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Labour Law

How to Settle Disputes the Humane Way

The ins and outs of mediation for your business.

Khanya Motshabi

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Access to justice in South Africa is set to improve dramatically in future, when a new High Court rule makes mediation compulsory for civil court cases. The implications for business are extremely positive, because mediation is a much more affordable and quicker process than going to court.

What is mediation?

Mediation is a process in which a mediator assists the parties in a dispute to carve out their own settlement, with the aid of their lawyers if they choose, instead of going to court.

How can I solve disputes myself?

Every company should incorporate mechanisms for dealing with conflict into all their business agreements, including employment and service contracts. For example, every contract should have a clause stipulating that the parties will attempt to solve disputes through negotiation first. If the parties cannot reach a settlement through negotiation, the dispute should be referred to a mediation service provider.

This way, discussions can begin before a dispute escalates, which could have a devastating effect on the productivity of employees.

You will be able to negotiate your way through many conflicts yourself if you and the other party do the following:

  1. Commit to listening to each other’s arguments in full, and putting yourself in the other person’s shoes.
  2. Agree to set your emotions aside and focus on the practical implications that the problem is having on the business. Things go pear-shaped when people act only out of emotion.
  3. If the two parties cannot find their own solution, your in-house mediator or a service provider should be engaged.
  4. Once you have found a solution, review the issue fortnightly, and at a later stage monthly.

When should I seek help from a mediation company?

If the other party fobs you off, or you cannot find a solution within the company, you should to contact a mediation service provider.

Make sure your business have mediation clauses in all contracts. If you don’t, the other party might refuse mediation and you might have to go to court.

Who do I approach?

There are very few mediation service providers inSouth Africa. Equillore has mediated 45 000 cases, more than any other company in the country, with over 70% of these mediated successfully. Equillore provides their services across the country.

The CapeChamber of Commercehas set up a dispute settlement centre, powered by Equillore, to boost mediation and other dispute settlement processes among its member businesses and business in general. It is called the African Commercial Dispute Settlement Centre. Log on to www.equillore.com or www.capetownchamber.com to find out more.

How do I prepare?

It will help to prepare a statement of case, to ensure that the mediator is prepared and that no time is wasted at the meeting. This statement could include documents, contracts or court pleadings.

The mediator will need to know how the dispute arose, who all the relevant parties are, the key factual and legal issues, the important points of agreement and disagreement, and whether the parties have held any direct negotiations, among other questions.

It would also be helpful to inform the mediator of the settlement you would like to reach.

How does it work?

The mediator is a neutral party who is committed to helping the parties to settle, but has no stake in the outcome. Costs and timeframes are fixed, unlike in court. Equillore favours a two-hour mediation sessions, as this is more efficient in cost and time effective than the full-day sessions – and four in five cases are settled within the first two hours.

The two-hour session will cost you less than R 4 000.00.

You will be able to choose your mediator and decide on the issues to address. Mediators are specialists in certain aspects of law, or certain professions. The mediator will apply their expertise in assisting the parties to reach early settlement.

You will also decide when the sessions will take place and how to apportion the fees.

Once a settlement has been reached, the mediator will draft a settlement agreement that will be signed by both parties and can be enforced. Settlement agreements can even be made an order of court.

What are the benefits?

The process, and costs involved, are defined from the start and are predictable, unlike legal cases which can be prolonged almost indefinitely.

Mediation helps the parties to understand each other’s position and the real cause of conflict, which are often hidden at first.

It usually results in a more sustainable solution, leaving both parties feeling better, than where a solution is imposed upon them. Your business is far less likely to be bankrupted than in litigation, and both parties are more likely to honour such a mediated agreement.

The mediator helps you find solutions that are satisfactory to both parties, and often the relationship between parties is restored and can be strengthened.

Mediation is confidential. So, you can express your views and feelings without causing any bad publicity. This helps you to be open and honest, and the other party is likely to follow suit. Also, what you say cannot be used against you if the matter proceeds to court. Your reputation remains intact!

Khanya Motshabi is the managing director of Equillore, South Africa’s leading commercial dispute settlement company. A former law academic at the universities of the Witwatersrand and Cape Town, he holds a Dip Jur, LLB from North West University and an LLM: Comparative and International Law from the Southern Methodist University in Dallas, Texas. He has held senior positions in large companies, including CEO at Futuregrowth and the National Empowerment Fund.

Labour Law

Dealing With Decision – Making Deadlocks In Private Companies

Effective decision – making is an important part of running any Business or Company.

Nicolene Schoeman-Louw

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In essence, Companies are 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 2008 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. Sound governance principles are in writer’s view key in avoiding decision – making deadlocks on both levels and further, to maintain healthy relationships between Shareholders and Board members.

The distinction between Shareholders and Directors

Shareholders own shares in the Company.  They are therefore  Investors who are key in making certain decisions. 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.

Related: Solutions To Get Your Business Through Tough Times

Shareholder and Director decision- making

Shareholder votes are directly correlated to the amount of shares they own in the Company. 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. The Memorandum of Incorporation (“MOI”) is instrumental in outlining this.

There are two types of resolutions in Shareholder meetings, ordinary and special resolutions. Generally speaking, ordinary resolutions require a 50% support and special resolutions 75%. Accordingly, more sensitive decisions are taken by special resolution. Section 65 of the Companies Act lists special resolutions for Shareholders. Examples include amending the Company’s (“MOI”), to approve the issue of shares and entering into fundamental transactions. This in addition to any matter prescribed to be considered by special resolution in the Company’s MOI.

