Monthly Archives: August 2012

Finance 101: Your business plan – a key ingredient to success

Business plans can be an invaluable tool in understanding and controlling your business. What is a business plan and who should do it? It is a thorough formal analysis of your business model. A business plan includes, among other things, the type of business you run or plan to run, what type of products or services the business produces, the customer base by industry and geographical location, the supplier base, your pricing, the experience and skill of you and your staff, how you plan to create demand for your business, how you intend to supply your customers and how you propose to finance the business.

There is a trend to outsource business plans – just look at the web where there are many institutions offering to do your business plan. But this defeats the point of the exercise – only you and your staff really understand how the business works or should work if it is a start-up business. So it makes sense that you do the business plan of your business. There may be areas where outside expertise is required such as financial or marketing plans, but as long as they are done under your supervision, you will still have ownership of the business plan.

Finally, it is also worth remembering that a potential investor or bank will quiz you on your business plan – if you are unsure of what is in the plan, you will almost certainly lose your investor or a bank loan.
Why is it important?

A business plan is important for several reasons, such as:

•Investors and bankers will require a business plan if they are going to either invest in or lend money to your business
•Documenting and thinking through your business model gives you key insights into how your business operates. It highlights weaknesses and strengths which you can incorporate into your business model
•It documents a road-map for your business. You can measure how the business has performed by comparing actual results to those envisaged by the business plan. You can isolate areas where the business has fallen short and see if you stuck to your business model or did not. This analysis will enable you to strengthen your business and come up with solutions to counter weaknesses identified.

A business plan can add significant value to your business in addition to being used as a tool to raise finance.

“CA(SA)DotNews” is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein.  Always contact your financial adviser for specific and detailed advice.

Directors’ liabilities: No room for delinquent directors in the new companies act

In previous issues, we have spoken about the increased liabilities placed on directors by the new Companies Act (the Act). The Act is a balancing piece of legislation and allows increased directors’ powers compared to the 1973 Companies Act. With this increased power there comes an increase in responsibility and a consequent increase in liabilities for directors.One of the increased liability provisions is section 162 of the Act – the “delinquency” provision.The effect of this section is that directors may be barred for life from being a director (this includes holding a senior management position with “general executive control” in the company) or for up to seven years or, in the case of a lesser offence, placed on “probation” for a period of time. The director may also face civil claims and potential criminal liability. Section 162 states that a director may be declared delinquent, or placed on probation, if that person is a director or was a director within 2 years of the application to a court. The delinquency danger, and grounds for declaration.Actions that warrant being declared delinquent include:

  1. Acting as a director when disqualified by the Act or by the Close Corporations Act
  2. Grossly abusing the position of a director
  3. Acting in a grossly negligent manner or with intent to harm the company (this includes a subsidiary of the company)
  4. Acting in a manner which shows “wilful misconduct” or a “breach of trust”
  5. The Act also provides that a director may be declared delinquent if he/she (or “another person” – presumably likely to be someone known to the director) “gains an advantage” from knowledge obtained as a director rather than the company or a subsidiary benefitting from this knowledge.

Who can apply to the Court to declare a director delinquent?

A fellow director, senior employee, registered trade union or any other body representing employees may apply to the court to declare a director delinquent or on probation. In addition, if a director repeatedly ignores a compliance notice, a “state organ” may also apply under section 162.

Clearly, this should concentrate the minds of directors. More than ever before, you need not only to act in a prudent manner, but also to be able to show that you have exercised your mind in relation to any decision you make or participate in making.

The negative aspect of such sections of the Act is they tend to scare away non-executive directors who are very important in checking on the actions of executive directors. Unfortunately, the Act does not differentiate the liabilities of executive and non-executive director. In a country where skills are short, this is a disappointing consequence of the Act.

“CA(SA)DotNews” is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein.  Always contact your financial adviser for specific and detailed advice.

Adopting a Memorandum of Incorporation as required by the Companies Act No 71 of 2008

All companies that existed prior to 1 May 2011 are required to Amend their Memorandum and Articles of Association or adopt a completely new ” Memorandum of Incorporation ” (MOI ) to remove any contraventions and/ or inconsistencies with the new Act .

Companies have until 30 April 2013 to meet this requirement.

The MOI shall have preference over any shareholders agreements which companies had in place before 1 May 2011. Thus it is essential that such agreements should be revised and amended (if necessary) before the cut-off date of 30 April 2013 to prevent any contradictions between shareholders’  agreements and the Law.

All companies are advised to get a MOI in place as soon as possible and also to look at shareholders’agreements timeously in order to ensure that they comply with the statutes of the Law.

We can assist you with compiling your “MOI”.

Newtons appoints new partner

Lucha Greyling made history at Newtons by being the first female partner to ever be appointed in the company’s 100 year existence. Lucha started her career as a tax inspector at the Inland Revenue Department of New Zealand (1997 – 1998) during which time she completed the taxation module of the graduate program at the Open Polytechnic of Wellington, New Zealand. After this, she worked in commerce in Canada, Mexico and the United States. On her return to South-Africa, she started as a trainee at Meintjies, Vermooten and Partners in Pretoria in 2007. In 2008 she transferred her training contract to Newtons and has been with the firm ever since. She became a partner in 2012.