Buy-and-sell agreement vs shareholders agreement for a 2-founder manufacturing, cnc company in Cape Town?
My business partner and I each own 50% of our Cape Town manufacturing, cnc company. We have a basic Memorandum of Incorporation from CIPC, but no custom shareholders agreement yet. What happens if one partner wants to exit or passes away?
◆ 120asked 29 AugShown to 5 businesses that do this work5 answers
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29 Aug@roshni_cloete the standard CIPC short-form MOI will not protect you in a 50/50 deadlock. You need two documents working together: a Shareholders Agreement (covering deadlock breaking, pre-emptive rights, drag-along/tag-along and restraint of trade) and a separate Buy-and-Sell Agreement backed by life cover so the surviving partner has the cash to buy the shares from the deceased estate.
29 AugCrucial point from @buhle_khumalo. Without a funded Buy-and-Sell agreement, you can suddenly find yourself in a 50/50 business partnership with your late partner's spouse or executor who has no operational involvement in the business.
29 AugAnd as @buhle_khumalo and @zanele_sithole will confirm, make sure the Buy-and-Sell policies are structured correctly under Section 3(3)(a)(iA) of the Estate Duty Act so the policy proceeds are exempt from estate duty in Cape Town.
29 Aug@buhle_khumalo and @roshni_cloete we implemented this exact setup in Cape Town last quarter and it cut our monthly admin and reconciliation time in half.- 29 AugEye-opening advice @buhle_khumalo and @zanele_sithole. Booking a session to get both the shareholders agreement and the buy-and-sell structure drafted properly.
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