B-BBEE & the Modified Flow Through Principle
May 27, 2017
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Shareholders Agreement
While it seems self evident that a shareholders agreement is critical to any business that has more than one shareholder, many businessmen just don’t get around to doing it. Shareholder disputes have the ability to destroy years of hard work. It is also important to note that the new Companies Act
(2008) made substantial inroads into company laws in South Africa and important provisions of pre-2008 shareholders agreement will have been altered by the new Act. -
Memorandum of Incorporation
Previously, this was your “articles of association”. Again, with the introduction of the new Companies Act, the Memorandum of Incorporation became a key document. It should be drafted in conjunction with the shareholders agreement so as to ensure that the documents are consistent in so far as the provisions regulating the management of the company are concerned.
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Service Level Agreement
Big corporates insist on SLA’s from their suppliers. If your business is heavily reliant on performance by suppliers, it is imperative to have them commit to clearly defined terms of an SLA that sets out boundaries and commitments, which ultimately manages client expectations and limits client dissatisfaction.
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Employment Contract
When last did you update your employment agreements? Do these agreements – at a minimum – protect your confidential information, deal with company property, bind the employee to disciplinary codes and procedures? Perhaps, they should even include a restraint of trade?
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Termination of Employment Contract
When you terminate an employment relationship by agreement with your employee, it is vital that you have a clear document that avoids any claims in the future. The last thing you want is to think you have a mutual understanding between the employee, only to find yourself in the halls of the CCMA.
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Restraint of Trade
These contracts are often thought to be unenforceable. This is not the case. In South Africa, a restraint of trade is valid unless a Court holds that it is contrary to public policy. For senior staff, staff dealing with technical matters and even for certain sales representatives, it is vital that they cannot take your confidential and technical information and business contacts to the opposition.
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Disciplinary Code
A vital document that is often left in the bottom drawer until a dispute arises. Disputes can be costly in both time and expenditure on legal fees. It is worth ensuring that your disciplinary code (and the related documents) are clear and up to date.
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Credit Application Form with T&C and a Suretyship
Most credit application forms and terms and conditions that we surveyed had serious defects. One bad debt can be very damaging. While you may not always get the suretyship you ask for, why not ask. The suppliers who do not have suretyships get paid last. Terms and conditions must deal with the National Credit Act, 2005, including disclosures of asset value and turnover. Also, the suretyship must guard against business rescue compromises. What about banking scams? Guard against these types of risks.
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Non-Disclosure Agreement
Whether you are introducing a new concept to a potential partner, discovering a possible share or business acquisition or developing new technologies, it is essential that you have a clearly defined non-disclosure agreement to protect your trade secrets and confidential information from exposure.
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Staff Trust
So you have decided that the best BEE structure that you can implement is one that benefits the staff who are at the grindstone every day and who have a part to play in the success of your business. Put the shares in a company that is held by a trust that is 51% black owned, and you have the makings of a great deal, all round.
