Monthly Archives: October 2016

Newtons Laws of Business

Running a successful business is one of the most difficult things to do.

One has to consider

  • Staff
  • Customers
  • Suppliers
  • Product
  • Finances
  • Marketing

As an owner there is often nobody to talk to or to assist in dealing with all these facets that comprise running your own business.

Over many years I have come across some tips which might be interesting or assist in thinking differently.

Please enjoy and read.

Law 1

Control and understand your business

Due to all the different facets that comprise the running of a successful business, try and find the one or two things in your business that can be easily identified that will inform you as to the health of the business.

For example, the owner of a shoe manufacturer insisted that every morning the total number of shoes manufactured the previous day was placed on his desk. In this way he was able to know exactly on a day to day basis what the general state of the business was.

Try to determine which factors are critical to your business and monitor them closely.

Law 2

Communication

Business owners often find it difficult to communicate.

Remember you are not alone. Your employees are a vital asset. It is only through proper communication that your employees know what is expected from them, what the goals and strategy of the business is.

Law 3

Think out of the box

Things do not stay the same and are continually changing.

In order to stay relevant the business must adapt, change and develop. Don’t do the same thing over and over and expect a different result. Take time out to think about the business. This is easier said than done but as the owner one has to have a wider vision. Most businesses have a limited lifespan especially with the technological developments.

It is important to sit back and think creatively on what to do or where to go.

Law 4

Accounting and sales

Salesmen want to sell and are not bothered if the money comes into the bank account while the accountants would rather not sell if there is a chance that the money will not be received.

It is very important that accounts and sales work in harmony with each other. The accounting side must not inhibit sales and sales must act responsibly. The two must ensure that maximum income is achieved with the necessary controls in place to ensure recovery.

I think it is important to tell both divisions that they do often pull in different directions and for them to realise this so that they can work together to achieve the right outcome.

Law 5

Employ the right staff

You will be successful if you appoint the best people available.

Surround yourself with great people. They will make you look good and increase profitability.

Compliments are for free and employees need to be praised if good work is achieved. They need to feel respected and appreciated. This features prominently in “Maslow’s hierarchy of needs”.

I know it doesn’t always feel this way but staff is an asset.

Law 6

Focus

Running a business is not easy and unfortunately in order to be successful one has to work very hard. Don’t lose focus on what you are doing.

Distractions are many and easily come by. Whether you are behind the till or have a group of managers and staff one always has to stay focussed on your business. Things can slip easily and quickly.

It might be useful to remember the 80 : 20 principle. Concentrate on the 20% that produces 80% of the profit whether the 20% is customers, stock items, services or areas.

Owning your own business is hard work and like everything else that is important needs a lot of attention.

Law 7

Happiness – Love what you do

You have a much greater chance of success if you enjoy getting up every morning and going to your business.

If you are not in that fortunate position, focus on the positives and don’t let the small negatives overshadow all the positive points. Often employing the right staff may change the environment into a happy place. Maybe by getting a partner that shares the stresses of a business can be the answer.

ENJOY LIFE

Many of these points may have no bearing on you or your business but I hope that some part of this would have been of interest.

– Cedric Peterson

Bosses Day

The Newtons staff celebrating Bosses day on the 17th of October 2016.

Removing directors of a company

The Companies Act, 71 of 2008, requires that the business and affairs of any company be managed by or under the direction of its board, which has the authority to exercise all of the powers and perform any of the functions of the company, except to the extent that the Companies Act or the company’s Memorandum of Incorporation provides otherwise (section 66(1)). The Companies Act further requires that a company must have at least one director (section 66(2)), and further that only natural persons may serve in that capacity (section 69(7)(a)).

Those individuals occupying the position of directors of a company are therefore responsible for managing the affairs of the company and they do so as custodians on the shareholders behalf. It should be remembered that the directors do not own the company: the company rather is owned by the shareholders and the directors serve therefore to promote the interests of the company, and indirectly therefore the economic interests of the shareholders.

