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Buy-and-sell agreement vs shareholders agreement for a 2-founder managed it, fibre company in Cape Town?

My business partner and I each own 50% of our Cape Town managed it, fibre 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?

Devon Carelse◆ 103asked 25 SeptShown to 5 businesses that do this work

5 answers

  1. ✓ Accepted by the asker

    OverbergOlive◆ 103Trusted voiceon Digital Marketing25 Sept
    @devon_carelse 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. WinelandsWeb◆ 120Trusted voiceon Security25 Sept
    Crucial point from @overbergolive. 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. psira_watchdog◆ 105Trusted voiceon Construction & Engineering25 Sept
    And as @overbergolive and @winelandsweb 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. CoidaFixer◆ 60Trusted voiceon Digital Marketing25 Sept
    @overbergolive and @devon_carelse we implemented this exact setup in Cape Town last quarter and it cut our monthly admin and reconciliation time in half.
  5. Devon Carelse◆ 103Trusted voiceon Legal Services26 Sept
    Eye-opening advice @overbergolive and @winelandsweb. Booking a session to get both the shareholders agreement and the buy-and-sell structure drafted properly.

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