Background

All pre-existing section 21-companies, including home owners associations using this corporate form, automatically became non-profit companies when the new Companies Act commenced on 1 May 2011. The existing memorandum and articles of association of such a company qualifies as its memorandum of incorporation for purposes of the new Act. However, any provisions that conflict with the new Companies Act will become void at the end of April 2013 when the two-year transitional period comes to an end. It is a good idea for these companies to revise their constitutive documents so as to ensure that they are in line with the demands of the Companies Act.

Because the new Act allows considerable flexibility in the structuring and governance of non-profit companies, pre-existing section 21-companies should consider whether it would be to their advantage to adopt a new style memorandum taking advantage of some of these new possibilities.

The following questions will enjoy attention

  • What objectives may be pursued by home owners associations and other non-profit companies? When may they trade?
  • What must, may and may not be in a memorandum?
  • When is it a good idea to base the memorandum on one of the prescribed standard forms?
  • What are the implications of the different options in the prescribed forms?
  • What matters should be regulated in the memorandum as opposed to the governance rules or other agreements? Where should the conduct rules of an HOA be located?
  • Is it possible to remove the guarantee amount each member undertook to contribute to a section 21-company?
  • Will a non-profit company automatically qualify for tax exempt status as a public benefit organisation?
  • What options exist for the incorporation of new NPC's?

The practice manual will provide

  • an overview of important aspects of the new Companies Act that have a bearing on the drafting of memoranda of incorporation
  • a detailed analysis of the specific provisions pertaining to the memorandum of incorporation
  • an exposition of the various options presented by the prescribed forms
  • guidelines for drafting a unique form memorandum of incorporation
  • an explanation of the function of governance rules
  • suggestions for the format of conduct rules