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Nicolene Schoeman-Louw In essence, Companies smes business plan governed by the democratic principle on both Shareholder and Board level. This means that the majority rules both on Shareholder and on Board level.
What is important to note though, particularly on Shareholder level is that besides the underlying asset value particularly in Private Companies, the ability to exercise effective control over the business and its assets by being a Majority Shareholder carries considerable economic value.
Conversely Minority Shareholding, although Minority Shareholders enjoy increased protection under the new Companies Act 71 of as amended, carries a lesser economic value and is often difficult to market and sell to Third Party Buyers. For this reason, Majority Shareholders are often reluctant to relinquish the effective control they hold.
The role of a Shareholder and Director are distinctly different from one another as will be investigated briefly through this article. The distinction between Shareholders and Directors Shareholders own shares in the Company.
Directors on the other hand, are Members of the Board and attend to the day- to- day running of the Company. Both Board and Shareholder decisions are made by way of resolution. Directors on the other hand, generally only have one vote each and resolutions are taken on majority vote.
It is important to distinguish which decisions are for the Board and which are for the Shareholders. There are two types of resolutions in Shareholder meetings, ordinary and special resolutions.
Accordingly, more sensitive decisions are taken by special resolution. Section 65 of the Companies Act lists special resolutions for Shareholders. Proposed resolutions must be sufficiently clear and accompanied by information enabling the Shareholder entitled to vote whether or not to vote in favour thereof.
If this is not the case, the Companies Act prescribes that such a Director or Shareholder may request such information or explanation regarding a proposed resolution. Importantly, the above remedy cannot be applied after the meeting has taken place.
What happens in a deadlock A deadlock is a situation, typically one involving opposing parties, in which no progress can be made. In essence this means that equal amounts of votes are both for and against a decision. Directors generally only have one vote each, however many Companies afford the Chairperson of the Board an additional vote or casting vote, usually exercised in cases of deadlock.
However, where this fails, the repercussions may be devastating. In terms of Section 81 any Director or Shareholder may apply to Court for the winding up of a Company. When deciding on shareholding allocation it is important to consider the practical and mathematical probabilities of deadlock.
The most important of these considerations, is crucially that Shareholders share the same values and vision for the Company. This will safeguard the relationship between them and ultimately may aid in avoiding potential deadlocks.
Boards should be diverse and Directors only focused on acting in the best interests of the Company. Ideally Shareholders and Directors should not be the same individuals but be two distinct bodies serving the Company.
If this is not the case though, those Companies should ensure that Shareholder- Directors understand the differences in the decision-making processes and the purpose thereof.A vibrant small and medium-sized enterprise sector is a vital ingredient for a healthy market economy.
Small and medium-sized enterprises (SMEs) make up over 99% of the total number of businesses across the countries where we work. This article is a comprehensive list of over free sample business plan templates that give an easy start to aspiring African entrepreneurs and small businesses.
A business continuity plan for small businesses should contain all the crucial information necessary to keep a business operational during an unforeseen event, such as a disaster.
It institutes risk management procedures and processes with the goal of avoiding or reducing disruption of mission. FRF for SMEs™ Toolkit for Small Business The AICPA has created numerous resources to help small businesses understand the Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs™ accounting framework).
SMEs should shift their mind-sets and make branding an integral part of their business plan rather than an afterthought. It should emerge, grow and evolve along with the business and the company will see a significant difference in the impact it creates.
business plan, management structure and in decision making (Kelkar, ). In addition, SMEs are characterized by inability to absorb most uncertainties and risks confronting business organisations.