Reserved Matters
Also known as: Veto Matters, Protective Provisions, Consent Matters, Shareholder Veto Rights.
What is Reserved Matters?
Reserved matters are strategic decisions that a company may not take without the specified super-majority shareholder or investor consent, overriding the default board authority. They are created contractually in the MOI or shareholders agreement under Section 15(7) of the Companies Act 71 of 2008 and typically cover new share issues, borrowings, and related-party transactions.
Drafted and reviewed by
Attorney & Founder, My-Contracts.co.za · Legal Practice Council of South Africa (LPC F17333)
Definition and context
Reserved matters (sometimes called "veto matters", "protective provisions", or "consent matters") are a scheduled list of corporate actions — usually 15 to 40 items — that cannot be validly taken by the board or management without the prior consent of a specified shareholder class, a designated investor, or a super-majority of shareholders. They override the default rule under Section 66 of the Companies Act 71 of 2008 that the business and affairs of a company are managed by or under the direction of the board.
South African company law does not create reserved matters as a statutory category; they are created contractually in the Memorandum of Incorporation under Section 15(7) or in a shareholders agreement that must be consistent with the MOI. Typical reserved-matter schedules cover amendments to the MOI or class-share rights; issue or redemption of shares or convertible instruments; borrowings above a threshold; acquisitions, disposals, or joint ventures above a threshold; change of auditors or accounting policies; approval of the annual budget and business plan; appointment and removal of the CEO and CFO; declaration of dividends; related-party transactions; commencing or settling material litigation; and voluntary liquidation or business rescue. Many of these overlap with Section 65 special-resolution matters — reserved matters can tighten, but never relax, those statutory protections.
In practice, reserved matters are the primary mechanism by which minority investors (private equity, venture capital, B-BBEE partners) secure strategic influence disproportionate to their equity stake. They complement but are distinct from director-appointment rights, which confer board-level participation. Drafting must address the approval threshold, the cure period, deemed-consent mechanics on silence, and consequences of breach — typically specific performance or put-option or default-interest triggers. Where reserved matters conflict with the statutory management power of directors, courts uphold contractually agreed consent rights as internal allocations of authority that do not bind third parties under Section 20(1).
Where this term lives in law
Companies Act 71 of 2008
Sections: 15(7), 65, 66
Governs the incorporation, governance, and winding-up of companies in South Africa.
Frequently asked questions
What is typically covered by reserved matters in a South African shareholders agreement?
Typical reserved matters include MOI amendments, share issues, borrowings above a threshold (often R5-50m depending on company size), acquisitions or disposals above a threshold, appointment of auditors and senior executives, approval of the annual budget, dividend declarations, related-party transactions, commencing material litigation, and commencing business rescue or voluntary liquidation. Schedules of 20-30 items are standard.
Can reserved matters override the board's statutory management authority?
Reserved matters do not override the statutory default in Section 66 of the Companies Act — they operate as internal consent gates. Directors retain authority but cannot validly implement reserved actions without the specified consent. Third parties dealing in good faith are protected by Section 20(1), so a breach of reserved matters is actionable internally (against the company, directors, or majority shareholder) but does not void the external act.
What is the difference between reserved matters and special-resolution matters?
Special-resolution matters (Section 65) are statutory — items like MOI amendments, name changes, voluntary winding-up — requiring a 75% shareholder majority. Reserved matters are contractual additions in the MOI or shareholders agreement; they can add items not covered by statute and can require higher thresholds (often unanimous or specific investor consent) but cannot dilute statutory special-resolution protections.
What happens if the company breaches a reserved matter?
The aggrieved shareholder may seek specific performance, an interdict reversing the action, or damages. Under Section 163 of the Companies Act, persistent or material breach may also ground an oppression application. Well-drafted shareholders agreements include default-interest triggers, put-option escalators, and director-appointment remedies, turning reserved-matter breach into an exit event rather than just a contractual claim.
Contract templates using this term
2 templates reference Reserved Matters.