When founders register a company online, the Companies and Intellectual Property Commission (CIPC) offers a ready-made memorandum of incorporation (MOI). Most founders accept it without reading it. It is quick, it is free, and the company is registered within days.
That is often a sensible start. But the MOI is the company’s constitution. It sets the rules on who can issue shares, how decisions are made, how directors are appointed and removed, and what happens when shareholders disagree. When a startup takes on a co-founder, raises money or grants equity to staff, the standard form can quickly become a problem.
Recent changes to the Companies Act have also made the timing of MOI amendments more predictable, which makes it easier to plan an amendment around a funding round.
What the MOI does
Under the Companies Act 71 of 2008, every company must have an MOI. It binds the company, its shareholders and its directors, and it sets out their rights and duties in relation to each other.
The Act contains many default rules. Some are unalterable, and the MOI cannot change them. Others are alterable, meaning they apply unless the MOI says otherwise. The MOI is where a company departs from the defaults to suit its own needs.
The MOI must also set out the classes and number of shares the company is authorised to issue, and the rights attached to each class. A private company’s MOI must prohibit offering its securities to the public and must restrict the transferability of its shares.
The standard form MOI
The CIPC’s short standard form MOI largely adopts the Act’s default rules. In broad terms, it provides for a single class of ordinary shares, leaves most decisions to the board, and follows the statutory rules for meetings and resolutions.
For a sole founder running a simple business, that can be enough. It becomes limiting when:
- the company needs more than one class of shares, for example preference shares for investors or a separate class for an employee scheme;
- investors want protective provisions, such as a veto over new share issues, a sale of the business or changes to the MOI;
- the founders want specific board appointment rights, for example each founder or lead investor appointing a director;
- the company needs clear transfer restrictions, such as pre-emptive rights, drag-along and tag-along rights, or a right of first refusal; or
- shareholders want different voting thresholds for important decisions.
The MOI and the shareholders’ agreement
Many startups put their commercial deal in a shareholders’ agreement and leave the MOI in standard form. That can work, but there is a catch. Section 15(7) of the Companies Act requires a shareholders’ agreement to be consistent with the Act and the MOI. Any provision that is inconsistent is void to that extent.
This means that if your shareholders’ agreement creates an investor veto, a second class of shares or a special board appointment right, and the MOI does not support it, the clause may be unenforceable when you most need it. The MOI and the shareholders’ agreement must be drafted together.
The two documents also differ in who can see them. The MOI is filed with the CIPC and is a public document. A shareholders’ agreement is private. It is common to put the essential structural rules in the MOI and keep commercial detail, such as valuation mechanisms, in the shareholders’ agreement.
Defaults founders often overlook
- Pre-emptive rights on new share issues. In a private company, existing shareholders have a right to be offered new shares in proportion to their holdings before they are issued to others, unless the MOI changes this. Investors and founders often want to modify this rule, for example to exclude shares issued under an employee incentive scheme.
- Board power to issue shares. The board can generally issue authorised shares. Founders who are minority directors after a funding round may want the MOI to require shareholder approval for new issues.
- Special resolution threshold. The default is 75% of votes exercised. The MOI may set a different threshold, within the limits the Act allows. This affects how easily the MOI itself can be changed.
- Removal of directors. Shareholders may remove a director by ordinary resolution under the Act. Appointment rights in the MOI should be drafted with this in mind.
- Ring-fencing. If the MOI contains certain restrictive or special conditions and is ring-fenced, the company’s name must end with “(RF)”, which signals to third parties that they should read the MOI.
Changing your MOI
An MOI is normally amended by special resolution of the shareholders, and the amendment must be filed with the CIPC on a notice of amendment. Under the amended section 16, which came into force on 27 December 2024, most amendments (other than a change of name) take effect ten business days after the CIPC receives the notice, unless the CIPC endorses or rejects it sooner or the notice states a later date.
In a funding round, the investment agreement usually makes the MOI amendment a condition, so it is worth building that timing into the transaction timetable.
A practical checklist for founders
- Read your current MOI and note which default rules it adopts.
- List the key decisions in your business and decide who should control each one: the board, a simple majority of shareholders, or a higher threshold.
- Decide whether you need more than one class of shares now or in the next funding round.
- Check that your shareholders’ agreement is consistent with the MOI, clause by clause.
- Decide whether pre-emptive rights should apply to all issues, or exclude employee scheme shares and agreed investor issues.
- Agree board composition and appointment rights, and put them in the MOI.
- Plan the MOI amendment into the timetable for any capital raise.
- Review the MOI again whenever a new shareholder joins.
How O’Reilly Law can help
We draft bespoke MOIs and shareholders’ agreements for startups and growing companies, align them with investment and incentive scheme documents, and manage the special resolutions and CIPC filings needed to amend an existing MOI. Our startup law packages bring company structuring and founder documentation together in one engagement.
Contact us to review your MOI before your next co-founder, investor or employee joins the cap table.
Related reading: Founders’ agreements: what co-founders should agree early · Your startup’s first 90 days: the legal and compliance checklist
This article is general information and not legal advice. Correct as at November 2026.