Do you manage a business? If so, it’s important that you understand the very significant changes triggered by the Companies Act 71 of 2008.
Under the Companies Act 61 of 1973 (the ‘Old Act’), every company had to register its Memorandum of Association and its Articles of Association. While the previous Act imposed various requirements on the form and content of the memorandum, it did not govern the content of the articles.
In terms of the 1973 Act, it was legal to alter the memorandum and articles independently of one another through a shareholders’ special resolution. Additionally, the memorandum and articles were binding between the members (shareholders) of the company and the company itself.
Now, however, the rules have changed quite drastically. Under the Companies Act 71 of 2008 (the “new Act”), the MOI is a legally binding document between shareholders themselves, between the company and shareholders, and between the company and third parties.
Now, existing companies that registered under the old Act must align their existing articles and memorandi with the provisions of the new Act. Furthermore, the new Act has set a window period within which this is to be done. The window period closes at the end of April 2013.
This means it’s important for companies to consult their attorneys sooner rather than later to assess the impact these changes may have on their financial year-end and to reconsider their strategies.
The legal nature of the Memorandum of Incorporation
A Memorandum of Incorporation (MOI) is defined in the new Act as an instrument: ‘that sets out rights, duties and responsibilities of shareholders, directors and others within and in relation to the company, and other matters as contemplated in section 15; and by which:
- The company was incorporated in terms of this Act, as contemplated in section 13; or
- A pre-existing company was structured and governed before the later of:
aa) the effective date; or
bb) the date it was converted to a company in terms of schedule 2’.
Accordingly, the MOI now combines the Articles of Association and Memorandum of Association in one legal document and broadens its purpose. Currently, the articles and memorandum of companies registered before the new Act was introduced will automatically form its MOI. However, these companies should ensure that their existing articles and memorandum conform to the provisions of the new Act.
Your company MOI and third parties
Under the old Act
A fundamental principle of the common law has always been that a company representative (or agent) must have the necessary authority to bind the company to a contract as the principal. This was enshrined in common law and the principles relating to the law of agency, which specifically evolved in the company law context.
Broadly speaking, a number of well-known company law doctrines or common law principles, such as the doctrine of disclosure, meant that prescribed information was continuously made public to inform interested parties about the true state of affairs within a company.
Because this information was made public, the doctrine of constructive notice assumed that everyone dealing with a company had knowledge of who had authority to bind the company. There was an assumption that anyone dealing with the company had read these documents.
Further, any acts outside the scope of the company’s business (known as ultra vires acts) were not permitted in terms of the common law either. The company’s business − or rather, the scope of its business − was defined in the company’s memorandum (sections 33 and 34 of the old Act).
This meant that third parties dealing with the company could be denied contractual rights because the contract was null and void from the start. In other words: it never came into existence.
The practical realities of conducting business meant that agents with invalid authority often entered into contracts on behalf of their company without the company itself necessarily objecting. The law was consequently adapted to match this reality.
Section 36 of the old Act altered the common law position by validating a company’s actions even if they were outside the company’s scope or entered into by directors acting without proper authority.
No dependence on this lack of capacity on behalf of the company or lack of authority on behalf of the director may have been relied on in any legal proceedings. The company rules were applicable only between the members/company and its directors.
Third parties could not rely on them. This represented a significant departure from the common law position.
Finally, the Turquand rule was imported into our law from England. This rule stated that a third party could presume that all internal company formalities specific to that company were complied with when granting an agent the necessary authority.
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Under the new Act
The common law will continue to apply − provided it does not conflict with the new Act. Disclosure is now regulated in terms of section 75 of the new Act (conflicts of interest). In addition, companies are obliged to disclose special or more restrictive provisions contained in their MOI by affixing the suffix ‘RF’ to the company name under section 19 of the new Act.
Furthermore, according to Section 19 of the new Act, a company now has ‘all of the legal powers and capacity of an individual, except to the extent that (i) a juristic person is incapable of exercising any such power, or having any such capacity; or (ii) the company’s Memorandum of Incorporation provides otherwise’.
In addition, Section 20 of the new Act has extended the rights of third parties against both the company and those purporting to represent the company because a contract cannot be declared void by the company under the common law. Accordingly, the doctrine of ultra vires seems totally redundant both in common law and as enshrined in Section 36 of the old Act.
On the other hand, the Turquand rule has not been totally removed from our law. Section 20(7) now states that a third party dealing with a company may still presume that all the internal formalities have been complied with − provided it was not within that person’s reasonable knowledge that this was not the case.
Because companies now have wider powers and greater capacity to act than before, it is of the paramount importance that third parties observe the contents of the company’s MOI and related documents, and seek advice about possible consequences when authority does not exist. In addition, third parties should also conduct a due diligence investigation.
What Can Businesses Expect From The Future Of Work?
While the future of work will always be a constant process of innovation and change, here are a few things that business today can expect in the near future.
The phrase “future of work” is something professionals have been talking about since the birth of the traditional workplace in the late 19th century.
