The process of incorporating a company in South Africa involves more than merely registering it with the Companies and Intellectual Property Commission (‘CIPC’). When thinking about beginning the CIPC registration process, business owners should also be considering the suite of internal and external agreements needed to keep their company legally compliant, operationally sound, and protected from disputes in the future. A well-versed commercial attorney will advise a business owner on the essential agreements every new South African private company should have in place, beginning with the internal governance documents, and then moving to the external agreements that regulate relationships with employees, customers, and service providers.
Internal Agreements
There are a number of internal agreements that govern the relationship between the company and its founders, directors, and shareholders. These founding documents should be tailored to suit the company’s specific business operations and needs. Having clear and concise internal agreements from the outset prevents many of the disputes that later derail growing businesses.
- Memorandum of Incorporation (‘MOI’)
The MOI is the founding document of every South African private company as required in terms of the Companies Act 71 of 2008. It is filed with the CIPC upon incorporation and, together with the Act, forms the legal basis on which the company is governed.
The MOI, in general, will contain the following essential elements:
- Company name, type of company, and registration details
- The rights, duties, and powers of shareholders and directors
- Rules for issuing shares and the classes of shares issued by the company
- Provisions on director appointment, removal, and meetings
- Any restrictions on the company’s activities
The MOI governs the internal relationship between the company and its shareholders, and between shareholders themselves, insofar as company law is concerned. It can adopt the Act’s standard rules or customise them to suit the company, for example, by including pre-emptive rights or special voting requirements. Because the MOI is a public document lodged with the CIPC, many founders choose to keep sensitive commercial arrangements in a separate Shareholders Agreement.
- Shareholders Agreement
While the MOI sets out the statutory framework, a Shareholders Agreement is a private, more flexible contract between the shareholders themselves. It is not compulsory, but for any company with more than one shareholder, it is arguably the single most important document a business can have, and will generally deal with:
- Shareholding structure and classes of shares
- Lock-in provisions and vesting rights in respect of shares
- Decision-making thresholds for key business decisions
- Dividend and profit distribution policy
- Restraint of trade and non-compete provisions
- Exit mechanisms, including restrictions on disposal, forced sale provisions, and come-along and tag-along clauses
- Dispute resolution procedures
The Shareholders Agreement addresses the practical and commercial relationship between shareholders and the company, the shareholders and the directors, the directors and the company, the directors themselves, and the shareholders themselves. These matters are not typically covered in the MOI in detail, for example what happens when a shareholder wants to exit the company, passes away, becomes insolvent, or simply disagrees with a major decision. A well drafted Shareholders Agreement is designed to anticipate conflict before it happens, and the specific mechanisms used should be tailored to each company’s structure and risk profile.
- Founders Agreement
For start-ups with multiple founders, a Founders Agreement (which is often incorporated into the Shareholders Agreement) sets out the co-founders’ roles, contributions, and expectations before the company takes on any outside investment. The essential elements of a Founders Agreement typically include the roles, responsibilities, time commitment and/or KPIs of each co-founder, intellectual property assignment to the company, vesting schedules for founder equity, and consequences for early exit.
External Agreements
Once internal governance is in order, a company needs a suite of external-facing agreements to regulate its dealings with employees, customers, suppliers, and the public.
- Employment Contracts
Every employment relationship in South Africa is governed by the Basic Conditions of Employment Act 75 of 1997 (‘BCEA’), hence it is essential that a company enter into properly drafted and compliant Employment Agreements with its employees. A well drafted Employment Agreement will contain clauses relative to:
- The employee’s job title, duties, and reporting lines
- Remuneration, benefits, and working hours
- Leave entitlements, compliant with legislation
- Restraint of trade, non-compete clauses, confidentiality, and IP assignment clauses
- Termination and notice provisions
Employment contracts govern the day-to-day employment relationship and set out each party’s rights and obligations. They must comply with the BCEA, the Labour Relations Act, and applicable sectoral determinations or bargaining council agreements. Non-compliant contracts expose employers to disputes at the CCMA and can render key protections (such as restraints of trade) unenforceable if not properly drafted.
