Series Seed Investment Documents for South Africa

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Overview

Well done for taking the bold step to start a business. The Series Seed Documents that you will find below this overview are intended to help you get the right company documents in place so that you can focus on making money. We have tried to make this as clear as we can. Please read these documents as you have a legal duty as a shareholder or director to understand these documents.

There are two important documents you must have when setting up a company. The first is your Memorandum of Incorporation (MOI). This is a public document that must be lodged by you with the Companies and Intellectual Property Commission (CIPC) as soon as you can after it has been approved – Don’t forget!

The second document is a Shareholders Agreement. This is a private document which is only available to the Shareholders and Directors of the company and is not lodged with the CIPC. In general the MOI should be the general framework for the way that the Company will work and the Shareholders Agreement spells out in detail what the rights are of each of the parties.

Sometimes a mistake is made and the Company documents contradict each other. For this reason it is important to know which document will win if there is a conflict. This is the order of priority (the top is the most important):

  1. Constitution of South Africa
  2. Companies Act no. 71 of 2008
  3. Regulations published in terms of the Companies Act no. 71 of 2008
  4. Company Memorandum of Incorporation (MOI)
  5. Shareholders Agreement
  6. Company rules

Always remember that the MOI is more important than the Shareholders Agreement!

This Memorandum of Incorporation and the Shareholders Agreement are based on the “Series Seed Investment” documents which are used by investors to invest in new companies in the United States of America. Obviously several things needed to change to make the documents more applicable to South Africa (and more readable) but the general principles are based on business concepts that have been tried and tested in many successful start-up companies over many years.

Once you have the MOI and a Shareholders Agreement in place, you need to either sell the existing shares in the Company to the investors, or issue new shares to the investors. If you are selling existing shares then you will be “assigning” them to the investor. If the Company is going to issue new shares then the Company and the Shareholders conclude a “Subscription Agreement” which will set out how many shares are issued by the Company, the type of shares, who gets them and how much they pay for them.

No copyright

These documents are freely available to the public and may be used by anyone in the world under Creative Commons Attribution 4.0 International License [1], provided they insert the following line onto the front pages of each MOI, Subscription and Shareholders Agreement used: “This document is not subject to copyright and has been kindly made available to the public by Newtown Partners (Pty) Ltd and Esselaar Attorneys.”

No legal advice given

Finally we are sure that you consider your business to be unique and so it makes sense that you may want to change these documents to better suit your needs. Please feel free to do that, but remember that these documents do not constitute legal advice. You are always better off going to speak to an attorney who will understand your needs.

Download Series Seed documents

  • Series Seed Memorandum of Incorporation v16 dated 5 February 2015 - [2]
  • Seried Seed Shareholders Agreement v4.2 dated 5 February 2015 - [3]
  • Series Seed Subscription Agreement v3.2 dated 5 February 2015 - [4]

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