Shareholders Agreement Template Word South Africa

SHAREHOLDERS AGREEMENT

1. DOCUMENT PREAMBLE & RECITALS

THIS SHAREHOLDERS AGREEMENT (the "Agreement") is entered into and made effective as of this [Day] day of [Month], [Year] (the "Effective Date"), by and between:

PARTIES:

1. [Company Name], a private profit company duly incorporated and existing under the laws of the Republic of South Africa, registration number [Company Registration Number], having its registered office at [Registered Address] (hereinafter referred to as the "Company"); and
2. [Shareholder 1 Name/Entity], [Identity Number / Registration Number], residing at / having its registered office at [Address] (hereinafter referred to as "Shareholder 1"); and
3. [Shareholder 2 Name/Entity], [Identity Number / Registration Number], residing at / having its registered office at [Address] (hereinafter referred to as "Shareholder 2").

(Shareholder 1 and Shareholder 2 are hereinafter collectively referred to as the "Shareholders" and individually as a "Shareholder").

RECITALS:

WHEREAS: A. The Company has an authorized share capital of [Number] shares of a single class of ordinary shares, of which [Number] ordinary shares have been issued and are fully paid-up, held by the Shareholders in the proportions set out in Schedule A hereto. B. The Shareholders are entering into this Agreement to regulate their respective rights and obligations as shareholders of the Company, to govern the management and operation of the Company’s business and affairs, and to provide for the orderly regulation of dealings in the Shares of the Company. C. The Parties intend for this Agreement to comply fully with the provisions of the Companies Act, No. 71 of 2008 (as amended) (the "Companies Act"), and any other applicable laws of the Republic of South Africa.

NOW, THEREFORE, in consideration of the mutual covenants, premises, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

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2. OPERATIONAL DEFINITIONS

For the purposes of this Agreement, except where the context requires otherwise, the following terms shall bear the respective meanings assigned to them below:

1. "Act" or "Companies Act" means the Companies Act, No. 71 of 2008 of the Republic of South Africa, together with the regulations promulgated thereunder, as amended from time to time.
2. "Agreement" means this Shareholders Agreement, including all recitals and schedules attached hereto, as amended from time to time in accordance with the provisions hereof.
3. "Board" means the board of directors of the Company for the time being.
4. "Business Day" means any day other than a Saturday, Sunday, or official public holiday in the Republic of South Africa.
5. "Deadlock" means a failure of the Board or the Shareholders to pass a resolution on any matter concerning the business or affairs of the Company after two consecutive meetings have been convened and failed to achieve a quorum, or where resolutions have been voted on twice and resulted in a tie.
6. "Director" means a director of the Company appointed in accordance with this Agreement and the Act.
7. "Effective Date" means the date first written above.
8. "Encumbrance" means any mortgage, pledge, lien, hypothec, security interest, option, right of first refusal, restrictive covenant, or third-party claim of any kind whatsoever.
9. "Fair Value" means the fair market value of the Shares as determined by an independent registered chartered accountant agreed upon by the disputing Parties or, failing agreement within 10 (ten) Business Days, appointed by the President for the time being of the South African Institute of Chartered Accountants (SAICA).
10. "Force Majeure" means any event beyond the reasonable control of the affected Party, including acts of God, war, terrorism, civil unrest, natural disasters, epidemics, pandemics, government restrictions, strikes, or major utility failures, which prevents a Party from performing its obligations under this Agreement.
11. "Good Leaver" means a Shareholder who ceases to be an employee, director, or shareholder of the Company by reason of death, permanent disability, retirement at retirement age, or dismissal without cause by the Company.
12. "Bad Leaver" means a Shareholder who ceases to be an employee, director, or shareholder of the Company by reason of resignation, termination for cause (including gross misconduct, fraud, breach of fiduciary duty, or material breach of this Agreement), or disqualification as a director under the Act.
13. "MOI" means the Memorandum of Incorporation of the Company, as amended from time to time.
14. "Party" means the Company or any Shareholder, and "Parties" shall mean all of them.
15. "Prime Rate" means the publicly quoted basic variable interest rate per annum, calculated daily and compounded monthly in arrear, published by [Bank Name] as its prime lending rate.
16. "Shares" means the ordinary shares of no par value (or par value, as applicable) in the capital of the Company.
17. "Transfer" means any sale, assignment, transfer, conveyance, gift, pledge, mortgage, encumbrance, or disposal of any nature whatsoever, whether voluntary or involuntary, of any Share or any right, title, or interest therein.