Quite often, in the case of private companies, the directors and shareholders may be the same individuals. However, where the directors have no or limited shareholding interest in the company itself, it may happen that the shareholders may wish to move to have certain directors removed and replaced on the company’s board if e.g. the company’s financial performance or operations otherwise are not satisfactorily conducted according to the shareholders’ liking.

Naturally, a director may be requested to resign under amicable circumstances. However, where a director refuses to resign (and may perhaps have the backing of other shareholders), the question becomes what remedies the aggrieved shareholders still have? It is possible to have these matters regulated in terms of the company’s Memorandum of Incorporation specifically to dictate under which circumstances a director may be removed from the board of a company. It could also be agreed with the director initially by way of a clause in the appointment contract.

Irrespective of whether the Memorandum of Incorporation or an appointment contract addresses the matter specifically, a director may always be removed by way of a majority vote at an ordinary shareholders’ meeting (section 77(1)). Before the shareholders of a company may consider such a resolution though, the director concerned must be given notice of the meeting and the resolution, and be afforded a reasonable opportunity to make a presentation, in person or through a representative, to the meeting, before the resolution is put to a vote (section 77(2)). In terms of procedures not entirely different from that as applied to shareholders, the directors may among themselves too resolve to remove a director from the board of a company (sections 77(3) & (4)).

It is important for directors to realise that they serve at the pleasure of shareholders. It is likewise necessary for shareholders to know that they have remedies against directors who do not deliver on their mandate, and that keeping directors in check amounts to good corporate governance.

This article is a general information sheet and should not be used or relied upon 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. Errors and omissions excepted (E&OE)

Dividends Tax Compliance

Our clients will know that the dividends tax replaced the old Secondary Tax on Companies (“STC”) effectively 1 April 2012 already. Briefly, the STC was a tax on companies and calculated as a factor of dividends declared by that company. The regime was somewhat out of touch with international trends though (which also gave rise to certain anomalies when South Africa negotiated double tax agreements with other countries): the international norm is rather what we have in South Africa today too, being a tax on shareholders (as opposed to the dividend declaring company) and which tax is withheld from payment of dividends to the shareholders. The dividends tax is levied at 15%. By way of an example therefore, if a person (not exempt from the dividends tax) were to receive R100 in dividends from a South African company, that company will only pay R85 to the shareholder, and R15 would be withheld and paid to SARS on the shareholder’s behalf.

Although in our experience most of our clients exhibit an understanding of how the dividends tax regime operates, many of our corporate clients appear to be unaware of their filing obligations which go hand-in-hand with both dividend declarations as well as dividends received. Companies are required to file a dividend tax return when declaring a dividend (section 64K(1A)), but persons are also required to file a return if they receive a dividend exempt from the dividends tax. Since generally all South African tax resident companies are exempt from the dividends tax, this will effectively translate into South African tax resident companies having to file dividends tax returns for all South African dividends which they receive too.

The necessary dividends tax returns (the SARS DTR01 and DTR02 forms) are required to be filed by the end of the month following the month during which the relevant dividend was paid/received. The dividends tax payment (where relevant) should accompany said return.

Therefore, even if a company only pays and receives dividends none of which are subject to the dividends tax the exempt taxpayer is still obliged to file the requisite returns. The returns are also not the only compliance requirement to be observed: where a shareholder relies on a double tax agreement in terms of which a reduced dividends tax rate is to be applied (as opposed to the statutorily imposed 15% applicable domestically), or that person is exempt from the dividends tax altogether, that shareholder must inform the company of this status by way of a declaration made, together with an undertaking that the shareholder will inform the company should the status of the aforementioned change in future. In the absence of such a declaration, the company must still withhold dividends tax even if the shareholder is objectively speaking exempt from the dividends tax.

As one will no doubt realize, non-observation of the relevant dividends tax compliance requirements – even if they do appear to be somewhat trivial and admittedly not practically heavily policed by SARS – one ignores these requirements at one’s own peril. In this instance non-compliance may have a significant impact if a taxpayer is upon investigation found to be wanting in this regard.

This article is a general information sheet and should not be used or relied upon 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. Errors and omissions excepted (E&OE)