- Independent Contractor Agreements
Where a company engages freelancers or consultants rather than employees, a separate agreement is essential to correctly define the nature of the relationship. Independent Contractor Agreements typically address the scope of services and deliverables expected from the contractor, invoicing and payment terms, confirmation of independent contractor status, and intellectual property ownership and confidentiality.
These agreements also expressly clarify that the relationship is not one of employment, which has significant implications for purposes of tax, labour law protections, and liability. Misclassifying an independent contractor as an employee, or vice versa, is a common and costly mistake.
- Service Level Agreements (‘SLAs’)
An SLA governs the standard of service a company provides to, or receives from, another party. These agreements are commonly used between a business and its key suppliers, IT providers, or B2B clients. An SLA should outline:
- Defined service standards and performance metrics
- Response and resolution timeframes
- Penalties and/or remedies for non-performance
- Reporting and review mechanisms
These agreements establish measurable expectations for service delivery and provide a contractual basis for recourse if those standards are not met. SLAs can be critical for businesses that rely on third-party infrastructure, or that offer guaranteed service levels to their own clients which are dependant on the performance of a third party.
- Terms and Conditions of Service or Sale
Terms and conditions (‘Ts&Cs’) govern the relationship between a company and its customers and are to be expected whether the business sells products, services, or operates online. A company’s Ts&Cs will explicitly stipulate the following for customers to refer to:
- A description of goods or services offered
- Pricing, payment, and cancellation terms
- Limitation of liability and disclaimers
- Compliance with the Consumer Protection Act 68 of 2008 (‘CPA’), where applicable
- Dispute resolution and governing law
A company’s Ts&Cs are the primary contract most businesses have with their customers. They must be carefully aligned with the CPA and, for online businesses, the Electronic Communications and Transactions Act 25 of 2002. Generic or copy-pasted templates frequently fall short of these requirements and can leave a company exposed to consumer complaints or regulatory action.
- POPIA and PAIA Compliance Policies
Any company that collects personal information, whether from customers, employees, or website visitors, must comply with the Protection of Personal Information Act (POPIA). Every private company is also obliged to comply with the Promotion of Access to Information Act (PAIA). A company’s POPIA & PAIA Policy must disclose, inter alia, categories of personal information collected and the purpose of processing this information, its legal basis for processing and rights of data subjects, data retention policies and security measures, how access to this information can be requested, and the details of the company’s Information Officer.
These policies govern how the company collects, stores, uses, shares, and promotes reasonable access to personal information. Non-compliance can result in regulatory penalties from the Information Regulator and reputational harm, particularly where a data breach occurs.
- Internal Workplace Policies
Beyond the Employment Agreement itself, companies also require a set of internal policies to regulate workplace conduct, promote transparency in the workplace, and ensure consistent, defensible decision-making.
These policies will outline, for example, disciplinary and grievance procedures, anti-harassment policies, health and safety policies, and remote work, leave, and social media/IT usage policies, in order to create a documented, consistent standard of conduct across the business. These policies can ensure that the company has decisive evidence in CCMA disputes or disciplinary hearings. Policies should be aligned with the company’s employment contracts and reviewed periodically as labour legislation evolves.
- Non-Disclosure and Confidentiality Agreements (NDAs)
NDAs are designed to protect sensitive business information shared with employees, contractors, investors, or potential business partners. A well drafted NDA governs how confidential information may be used and shared, and is often a company’s first line of defence in protecting trade secrets, client lists, and proprietary business processes, particularly during due diligence, fundraising, or partnership discussions.
Getting It Right from the Start
The agreements highlighted above form the backbone of a legally sound and well-governed company, but the right combination, and the specific clauses each agreement should contain, depends heavily on a company’s industry, shareholding structure, growth plans, and risk exposure. A template shareholders agreement or a generic set of T&Cs downloaded online rarely accounts for the nuances of a specific business, and gaps in these documents tend to surface when a dispute, sale, or regulatory audit is already underway.
If you are starting a new company, restructuring an existing one, or simply want to ensure your agreements are fit for purpose, our commercial law team can assist with drafting, reviewing, and negotiating to suit your company’s needs.
Content Disclaimer: This article is for general informational purposes only and does not constitute legal advice. The information contained herein should not be relied upon as a substitute for professional legal advice following consultation. Legislation and regulations referenced may have changed since publication.