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. If  it is still insufficient a Shareholder may, before the start of the meeting, “seek leave to apply” to Court for an order restraining the Company from putting the matter to the vote and requiring the Company to amend the proposed resolution to comply with the requirements.  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.

Deadlocks can be easily avoided in Shareholder’s meetings by dividing the shareholding in such a way that all combinations lead to a majority vote or casting vote. This of course does not ensure that all decisions or processes will be dispute- free, but at least avoids the clear threat of a deadlock when a Company is owned by for example two Shareholders each holding 50% of the shares.

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.

Related: When To Collaborate And When To Employ

Where deadlocks arise on Shareholder or Board level, consultation with an Independent Expert, mediation  or arbitration can aid in the breaking of a 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 underlying reasons for deadlocks are complex considerations involving in writer’s view the essence of the human experience. 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.

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Labour Law

When To Collaborate And When To Employ

To help you navigate the maze we have constructed some key questions.

Nicolene Schoeman-Louw

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Given the complexity of the labour legislation in South Africa, entrepreneurs are often reluctant to employ and rather look at other forms of agreements to achieve the same outcome. There are instances when it is more appropriate to contract in a different way, but it is important that these reasons are sound.

A number of alternatives could be plausible to consider, these include: Agency, Distribution, Independent Contractor or Supplier Agreements. To help you navigate the maze we have constructed some key questions.

1. Supplier

Question: Is this a unilateral arrangement (to some degree)? In other words, will one party supply or provide something to th other in exchange for payment?

Required Document: Clients or customers are typically engaged by agreement, usually a form of terms and conditions or perhaps even an agreement detailing credit terms. An important provision to include is the aspect of confidentiality and data protection / security. This is crucial from both a customer and supplier perspective.

Related: What Is The Legal Impact Of Acknowledgements?

2. Agency

Question: Do you want to engage multiple people or organisations to sell the goods or services you supply?

Required Document:  An agency agreement could either relate to an individual or an organisation. This means an individual or a business could represent the supplier of the goods or services and earn a commission or remuneration for actual sales. One of the advantages is that this does not create the commitment usually associated with an employment relationship, however, a number of aspects should be carefully considered or constructed including the agent’s powers of representation and some checks and balances should ideally be in place to ensure that these are not exceeded. The process of adjusting commissions in certain instances such as customer complaints or returns.

3. Distribution

Question: Do you sell and market goods? Are you concerned about multiple people or organisations selling the goods you supply, overstepping? Rather prefer that the goods be purchased and delivered to the end consumer from there?

Required Document: A distribution agreement detailing the price to be paid, passing of risk, storage and logistics. This is usually a more appropriate arrangement for a larger scale manufacture or export business. It could also be suitable (where logistics and storage would be less important) for software products. 

Related: The Differences Between A Supplier Relationship, Agency And Distributor

4. Independent Contractor

Question: Have you contracted with an organisation and require a skill you don’t have, to perform the contract only for purposes to finish the contract or project involved? There is no need for the person only working for you.

Required Document: An independent contractor agreement detailing remuneration and term being linked to the contract or project. There is a fine line between these arrangements, labour broking and employment. It is therefore crucial to understand the risks involved and to seek professional guidance when electing to proceed this way. 

Conclusion

It is best to strategically assess your risks, intentions and needs before electing which agreement to use. Contact an expert at SchoemanLaw today.

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Labour Law

An Ongoing Debate: Labour Brokers And Outsourced Labour To Keep Businesses Lean

Every business reaps the consequences of political actions in some way; coupling this with political uncertainty, slow economic growth and an underperforming Rand has brought some businesses to their knees.

Kristly McCarthy

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labour-law

Creating scalable businesses in a tough economy has become particularly eminent in 2018. No stranger to uncertainty, the construction sector, for instance, further plummeted in 2017 and these results have rippled through into this year.

Every business reaps the consequences of political actions in some way; coupling this with political uncertainty, slow economic growth and an underperforming Rand has brought some businesses to their knees.

Wayne Bartlett, Contracts Director for Bartlett Construction says that more than 19 000 jobs were lost in the construction sector alone last year. With the company’s long-standing history of more than half a century in South Africa, Wayne says that we are now seeing more diversification and lean business practices than ever before.

“We are seeing established companies reinvigorating their brands and business strategies. This is not a bad thing – it helps to grow the economy in other areas and establishes more resilience and perhaps more effort by businesses today. Complacency is no longer an option and as such as property management, social housing, renewable energy projects and road infrastructure are just some of the ways that traditional construction companies have branched out,”

Discussing the role that labour brokers in the construction industry and outsourced labour the country over plays, Wayne says: “While physical labour is key in every industry, we see companies reducing their risk by outsourcing work. This creates employment opportunities, funds small businesses and nurtures fresh thinking”.

Related: SA’s Labour Laws: Key Changes And How They Will Affect You And Your Business

Speaking to the topic of mechanisation in industry, Wayne says that while this is on the rise, bricks and mortar still plays a crucial role in business. “More than ever, consumers want value. We want to touch, see and experience what we pay for”.

Skilled labour shortage in South Africa has always been an issue. “We couple this with the need to compete on price whilst factoring in labour issues, BEE policies, trade unions, various regulatory changes and labour brokers”,

In February of this year, third-party suppliers once again came into the spotlight with labour brokers arguing that removing them from the employment equation would trample the rights and protection of employees.

“Despite conflicting views, labour brokers still have a role to play in uncertain economic times, provided that they are properly regulated. This market is huge for people wishing to enter the workplace and needing a platform to do so” Wayne continues.

Wayne concludes saying: “With the YES initiative soon coming into effect, the construction industry looks to empowering and upskilling the youths both in-line with labour brokers and as individual entities.”

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