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3. SUBSTANTIVE TERMS & OBLIGATIONS

3.1 Governance and Board Composition

1. The Board shall consist of a maximum of [Number] Directors. Each Shareholder holding not less than [Percentage]% of the issued Shares shall be entitled to nominate [Number] Director(s) to the Board by written notice to the Company.
2. Board meetings shall be convened upon giving at least 7 (seven) days' written notice to all Directors, unless all Directors agree in writing to a shorter notice period.
3. A quorum for a meeting of the Board shall be a majority of the Directors holding office, provided that at least one Director nominated by each major Shareholder is present.

3.2 Funding, Financial Performance, and Contributions

1. The Shareholders shall provide funding to the Company in proportion to their respective shareholding percentages as set out in Schedule A, by way of equity subscriptions or Shareholder loans, as determined by the Board from time to time.
2. Any Shareholder loan advanced to the Company shall bear interest at a rate determined by the Board, not exceeding the maximum rate permitted under South African law, and shall be subordinated to the claims of external commercial creditors of the Company.
3. The Company shall achieve the operational and financial performance metrics set out in Schedule B hereto. The Board shall review performance metrics on a quarterly basis.

3.3 Restrictions on Transfer of Shares

1. No Shareholder shall Transfer any Shares held by them except in accordance with the provisions of this Agreement and the MOI. Any purported Transfer in violation of this clause shall be null and void ab initio.
2. Right of First Refusal: If any Shareholder (the "Selling Shareholder") wishes to Transfer all or any part of their Shares, they shall first offer such Shares (the "Offer Shares") in writing to the other Shareholders (the "Non-Selling Shareholders") pro rata to their existing shareholdings, at the same price and on the same terms and conditions as offered by a bona fide third-party purchaser.
3. The Non-Selling Shareholders shall have 30 (thirty) Business Days from receipt of the written offer to accept the Offer Shares in whole or in part. If the Non-Selling Shareholders decline or fail to accept the Offer Shares within the stipulated period, the Selling Shareholder may Transfer the remaining Offer Shares to the third-party purchaser within 60 (sixty) Business Days thereafter, provided such sale is on terms no more favorable to the third party than those offered to the Non-Selling Shareholders.

3.4 Tag-Along and Drag-Along Rights

1. Tag-Along Right: If a Shareholder or group of Shareholders holding more than [Percentage]% of the issued Shares (the "Majority Seller") receives a bona fide offer from a third party to purchase all or a majority of the Shares, the Majority Seller shall not complete the sale unless the third party makes a contemporaneous, identical offer to purchase the remaining Shareholders' Shares on the same terms and conditions.
2. Drag-Along Right: If the Majority Seller wishes to accept a bona fide third-party offer to purchase 100% (one hundred percent) of the issued Shares, the Majority Seller may require all other Shareholders to sell all of their Shares to the third party on the same terms and conditions, by delivering written notice to that effect.

3.5 Representations and Warranties

Each Party represents and warrants to and in favor of the other Parties that:

1. It has full power, authority, and legal capacity to enter into, execute, and perform its obligations under this Agreement.
2. The execution and performance of this Agreement do not and will not violate any law, regulation, order, or contractual obligation to which it is bound.
3. All Shares held by a Shareholder are free and clear of any Encumbrances whatsoever, save as permitted under this Agreement.

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4. DEFAULT, TERMINATION, AND REMEDIES

4.1 Events of Default

A Party shall be deemed to be in material breach of this Agreement (an "Event of Default") if it:

1. Fails to pay any monetary sum due under this Agreement within 10 (ten) Business Days of receiving written demand therefor;
2. Commits any material breach of any non-monetary obligation contained in this Agreement;
3. Becomes financially distressed, is placed under business rescue proceedings in terms of Chapter 6 of the Act, passes a resolution for winding-up, or is provisionally or finally liquidated or sequestrated; or
4. Perpetrates fraud, gross negligence, or willful misconduct detrimental to the business or reputation of the Company.

