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Shareholders Agreement Template – South Africa

A shareholders agreement governs the relationship between the shareholders of a South African private company (Pty) Ltd. Our free template covers share transfers, pre-emptive rights, tag-along and drag-along provisions, dividend policy, and director appointment rights under the Companies Act 71 of 2008.

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SHAREHOLDERS AGREEMENT
SHAREHOLDER 1
Thabo Nkosi
12 Jan Smuts Avenue, Parktown, Johannesburg 2193 · SA ID 8008155800084
SHAREHOLDER 2
Priya Pillay
8 Boundary Road, Century City, Cape Town 7441 · SA ID 8205250200085
SHAREHOLDER 3
James van der Berg
3 Somerset Road, Green Point, Cape Town 8005 · SA ID 7903185800081
Company: AfriTech Innovations (Pty) Ltd · Reg No 2022/123456/07
Effective: 25 April 2026 · Total Shares: 100
This Shareholders Agreement ("Agreement") is entered into as of 25 April 2026 by and among the shareholders named above (individually a "Shareholder", collectively the "Shareholders") of AfriTech Innovations (Pty) Ltd (registration number 2022/123456/07) ("Company"). This Agreement supplements and is read together with the Company's Memorandum of Incorporation ("MOI") as contemplated by section 15 of the Companies Act 71 of 2008. In the event of any conflict between this Agreement and the MOI, this Agreement shall prevail between the Shareholders to the maximum extent permitted by law. The parties agree as follows:
1.
SHAREHOLDING
As at the Effective Date, the issued share capital of the Company comprises 100 ordinary shares of no par value, held as follows:
Thabo Nkosi40 shares (40%)
Priya Pillay35 shares (35%)
James van der Berg25 shares (25%)
Total Issued Shares100 shares (100%)
2.
BOARD OF DIRECTORS
The Company shall be managed by a Board of Directors. Each Shareholder holding ten percent (10%) or more of the issued share capital shall be entitled to appoint one (1) director to the Board. A director so appointed may be removed only by the Shareholder who appointed that director. Board decisions shall require the approval of a simple majority of directors present. The Board shall meet at least quarterly. Board meetings may be held in person, by telephone, or by video conference as contemplated by section 73 of the Companies Act. A director may be removed by the Shareholders in accordance with section 71 of the Companies Act. The Board shall be responsible for the day-to-day management of the Company, subject to the reserved matters listed in clause 5 below.
3.
SHAREHOLDERS MEETINGS
Shareholders' meetings shall be convened and conducted in accordance with section 61 of the Companies Act. An ordinary resolution shall require not less than two-thirds (66.7%) of shareholders by voting rights for the following matters: annual financial statements, appointment of auditors, and declaration of dividends. Special resolutions (requiring 75% or more of voting rights under Companies Act s. 65(9)) shall be required for: amendment of the MOI, approval of any merger, amalgamation, or scheme of arrangement, and any disposal of all or substantially all of the Company's assets. Notice of shareholder meetings shall be given in writing at least fifteen (15) business days before the meeting (or such shorter period as permitted by the Act with shareholder consent).
4.
RESERVED MATTERS
The following matters shall require the prior written consent of Shareholders holding not less than 66.7% of the issued share capital: (a) issuance of new shares or any dilutive securities; (b) incurring debt in excess of ZAR 1 000 000 in aggregate in any financial year; (c) entering into any related-party transaction; (d) material change in the nature of the Company's business; (e) appointment or removal of the chief executive officer or chief financial officer; (f) approval of the annual budget; and (g) commencement of litigation with a potential value exceeding ZAR 500 000.
5.
TRANSFER RESTRICTIONS
No Shareholder may sell, transfer, donate, encumber, or otherwise dispose of all or any part of its shares in the Company without the prior written consent of Shareholders holding a majority of the issued shares (excluding the transferring Shareholder). Any purported transfer in violation of this clause shall be void and of no effect. This restriction is consistent with the private company transfer restrictions contemplated in section 8(2)(b)(ii) of the Companies Act 71 of 2008.
6.
PRE-EMPTIVE RIGHTS
Before any Shareholder ("Selling Shareholder") transfers any shares to a third party, it must first offer those shares to the remaining Shareholders ("Offeree Shareholders") pro rata to their existing shareholding in writing (the "Offer Notice"), at the same price and on the same terms as the proposed third-party transaction. The Offeree Shareholders shall have twenty (20) business days from receipt of the Offer Notice to accept or decline the offer. This right is consistent with the pre-emptive rights framework under section 37 of the Companies Act and the MOI. Shares not taken up by the Offeree Shareholders within the acceptance period may be transferred to the third party on the same terms, subject to the transfer restriction in clause 5 above.
7.
DRAG-ALONG RIGHTS
If Shareholders collectively holding not less than 75% of the issued share capital (the "Dragging Shareholders") agree to sell all of their shares to a bona fide third-party purchaser (the "Proposed Buyer"), the Dragging Shareholders shall have the right to require all other Shareholders to sell their shares to the Proposed Buyer on the same price per share and substantially the same terms and conditions ("Drag-Along Right"). The Dragging Shareholders shall notify the remaining Shareholders in writing not less than thirty (30) business days before completion of the proposed sale. Shareholders subject to the drag-along shall execute all required transfer documentation. Appraisal rights under section 164 of the Companies Act shall remain available to dissenting Shareholders in applicable transactions.
8.
TAG-ALONG RIGHTS
