Buy-and-sell agreement vs shareholders agreement for a 2-founder coffee roaster, hospitality company in Cape Town?
My business partner and I each own 50% of our Cape Town coffee roaster, hospitality 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?
◆ 103asked 6 d ago5 answers
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6 d ago@nomvula_zwane 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.
6 d agoCrucial point from @kevin_chen_jhb. 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.
6 d agoAnd as @kevin_chen_jhb and @darren_wong_sa 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.
6 d ago@kevin_chen_jhb and @nomvula_zwane we implemented this exact setup in Cape Town last quarter and it cut our monthly admin and reconciliation time in half.- 6 d agoEye-opening advice @kevin_chen_jhb and @darren_wong_sa. Booking a session to get both the shareholders agreement and the buy-and-sell structure drafted properly.
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