Once defined by cubicles that were arranged neatly side by side with meeting rooms and, of course, the head office with an amazing view of the skyline, today’s offices are strikingly different.
Over the last decade, there has been a surge in the development of open-plan offices, and more and more companies are moving their employees to co-working spaces and experimenting with remote work. For businesses that are still straddling the traditional office, but looking to embrace the future of work, it could be overwhelming at first. While the future of work will always be a constant process of innovation and change, here are a few things that business today can expect in the near future.
Expect flat hierarchies
In 2017, most companies have recognised that employees, especially younger ones are turned off by the conventional hierarchies that once dominated the world place.
Start-ups and small businesses often pride themselves on their “flat” workplace culture, which aims to give both leaders and employees the chance to give input on an equal level. In theory, these structures aim to make room for more innovation and also to help workers feel more appreciated in their roles.
Yet, it doesn’t come without its issues. There have been various studies showing that egalitarian workplace structures can be disorienting and can potentially result in higher turnover rates, as employees feel lost in their roles. Thus, it will take time for the workplace to strike a balance between structure and equality, but so far it seems we are well on our way.
The architecture of the office space is changing rapidly
Chances are you’ve heard of open-plan offices. With corporate giants like Facebook and Google companioning the flexible workspace, company around the world are breaking down literal walls to create airy and open offices that encourage collaboration.
Again, much like the flat workspace, open-plan offices need to be considerate of individual needs. While many workers appreciate the chance to work in a more informal setting, the open office has also faced criticism for introducing new distractions by not including enough private areas, which can lead to a downturn in productivity. As a result, more companies are turning to co-working spaces, which offer both workspace and community space.
Co-working spaces differ from open-offices in the way that they provide community management, structure, and flexibility, ensuring that workers have their needs met, whether that means a private office for the whole company or a hot desk for workers who just want to come in a couple of times during the week.
Remote work will be commonplace
Allowing employees to work remotely has proven to be successful. Companies have been introducing remote days over the last five years, and some even allow their staff to telecommute on a full-time basis. In the early days of the freelance ecosystem, remote work was considered to be unprofessional, but we have learned over the years the allowing employees to telecommute, even on a part-time basis can make them more productive and satisfied in their roles.
There’s no doubt that advancements in communication tools, such as Slack, have allowed workers more freedom, but there are also enormous benefits for businesses as well.
Companies can save on overhead costs by moving teams into a co-working space, or take out a flexible lease in combination with allowing workers to work outside of the office, even if it’s just a few days a week. By saving on rent and utilities, leaders can make room in their budget to invest in employees, by offering educational workspaces or purchasing new equipment.
Overall, these changes have a long way to go before they become permanent fixtures in the workplace. In fact, many businesses are now experimenting with various workplaces trends to find what works best for them and their employees.
Yet, even if you are not ready to grant your staff remote days or turn your office into a single shared space, it’s vital that your business is aware of these trends so you can keep up with the rapidly changing future workplace.
How Investors Can Take Advantage Of The Rand’s Currency Trading Rates
Negative sentiment is likely to be pervasive with the SA economy, and it will take more than a new figurehead in government to right the wrongs of a mismanaged economy.
The USD/ZAR currency pair is trading in the 13.65 range heading into mid-December 2017. Over the past year, the 52-week low was 12.3126, and the 52-week high was 14.5742. As one of the more volatile currencies in the trading spectrum, the ZAR is closely associated with the political shenanigans taking place in South Africa.
The year to date return for the currency pair is -0.50%, after having started 2017 at 13.7351. Much of the activity taking place with the ZAR is speculative. Futures contracts are largely responsible for the whipsaw movements in prices.
Wilkins Finance strategists stress the importance of credit ratings agencies on currencies:
‘Whenever credit ratings agencies such as Moody’s and Fitch downgrade their assessments of the South African economy, this has a negative impact on the ZAR. The impact is not always predictable however – towards the end of November 2017, the USD/ZAR had appreciated after the recent ratings downgrade of the economy.’
Moody’s Investors Service downgraded South Africa’s economy to a rating of Baa3. This is the lowest rating level for Moody’s. Further ratings will be announced in February next year. Fitch has already downgraded the foreign currency and local currency to BB +, but has offered a stable Outlook for the ZAR.
That S&P also downgraded the South African economy to sub-investment grade is an important decision, and one that will have negative ramifications for the South African bonds market. Now, the Barclays Global Bond Index will no longer feature South African bonds. That South Africa’s bond market will be excluded from the World Government Bond Index will also be a bugbear to any hopes of the ZAR appreciating.
Interest Rates in the South African Economy
The South African interest rate is highly attractive to foreign investors, given that the UK, US, Canada, Japan, and European bank rates are at historic lows. There is little to be gained by investing cash in fixed-interest-bearing securities in these economies. The current interest rate in South Africa is 6.75% (as at November 23, 2017). The interest rate has dropped to expand economic activity in the country.