If any Shareholder ("Selling Shareholder") proposes to transfer shares representing twenty percent (20%) or more of the issued share capital to a third party, each other Shareholder ("Tag-Along Shareholder") shall have the right (but not the obligation) to participate in such sale on the same price per share and on substantially the same terms and conditions by giving written notice to the Selling Shareholder within fifteen (15) business days of receiving notice of the proposed sale ("Tag-Along Right"). The Selling Shareholder shall not complete the proposed sale unless the third-party purchaser agrees to purchase the Tag-Along Shares on the same terms.
9.
DEADLOCK RESOLUTION
If the Board or the Shareholders are unable to reach a decision on a Reserved Matter within thirty (30) calendar days of a first vote (a "Deadlock"): (a) either party may refer the matter to the respective chief executives (or equivalent) of each Shareholder for senior-level negotiation over a further period of thirty (30) days; (b) if the Deadlock is not resolved, either party may refer the matter to mediation before a mutually agreed mediator within fifteen (15) days; and (c) if mediation fails, either Shareholder may trigger the buy-sell mechanism in clause 10 below. Nothing in this clause prevents a Shareholder from exercising any rights under the Companies Act, including applying to court under section 163 (Oppressive or Prejudicial Conduct).
10.
BUY-SELL MECHANISM (SHOTGUN CLAUSE)
If a Deadlock remains unresolved after the process in clause 9 above, any Shareholder ("Offering Shareholder") may trigger a buy-sell by giving written notice to the other Shareholders specifying a price per share ("Trigger Price") at which the Offering Shareholder is willing to either buy all shares of the other Shareholders or sell all of its own shares. Each other Shareholder shall, within thirty (30) days of receipt of such notice, elect either: (a) to sell all of its shares to the Offering Shareholder at the Trigger Price; or (b) to purchase all of the Offering Shareholder's shares at the Trigger Price. Failure to elect within the stipulated period shall constitute an election to sell. The parties shall complete the transaction within sixty (60) days of the election.
11.
DIVIDEND POLICY
The Board shall declare and pay a dividend of not less than 30% of the Company's after-tax net profit in each financial year, subject to: (a) the Company satisfying the solvency-and-liquidity test under section 4 of the Companies Act immediately after the distribution; (b) the Company having sufficient retained earnings or distributable reserves; and (c) there being no material capital expenditure or debt repayment obligations in the succeeding financial year that would require such funds. Any amount not distributed shall be retained for working capital and growth. Dividends shall be distributed proportionally to shareholding.
12.
CONFIDENTIALITY
Each Shareholder undertakes to keep the terms of this Agreement and all non-public financial and business information of the Company strictly confidential and not to disclose such information to any third party without the prior written consent of the other Shareholders, except: (a) to legal, financial, and professional advisors bound by equivalent confidentiality obligations; (b) as required by law, regulatory authority, or court order; or (c) to a prospective purchaser of its shares, provided such person executes a confidentiality agreement. These obligations shall survive termination of this Agreement for five (5) years.
13.
RESTRAINT OF TRADE
For a period of twenty-four (24) months following a Shareholder's disposal of all of its shares in the Company ("Exit Date"), such Shareholder shall not, within the Republic of South Africa, directly or indirectly: (a) carry on or be engaged in a business that competes with the Company's principal business as conducted at the Exit Date; (b) solicit or entice away any employee, director, or independent contractor of the Company; or (c) solicit any customer or client of the Company with whom such Shareholder had material contact in the twenty-four (24) months prior to the Exit Date. This restraint is intended to protect a legitimate proprietary interest (including goodwill, confidential information, and client relationships) and is reasonable in scope, duration, and geographic extent, consistent with Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A).
14.
GOVERNING LAW AND JURISDICTION
This Agreement is governed by the laws of the Republic of South Africa, in particular the Companies Act 71 of 2008 and the common law of contract. Each party irrevocably submits to the non-exclusive jurisdiction of the High Court of South Africa (Gauteng Division, Johannesburg). Nothing in this clause limits any Shareholder's right to apply to court under section 163 (Oppressive Conduct) or section 164 (Appraisal Rights) of the Companies Act.
15.
ELECTRONIC EXECUTION
This Agreement may be signed electronically. Electronic signatures are valid and enforceable under sections 11 and 13 of the Electronic Communications and Transactions Act 25 of 2002 (ECT Act).
16.
GENERAL PROVISIONS
Entire Agreement: This Agreement constitutes the entire agreement between the Shareholders with respect to its subject matter. Amendment: No amendment is valid unless in writing and signed by all Shareholders. Severability: Any provision found invalid shall be severed; the remaining provisions continue in force. Binding on Successors: This Agreement binds and inures to the benefit of the parties and their permitted successors and assigns. Accession: Any future shareholder of the Company shall be required to execute an accession deed agreeing to be bound by this Agreement as a condition of being registered as a shareholder. Counterparts: This Agreement may be signed in counterparts, each of which constitutes an original.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date first written above.
SHAREHOLDER 1
Thabo Nkosi
Date: ____________________
SHAREHOLDER 2
Priya Pillay
Date: ____________________
SHAREHOLDER 3
James van der Berg
Date: ____________________

