2.6 ONE SIZE FITS ALL APPROACH
It is the intention of government to eventually phase out the Close Corporation so the New Companies Act is essentially an Act of one size fits all, in other words it caters for the smallest of companies as well as the larger JSE or listed companies. The act does this by the way the MOI or Memorandum of Incorporation is produced. The MOI is the constitution of the company. There is a new concept of where over 50 alterable provisions in the Act have been introduced to change governance to what the shareholders want. The alterable sections of law introduce a more flexible approach and is a choice in the way certain regulations work. There are also unalterable provisions which are laws embedded in the Act which cannot be changed by the MOI and are not flexible. The unalterable provisions are in fact a minimum requirements standard for companies. If you are to look at the standard Long Form MOI produced by the CIPC you will have an idea of what the alterable provisions are as a choice is provided. When submitting the standard long form MOI the provisions that you want to apply to the company must be ticked off.
Essentially a company is formed in terms of Section 19(1)(c) of the 2008 act and is constituted in accordance with
1. The unalterable provisions of the Act;
2. The alterable provisions of the Act, subject to any negation, restriction, limitation, qualification, extension or other alteration that is contemplated in an alterable provision, and has been noted in the Company’s MOI and;
3. Any further provisions of the Company’s MOI.
Very simply put, an unalterable provision is something in the Act that cannot be weakened, however in certain instances it may be made stronger. An alterable provision is something in the Act that can be changed by being negated, restricted, limited, and qualified or extended.
Section 15(2) expands on s 19(1)(c) as it provides further that the MOI may include any provision dealing with a matter that the Act does not address. The MOI may include any provisions altering the effect of an alterable provision and include any provision of a higher standard, greater restriction or longer period of time or any similar onerous requirement. This is a crucial provision because it enables a company’s shareholders to effectively override or veto what they want.