Business.co.za
SolvedLegal ServicesCape Town

Buy-and-sell agreement vs shareholders agreement for a 2-founder chartered accountant (sa) company in Cape Town?

My business partner and I each own 50% of our Cape Town chartered accountant (sa) 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?

steph_huang◆ 103asked 26 Sept

5 answers

  1. ✓ Accepted by the asker

    Theuns Erasmus◆ 103Trusted voiceon Legal Services26 Sept
    @steph_huang_cpt 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.
  2. Hennie Cronje◆ 83Trusted voiceon Digital Marketing26 Sept
    Crucial point from @theuns_erasmus. 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.
  3. Wynand Olivier◆ 68Trusted voiceon Legal Services26 Sept
    And as @theuns_erasmus and @hennie_cronje_za 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.
  4. kobus_b◆ 48Contributoron Legal Services26 Sept
    @theuns_erasmus and @steph_huang_cpt we implemented this exact setup in Cape Town last quarter and it cut our monthly admin and reconciliation time in half.
  5. steph_huang◆ 103Trusted voiceon Web Design26 Sept
    Eye-opening advice @theuns_erasmus and @hennie_cronje_za. Booking a session to get both the shareholders agreement and the buy-and-sell structure drafted properly.

Your answer