Brisk General Holdings Group

02/08/2016

INTRODUCTION TO THE SHAREHOLDERS STRUCTURE.

Author: Tebogo Serithi; CEO Brisk General Holdings Group.
20/07/2016

When looking at the requirements of corporate governance and corporate state federal laws internationally, a company that has financial interest in its dealings is required to have in place, but is not limited to, two corporate governance structures; the owners (shareholders structure) with the ultimate responsibility of safe guarding their capital investment while adhering to state regulations, and the managers (Board of directors structure) with the sole responsibility of receiving one of the many mandates from the shareholders structure of how to safe guard their investment through the day to day management of a company, while adhering to state regulations. In the common stage of new development or up and coming businesses with a sole or multiple incorporator/ shareholder/ director individual(s), these provisions are self imposed by entrepreneurs, however, adherence is still a requirement.

Who are shareholders?

Shareholders are the men and woman who have entitlement to the ownership of a company's securities/shares. They are a company's financial supporters through the purchasing of shares in it. This gives them certain rights as shareholders; they also have roles and duties to adhere to, which are set out in the Companies Act. It is fundamentally important for shareholders who are also directors in their respective companies to understand the difference of the two structures and roles of a shareholder and of a director because shareholders may or may not be directors of the company. A Director is in charge of running the day to day business of the company and making decisions, given those privileges by the shareholders and their trust and confidence in them. However, shareholders have a few specific roles and duties to ensure they ultimately have control over the company.

Roles of the Shareholders

The main duty of shareholders is to pass resolutions at general meetings by voting through their shareholder capacity to major decisions which would have an effect on the shareholders’ rights. This duty is particularly important as it allows the shareholders to use their ultimate control over the company and how it is managed. Shareholders can vote in one of two ways: on a show of hands or through a poll vote where each vote will be proportionate to the amount of shares held by each shareholder.

Only certain acts can be done by the shareholders such as; removing a director from office, or authorizing a service contract for a director which gives themself job security for a specific time not prescribed by your corporate bylaws or which authorizes financial gain to the director.

Hence stated above, "A Director is in charge of running the day to day business of the company and making decisions, given those privileges by the shareholders and their trust and confidence in them", in general, shareholders have little power over the directors and how they run the company, but their main role is to attend meetings and discuss what ever is on the agenda to ensure the directors do not go beyond their powers. In the event were one is within the capacity of being a director and a shareholder, they also self impose those requirements.

The share acquiring process.

Lets discuss this fearsome stage. As an entrepreneur in my beginning days, I use to be very reluctant to bring people to engage with me in relation to my business initiatives. To date,most entrepreneurs still are. It is because, it is commonly though that once any one is brought into your company, they automatically are entitled to shareholding. This simply means that, the share acquiring process is unknown.

What is the share acquiring process?

Companies Act provides regulations on issuing authorized shares. However, in a nutshell, the shareholders and the board must issue a resolution that authorizes the issuing of shares. To bring anyone on board for collaboration rather, or for any act, except the act of share issuing does not entitle them to shareholding unless the shareholders and the board issue a resolution that authorizes the issuing of shares.

Capitalization of shares

The Companies Act provides regulations on shares capitalization. Shares are a source that can be capitalized within a company with a primary objective of gaining capital that can be reinvested within the corporation. Idealy, I usually advice my clients when developing their shareholders structure, to reserve a number of their corporate shares to offer any formal investor prior to have access to capital. E.g. Seed funding, operations funding or even expansion funding. Publicly listed companies to the JSE use this tactic to bring in additional finance from investors, and those investors are the general public like you and I. I can say we are external investors because we don't have a say in what publicly listed companies do, however we are entitled to our profits. This is similar to a unlisted start up, small or any business, however, Companies Act prohibits private companies from offering its shares to the public. This means we can only provide shares to internal investors who will have a say in how and what we do within the company. Ultimately shares are a source of capital gain for a company.

Shares have no nominal nor par value, therefore, to determine the value of the shares within an organization, the directors and shareholders have the responsibility to pass a minuted resolution that defines their preferred share capital.

Shareholders documents: each and every shareholders structure has to have in place the following documents;
a. The share certificate
b. Shareholders agreement (legal document)
c. Shareholders register
d. Shareholder Communication Policy
e. Procedures for shareholder(s) to convene general meetings / nominate a person for election as a director
f. Letter to our shareholders Template
g. Information on attendance, postal voting and proxy voting
h. Explanatory details on shareholders rights
i. Power of attorney form
j. Disclosure of the Supervisory Board members’ individual participation in Supervisory Board meetings and its committees
k. Independence of directors - Additional information

For a detailed and professional shareholders structure development and advice, you can consult Brisk General Holdings Group CEO, Tebogo Serithi on 0765680381 or email; [email protected]...........................................
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Next article: 27/07/2016
Subject: The Board of Directors structure.