What Is a Shareholders Agreement?

A shareholders agreement is a private contract between the shareholders of a company that supplements the company's Memorandum of Incorporation (MOI). It governs the relationship between shareholders, the management of the company, and the rights and obligations that apply to the shareholders as between themselves. Unlike the MOI, a shareholders agreement is not filed with the Companies and Intellectual Property Commission (CIPC) and remains confidential to the parties.

In South Africa, private companies are incorporated and governed under the Companies Act 71 of 2008. The Act provides a default framework, but shareholders are free to agree on arrangements that differ from or supplement the default rules by including them in the MOI or in a shareholders agreement. A shareholders agreement is particularly valuable in closely held companies with a small number of shareholders — it provides certainty on issues such as how shares may be sold, how deadlocks are resolved, and what happens when a shareholder wishes to exit the company or dies.

South African company law under the Companies Act 71 of 2008 provides considerable flexibility for shareholders to regulate their relationships by agreement. The Act's provisions on fundamental transactions and shareholder approvals set a statutory floor, and the shareholders agreement operates within and above this floor. Where a shareholders agreement is inconsistent with the Companies Act, the Act prevails. A well-drafted South African shareholders agreement should also address POPIA 4 of 2013 compliance for the company's data processing activities, and should consider the tax consequences of share transfers and dividend distributions under the Income Tax Act 58 of 1962.

