The Memorandum of Incorporation is the founding document that governs how your company is run — who can appoint directors, how shares are issued and transferred, what majorities decisions require, and what powers the board has. Every company has one, because CIPC applies a standard MOI where you do not adopt your own. A custom MOI is worth doing where there is more than one shareholder, where shareholders hold unequal stakes, or where anyone will ever put money in and want protection.
Most small companies have never read theirs. That is fine until the day two shareholders disagree, and the MOI is the document that decides who wins.
What the MOI actually governs
Think of it as the rulebook that sits above every decision the company makes.
Shares. How many are authorised, what classes exist, what rights attach to each class, and who has the power to issue more. The power to issue shares is the power to dilute everyone, which makes this the most commercially significant section in the document.
Directors. The minimum and maximum number, how they are appointed and removed, whether any shareholder has a right to appoint one, and what powers the board holds.
Decision-making. What majority is needed for ordinary resolutions, what is needed for special resolutions, quorum requirements, and whether any decisions require unanimity.
Meetings. Notice periods, how meetings are called, whether written resolutions are permitted instead of meetings.
Share transfers. Whether shares can be sold freely or must first be offered to existing shareholders — pre-emptive rights, which is the mechanism preventing a co-shareholder selling to someone you would rather not be in business with.
Financial reporting. Whether the company voluntarily submits to audit or independent review beyond what the law requires.
Alterable and unalterable provisions. The Companies Act contains some rules you cannot change and others you can. The MOI is where you exercise those choices — and where, by default, you decline to.
The standard MOI: what you get by default
When a company is registered without a custom MOI, the standard form applies.
It is perfectly adequate for a single-shareholder company. One person owns everything and decides everything. There is nobody to have a dispute with, and nothing the standard MOI does will surprise you.
It becomes inadequate the moment there is a second shareholder, because the standard MOI is written for the general case and makes no assumptions about your commercial arrangement. In particular:
It does not deal with deadlock. Two shareholders at 50/50 who disagree have no mechanism to break the tie. The company simply stops being able to make decisions. This is the single most common structural failure in South African small companies, and it is entirely foreseeable at incorporation.
It does not restrict who shares can be sold to beyond the default position, so you can find yourself in business with your co-founder's ex-spouse, creditor, or a competitor who bought them out.
It does not compel anyone to work in the business. A founder who stops contributing keeps every share and every dividend.
It does not deal with death or incapacity. Shares pass to an estate, and the surviving shareholder deals with whoever inherits them.
It gives no protection to a minority. A shareholder with 20% has very little say under a majority-rules default, including on decisions that fundamentally change what they invested in.
When you need a custom MOI
More than one shareholder. Almost always worth it, and the cost is small relative to what it prevents.
A 50/50 split. Not optional in my view. Build in a deadlock mechanism — a casting vote, a buy-sell provision, mediation, or a shotgun clause — before you need it.
Unequal shareholdings where the minority needs protection, or where the majority wants certainty that the minority cannot obstruct.
An investor coming in. They will want board representation, veto rights over certain decisions, anti-dilution protection and information rights. Expect them to insist.
Family businesses with succession in mind, where you want shares to stay within the family and want a valuation mechanism agreed in advance rather than argued about at a funeral.
Professional practices with rules about who may hold shares — often required by the governing professional body.
Where you want higher thresholds for particular decisions: taking on debt, selling assets, changing the business, admitting a new shareholder.
MOI vs shareholders' agreement
These are different documents doing different jobs, and the distinction matters.
| MOI | Shareholders' agreement | |
|---|---|---|
| Filed at CIPC? | Yes — public | No — private |
| Binds | The company, shareholders and directors | The parties who sign it |
| Changing it | Special resolution and a CIPC filing | Agreement of the parties |
| Typically covers | Constitutional matters — shares, directors, decisions | Commercial matters — exit, valuation, work obligations, dividends, restraints |
A shareholders' agreement must be consistent with the MOI. Where the two conflict, the MOI generally prevails and the conflicting provision in the agreement is void. This catches people who put a carefully drafted agreement in place without checking it against the constitution sitting above it.
Most well-structured small companies have both. The MOI handles the constitutional architecture and is public. The agreement handles the commercial deal between the people and stays private — which matters, because you probably do not want your buy-out valuation formula on a public register.