Brisk General Holdings Group provides industry-focused assurance, and advisory services for public and private clients with regards to Corporate Governance

13/07/2016

INTRODUCTION TO CORPORATE GOVERNANCE.

Author: Tebogo Serithi; CEO Brisk General Holdings Group.
13/07/2016

I often get asked these common questions by my clients, in relation to Corporate Governance.

WHAT IS CORPORATE GOVERNANCE?

ANSWER: Corporate governance is a structure by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among the board, managers, and shareholders, and spells out the rules and procedures for making decisions on corporate affairs.

IS CORPORATE GOVERNANCE A REQUIRED REGULATION TO OUR BUSINESSES?

ANSWER: Yes, The King Committee on governance, from the Institute of Directors of South Africa, issued the King Report on Governance for South Africa – 2009 (the “Report”) and the King Code of Governance Principles – 2009 (the “Code”), together referred to as “King III” on 1 September 2009. King III requires that a formal process of assurance with regard to good governance should be established to all entities regardless of the manner and form of incorporation or establishment.

With respect to CIPC registered organizations, Companies Act; Part F of the act states the requirements of the organizations governance.

I OWN A SMALL OR START UP BUSINESS. DO I HAVE TO ENFORCE CORPORATE GOVERNANCE?

ANSWER: Yes, King III applies to all entities regardless of the manner and form of incorporation or establishment. The principles, if adhered to, will result in any entity practicing good governance. Also, with respect to CIPC registered organizations, Companies Act; Part F of the act states the requirements of the organizations governance.

Additionally, take note that a company's Corporate Governance structure is critical for its successes. Think of Corporate Governance as a system of rules, principles and processes by which your company is directed and controlled. They are guidelines as to how your company can fulfill its goals to enhance value.

HOW WILL IT HELP MY SMALL OR START UP BUSINESS IF I ENFORCE CORPORATE GOVERNANCE IN MY BUSINESS?

ANSWER: A full understanding of the functions and responsibilities of board members, managers, and shareholders provides a structure by which a business corporations is directed and controlled. This will in return provide Transparency, Accountability, and Corporate Control. Which will lead to corporate growth and sustainability.

Corporate Governance also provides a framework for balancing the expectations and interests of the many stakeholders in your company – which include your Shareholders, Board of Directors, Management, Employees, Customers, Suppliers, Financial Institutions, Government and the Community".

WHAT IS THE PROCESS OF IMPLEMENTING CORPORATE GOVERNANCE IN MY BUSINESS?

ANSWER: First and foremost, corporate governance can't be enforced in a company that has 1 director. The commonly made mistake by entrepreneurs is going into business solo. Any business that was formed with the mentality of being transformed into an empire, need to poses at least 5 minimum directors irrespective of its magnitude.

Regardless of your business size, nature or financial standing, it is mandatory that following structures are developed;

a) Shareholders Structure: this is a structure that consists of people who made financial injection to the establishment of the organization. They have ownership within the company in a form of securities percentage holding.

b) Board of Directors Structure: this structure is a liaison structure between the shareholders and the company dealings. They are the decision makers of the company who carry out organizational decision making processes that are in favor of shareholders, management and consumers.

c) Committees Structures; committees are task forces of the board, who carry out wishes of the board as per the boards instructions and requirements. In most companies and organizations, you find committees such as, executive committee, audit committee, remunerations committee, ECT.

d) Management Structures; these includes your CEOs, CFOs, MDs, HR Manager, and all senior managers together with their junior and field workers.

Structure establishment also requires that structure functions and responsibilities imposed to organizations are fundamentally understood.

Prior to small or start up companies, Shareholders Structure, Board of Directors Structure, Committee Structures, and Management Structures can be implemented and held by the same persons. However, it is critical that individuals have the abilities and understanding of different role holding and each and every role requirements.

For a detailed and professional corporate governance advice, you can consult Brisk General Holdings Group CEO, Tebogo Serithi on 0765680381 or email; [email protected]...........................................
For comments, and questions requiring answers please please feel free to add comments and I will respond to them.

Next article: 20/07/2016
Subject: definition, and focus on functions and responsibilities of Shareholders Structure and how they influence corporate governance.

10/07/2016