What's Covered in This Template

Our South African shareholders agreement template covers the essential governance and commercial arrangements for a private company.

Company and Shareholder Details

Company registration number (CIPC), shareholders' names, and their respective shareholdings.

Board Composition and Director Appointments

Each shareholder's right to appoint one or more directors and the procedure for removing appointed directors.

Voting and Decision-Making

Ordinary and special resolution thresholds, reserved matters requiring unanimous or supermajority approval.

Share Transfer Restrictions

Pre-emptive rights of first refusal on proposed share transfers between shareholders and to third parties.

Tag-Along Rights

Minority shareholders' right to sell their shares on the same terms as the majority in a third-party sale.

Drag-Along Rights

Majority shareholders' right to compel the minority to sell in a qualifying third-party acquisition.

Share Valuation Mechanism

Agreed method for determining the fair value of shares on a buyout — independent auditor determination or agreed formula.

Dividend Policy

Agreed policy on the declaration and payment of dividends, and shareholder loan repayments.

Non-Compete and Non-Solicitation

Restrictions on shareholders competing with the company or soliciting its clients and employees while and after they hold shares.

Deadlock Resolution

Procedure for resolving deadlocks in board or shareholder decisions, including escalation and compulsory buyout triggers.

Exit Events and Buyout Rights

Events triggering a compulsory buyout — death, insolvency, resignation, or conviction of a shareholder.

Governing Law

South African law and Companies Act 71 of 2008 govern the agreement, with the appropriate High Court Division having jurisdiction.

How to Create a Shareholders Agreement in South Africa

Follow these steps to produce a South African shareholders agreement that protects all shareholders.

  1. 1

    Identify the Company and Shareholders

    Record the company's CIPC registration number and the names and shareholdings of all shareholders.

  2. 2

    Agree on Board and Governance Structure

    Specify director appointment rights, reserved matters, and decision-making thresholds.

  3. 3

    Set Share Transfer Rules

    Define pre-emptive rights, tag-along, drag-along, and the share valuation method for buyouts.

  4. 4

    Address Dividends, Non-Competes, and Exits

    Agree on dividend policy, shareholder non-compete obligations, and events triggering compulsory share purchases.

  5. 5

    Review and Download

    Review the shareholders agreement against the company's MOI and South African law, then download as a PDF.

Legal Considerations

South African shareholders agreements operate within the mandatory framework of the Companies Act 71 of 2008.

This template is for informational purposes only and does not constitute legal advice. Consult a qualified South African attorney for advice specific to your situation.

Reviewed for South African law

Relationship with the MOI and Companies Act

Section 15 of the Companies Act 71 of 2008 provides that a company's MOI is a binding contract between the company and each shareholder. A shareholders agreement supplements the MOI but cannot override the Companies Act or contradict the MOI without amending both documents. Any provision in a shareholders agreement that is inconsistent with the Companies Act is void to that extent. A South African attorney should ensure alignment between the shareholders agreement and the MOI.

Appraisal Rights and Fundamental Transactions

The Companies Act 71 of 2008 grants dissenting shareholders appraisal rights (the right to demand fair value for their shares) in connection with fundamental transactions such as mergers, disposals of all or substantially all assets, and amalgamations. These statutory rights cannot be excluded by a shareholders agreement. The agreement can, however, specify agreed valuation mechanisms and timelines that apply in non-statutory buyout situations.

Dividend Withholding Tax

Dividends declared by a South African company are subject to dividends withholding tax (DWT) at 20% under the Income Tax Act 58 of 1962 as amended. The shareholders agreement should reflect this obligation and confirm that dividends are paid net of DWT unless an exemption applies — for example, where the recipient is a South African company or certain trusts and retirement funds. A tax adviser should be consulted to confirm the applicable DWT treatment.

Frequently Asked Questions

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