How to adopt or change an MOI
At incorporation, you file the custom MOI as part of the registration. This is by far the easiest moment to do it, because everyone is aligned and nobody yet has a reason to resist a particular clause.
After incorporation, amending the MOI requires:
1. A special resolution of shareholders — generally at least 75% support, unless your MOI sets a different threshold.
2. Filing the amendment with CIPC, with the resolution.
3. CIPC processing, after which the amended MOI takes effect.
The practical difficulty of amending later is not the process — it is the politics. Getting 75% support for a clause that constrains a shareholder is straightforward before anyone has money in and hard afterwards. Do it at the start.
A note on blocked filings: where annual returns or beneficial ownership are outstanding, CIPC can refuse other filings including MOI amendments. Bring compliance up to date first. See how to check if your company is CIPC compliant.
Reading your own MOI: the five clauses to check
Whatever you have, these are the provisions that will matter.
1. Authorised shares. How many are authorised, and how many are issued? If they are equal, you cannot issue a single new share without amending the MOI first — which means bringing in an investor requires a special resolution before you even start. See how to issue shares to a new shareholder.
2. Who can issue shares. Board alone, or shareholder approval required?
3. Pre-emptive rights. Must new shares be offered to existing shareholders first? Must a departing shareholder offer their shares to the others before selling externally?
4. Director appointment and removal. Does any shareholder hold an appointment right? What majority removes a director?
5. Special resolution threshold. The default is generally 75%, but your MOI may differ — and that number determines who can block a name change, an MOI amendment or a fundamental transaction.
A shareholder with 26% can block a special resolution at a 75% threshold. Whether that is a feature or a problem depends entirely on which side of it you are on, and it is worth knowing which before you find out.
Frequently asked questions
What is a Memorandum of Incorporation? The founding document that governs how a South African company is run — share classes and issue powers, director appointment and removal, decision-making majorities, meeting requirements and share transfer restrictions. Every company has one, since CIPC applies a standard MOI where a custom one is not adopted.
Do I need a custom MOI? For a single-shareholder company the standard MOI is generally adequate. Once there is more than one shareholder — and especially at 50/50, with an incoming investor, or where a minority needs protection — a custom MOI is worth doing, because the standard version has no deadlock mechanism and no share transfer restrictions beyond the default.
What is the difference between an MOI and a shareholders' agreement? The MOI is filed at CIPC and is public, binding the company, shareholders and directors on constitutional matters. A shareholders' agreement is private and binds only its parties, covering commercial matters like exit, valuation and work obligations. A shareholders' agreement must be consistent with the MOI, and where they conflict the MOI generally prevails.
How do I change my company's MOI? Pass a special resolution of shareholders — generally at least 75% support unless the MOI sets a different threshold — and file the amendment with CIPC together with the resolution. Amendments can be blocked where annual returns or beneficial ownership are outstanding.
What happens if my company has a 50/50 shareholding and we disagree? Under a standard MOI there is no tie-breaking mechanism, so the company can become unable to make decisions. This is why a deadlock provision — a casting vote, buy-sell clause, mediation or shotgun clause — should be built into a custom MOI at incorporation.
Is the MOI public? Yes. It is filed at CIPC and forms part of the public record, which is one reason commercial terms such as buy-out valuation formulas are usually kept in a private shareholders' agreement instead.
What are pre-emptive rights? The right of existing shareholders to be offered shares before they are issued to, or sold to, an outsider. They prevent unwanted dilution and prevent a co-shareholder selling their stake to someone the others would not choose to be in business with.
Can I have a custom MOI after the company is already registered? Yes, by special resolution and a CIPC filing. The process is straightforward; getting the necessary support once shareholders have competing interests is the hard part, which is why it is better done at incorporation.
Do it at the start, not during the argument
An MOI costs very little at incorporation and is close to impossible to fix once two shareholders want different things.
Smartbook registers companies with a custom MOI where the structure warrants it, reviews existing MOIs against what the shareholders actually intended, and files amendments at CIPC.
Last reviewed: 28 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Drafting an MOI or a shareholders' agreement is legal work — take advice from an attorney on the specific provisions your structure needs. General guidance, not legal advice.
Primary sources: Companies Act 71 of 2008 · CIPC · CIPC e-Services