder Agreement
Tell us who the shareholders are, whether an agreement and MOI already exist, and what change or decision prompted the review. We will first complete conflict and client-identification checks.