Overall, South Africa’s inflation rate for the year is expected to remain at 5.3% dropping to 5.2% in 2018 and rising to 5.5% by 2019. Global investors remain concerned about the risk/reward environment in South Africa. The country has experienced significant capital outflows in recent years, driven in large part by uncertainty regarding future prospects. The USD/ZAR was trading at 14.60 in late November, and current ZAR strength is being attributed to USD weakness.
Factors on Both Sides of the Atlantic
One of the major economic events affecting exchange rates will be the reconciliation of the House and Senate bills on US tax legislation. Any major overhaul of the US tax code will invariably result in a dramatically boosted USD, and a weakened ZAR. For traders, it appears to be short-term call options on the local currency and long-term call options on the USD.
It is evident that currency traders are hedging against the ZAR over the long-term. The fundamentals of the economy are structurally unstable. The power grid infrastructure, water supply problems, and political instability at the highest echelons are but a few of the many problems plaguing South African growth prospects.
However, the ZAR will draw strength from the election of a credible leader, and this will be particularly noteworthy with Cyril Ramaphosa’s appointment. Overall, negative sentiment is likely to be pervasive with the SA economy, and it will take more than a new figurehead in government to right the wrongs of a mismanaged economy.
For many people, the holiday season represents a time of change.
For many people, the holiday season represents a time of change. Some folks have made the decision throughout the year to start a new business in 2018, and the festive season’s message is one of hope for a bright new entrepreneurial future. Unfortunately, for most, this dream can become a nightmare without considerable amounts of planning on part of the entrepreneur and start-up founder.
So, without sounding too depressing, Christmas and New Year’s should be a time for stringent planning rather than celebration for the season and the year ahead. Call me Ebenezer Scrooge, but hitting the laptop and doing research is the best thing an entrepreneur can do while family and friends are unwrapping gifts or holiday-making.
As a business owner who has used the month of January as a starting block for my foray into a new industry, I can say that one of the problems I encountered was not accurately defining my customer personas, both in real-time and online. It got me thinking; if I can make the mistake when it comes to accurately segmenting customers in real-time, how many people make the mistake of inaccurately creating customer personas for their online brands?
It’s All About the Customer
Creating a customer persona is easy. Most business founders have an idea of who their customer is before marketing their product. And once you know who the customer is, its just as easy to find out their likes and dislikes, as well as their habits.
The best way to create customer personas is to base your personas on research and data. Many established businesses find this a simple task, as they have a wealth of clients from which to draw this data. Unfortunately, this is not the case for business founders, so they must carefully test the waters using surveys, third-party research, and an ear-to-the-ground within the industry.
Once a business understands its various buyer personas, it’s time to start considering the typical online buyer persona…
Just because you can accurately determine your optimal customer due to your created customer personas, you may have to create alternative personas for online consumers. This is because a slightly different person will be looking for your product online.
As an example, Bob owns a pool business, building as well as maintaining pools for residential clients across Johannesburg. Bob’s nominal customer persona is that of Adam, the 40-something business owner who owns a home in a middle-class neighbourhood. Adam is likely to come across Bob’s out-of-home marketing material, or comes to Bob for business through referrals. However, Adam differs from Lerato. Lerato is a different age, race and gender. Even more importantly, Lerato looks for products and services exclusively online. To appeal to Lerato over Adam, Bob’s customer persona must be changed for the online customer, and the online customer must be exposed to tailored content to be appealed to.
Lerato also lives in a middle-class neighbourhood, but Lerato has young children, while Adam’s children have now moved out of home. This means that Bob can take advantage of Lerato’s need for pool safety nets and a custom-built pool fences, and Bob will make sure that Lerato is exposed to content about these services while making her online journey.
When creating online material, ensure that it is developed to take advantage of the online customer. One mistake that business owners make is that, in their attempts to be recognised as industry leaders, they try very hard to use industry specific language. They make attempts toward showing their prowess in the trade and showcase their own certification and business journey.
The online customer persona representing the business’s primary online buyer does not care about the business’s goals and objectives, and they have no clue as to what is being said when the website uses online lingo. They want content created for them; they want to know why they need the product or service, they want to know that they are using the best business for the job, and they want social proof regarding the service offered.
Make sure that you do proper content mapping research, and identify the online journey taken by the consumer through online channels before they make a purchasing decision.
Take this a step further and make sure that you define several online customer personas. Determine the value of each persona and structure content and the consumer journey for the most profitable of the personas. Additionally, determine the lifecycle of the journey, how much attention a segment of online content generates, and capitalise accordingly. For example, if most of the purchasing decision is made on the product or service landing page, make sure that the landing page is optimised as often as possible to increase your business’s revenue.
Hit January 2018 running, and make sure you understand your online client before receiving your first online lead. And if you make a few mistakes initially, don’t worry. 2017 was – and 2018 will be – known for being the year of big data, where business owners make operations and marketing decisions based on the behaviour of customers online. Always analyse the data available to your business when made available, and make changes accordingly. The best of luck for the year ahead!
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