The memorandum of incorporation (MOI) is the main constitutional document governing a company’s affairs and deals with various matters including, amongst others, the company’s powers, internal governance, the regulation of securities and the powers of its board and shareholders.
The Act, however, is not a rigid document and recognizes that modern businesses require flexibility in the operation of companies.
Against this background, Section 6(2) of the Act creates a process for a person to apply to the Companies Tribunal (Tribunal) for an administrative order exempting “an agreement, transaction, arrangement, resolution or provision of a company’s MOI or rules from any prohibition or requirement established by or in terms of an unalterable provision of this Act“.
This provision confers wide discretionary powers on the Tribunal and, except for matters that fall within the jurisdiction of the Takeover Regulation Panel, the Tribunal conceivably has the power to exempt an MOI from any unalterable provision in the Act.
When will the Tribunal grant an exemption?
The Tribunal’s discretion is not unfettered as it must act within the confines of the Act.
Section 6(3) sets out the circumstances when the Tribunal may grant an exemption. It provides that the Tribunal must be satisfied that:
- “the agreement, transaction, arrangement, resolution or provision serves a reasonable purpose other than to defeat or reduce the effect of that prohibition or requirement”; and
- it is reasonable and justifiable to grant the exemption, having regard to the purposes of the Act and all relevant factors including:
- the purpose and policy served by the relevant prohibition or requirement; and
- the extent to which the agreement, transaction, arrangement, resolution or provision infringes the relevant prohibition or requirement.
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