Time for a review of your shareholders agreements?

By |January 6th, 2015|Company Law|0 Comments

In the matter of Vesagie NO & others v Erwee NO & another (734/2013) [2014] ZASCA 121 (19 September 2014) the Supreme Court of Appeal held that where a contract for the purchase and sale of shares in a company provides for interest to be paid on the purchase price, such a contract is a credit transaction in terms of s8(4)(f) of the National Credit Act 34 of 2005 (“NCA”), and if the seller is not registered as a credit provider in terms of section 40 of the NCA, the contract is null and void ab initio.
The judgement has important consequences, not only for Share Purchase Agreements that are concluded in the ordinary course, but also (and perhaps more significantly), for pre-emptive rights provisions that are incorporated in most Shareholders Agreements.

To summarise, typically Shareholders Agreements provide for automatic sales/trigger events, so that if for example, a shareholder that is a natural person dies, there is either an automatic sale, or, an option granted to the remaining shareholders to purchase the shares held by the deceased estate. These clauses are important in that they often provide the certainty to a shareholder that his or her […]