4.2 Notice and Cure Period

1. If an Event of Default occurs, the non-defaulting Party or Parties may give written notice to the defaulting Party specifying the nature of the breach and requiring the defaulting Party to remedy the breach within 30 (thirty) business days of receipt of such notice (the "Cure Period").
2. If the defaulting Party fails to remedy the breach within the Cure Period, the non-defaulting Parties shall be entitled to exercise any of the remedies set out in clause 4.3.

4.3 Remedies

Upon the expiry of the Cure Period without the default being remedied, the non-defaulting Parties may, without prejudice to any other rights or remedies available to them under law or this Agreement:

1. Claim specific performance of the obligations under this Agreement;
2. Cancel this Agreement and claim damages from the defaulting Party;
3. In the case of a defaulting Shareholder, compulsorily purchase (or procure the purchase of) all of the defaulting Shareholder's Shares. If the defaulting Shareholder is classified as a "Bad Leaver", the purchase price for their Shares shall be the lower of the Fair Value or the original subscription price paid for such Shares. If classified as a "Good Leaver", the purchase price shall be the Fair Value.

4.4 Termination

This Agreement shall terminate automatically upon the occurrence of any of the following events:

1. The written agreement of all Shareholders to terminate this Agreement;
2. The winding-up, liquidation, or deregistration of the Company; or
3. The date on which all the Shares of the Company are held by a single Shareholder.

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5. BOILERPLATE LEGAL PROVISIONS

5.1 Severability

If any provision of this Agreement is found by any court or competent authority to be invalid, illegal, or unenforceable, that provision shall, to the extent required, be deemed not to form part of this Agreement, and the validity, legality, and enforceability of the remaining provisions shall not be affected thereby.

5.2 Entire Agreement

This Agreement, together with the MOI and schedules hereto, constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes all prior negotiations, representations, understandings, or agreements, whether written or oral.

5.3 Force Majeure

1. If a Party is prevented from or delayed in performing any obligation under this Agreement by an event of Force Majeure, such obligation shall be suspended to the extent and for the duration of the Force Majeure event.
2. The affected Party shall promptly notify the other Parties in writing of the occurrence of the Force Majeure event, detailing its expected duration and impact.
3. If a Force Majeure event continues for more than 60 (sixty) consecutive days, any unaffected Party may terminate this Agreement upon written notice to the other Parties.

5.4 Governing Law and Jurisdiction

This Agreement shall be governed by, construed, and interpreted in accordance with the laws of the Republic of South Africa. Subject to clause 5.5, the Parties hereby irrevocably submit to the exclusive jurisdiction of the High Court of South Africa ([Division, e.g., Gauteng Local Division, Johannesburg]).

5.5 Dispute Resolution

1. In the event of any dispute, controversy, or claim arising out of or relating to this Agreement, including its formation, breach, termination, or validity (a "Dispute"), the Parties shall first use their best endeavors to settle such Dispute amicably through good-faith negotiations between the senior representatives of the Parties within 14 (fourteen) days of written notice of the Dispute being given.
2. If the Dispute cannot be resolved amicably within the aforesaid 14 (fourteen) day period, the Dispute shall, upon written demand by any Party, be submitted to and decided by arbitration in accordance with the rules of the Arbitration Foundation of Southern Africa (AFSA) by a single arbitrator appointed by agreement between the Parties or, failing agreement within 10 (ten) Business Days, appointed by the Secretariat of AFSA.
3. The arbitration shall be held in [City, e.g., Johannesburg], South Africa, and shall be conducted in the English language. The arbitrator's award shall be final and binding upon the Parties and may be made an order of any court of competent jurisdiction.

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6. FORMAL EXECUTION BLOCK

IN WITNESS WHEREOF, the Parties have executed this Agreement by their duly authorized representatives on the respective dates set forth below.

FOR AND ON BEHALF OF THE COMPANY:

[Company Name]

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Signature: [Authorized Signatory]
Name: [Name of Signatory]
Title: [Director / Managing Director]
Date: [Date]

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FOR AND ON BEHALF OF SHAREHOLDER 1:

[Shareholder 1 Name/Entity]

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Signature: [Authorized Signatory / Individual]
Name: [Name]
Title: [Capacity / Title]
Date: [Date]

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FOR AND ON BEHALF OF SHAREHOLDER 2:

[Shareholder 2 Name/Entity]

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Signature: [Authorized Signatory / Individual]
Name: [Name]
Title: [Capacity / Title]
Date: [Date]