A joint venture (JV) is a business arrangement in which two or more parties agree to pool their resources and expertise to achieve a specific goal or project. In South Africa, JV agreements can take many forms, including profit and revenue share agreements and 50-50 partnerships.

## Table of Contents

1.  Introduction to Joint Ventures in South Africa

2.  Profit and Revenue Share Agreements

3.  50-50 Partnerships

4.  Legal Considerations for Joint Ventures in South Africa

5.  Conclusion

## Introduction to Joint Ventures in South Africa

A joint venture is a popular business structure for companies looking to expand their operations, enter new markets, or access new technologies or expertise. JVs can be formed between companies of any size, and can be structured in a variety of ways, depending on the goals and objectives of the parties involved.

## Profit and Revenue Share Agreements

Profit and revenue share agreements are a common type of JV in South Africa. In a profit share agreement, the parties agree to share profits from the venture in a specified proportion. This type of JV is typically used when the parties have different levels of expertise or resources and want to share the risks and rewards of the venture. For more detailed information on profit share agreements visit: <https://shop.hellocontract.co.za/companyandlaw/profit-and-revenue-share/profit-share-agreement>

Revenue share agreements, on the other hand, involve the parties sharing revenue generated by the venture in a specified proportion. This type of JV is typically used when the parties have complementary skills or resources and want to share in the revenue generated by the venture. For more detailed information on Revenue share agreements visit: <https://shop.hellocontract.co.za/companyandlaw/profit-and-revenue-share/revenue-share-agreement>

## 50-50 Partnerships

A 50-50 partnership is a type of JV in which each party owns and controls 50% of the venture. This type of JV is typically used when the parties have similar levels of expertise or resources and want to share the risks and rewards of the venture equally.

## Legal Considerations for Joint Ventures in South Africa

Joint ventures in South Africa are governed by the Companies Act, which sets out the legal requirements for forming, operating, and dissolving a JV. It's important for parties to seek legal advice and ensure that their JV agreement complies with the Companies Act and other relevant laws and regulations.

## Structure and Ownership of Joint Ventures

The structure and ownership of a JV can take many forms, depending on the specific terms of the agreement. In some cases, the parties may form a separate legal entity, such as a limited liability company or corporation, to manage the venture. In other cases, the parties may operate as a partnership or a joint venture company.

Regardless of the structure, it's important to clearly define the ownership and control of the venture in the JV agreement. This includes specifying the percentage of ownership for each party and outlining the process for making decisions and managing the venture.

## Control and Management of Joint Ventures

The control and management of a JV is typically outlined in the JV agreement. This includes specifying the roles and responsibilities of each party, outlining the process for making decisions, and establishing a management structure.

It's important to note that in a JV, each party has a say in the management and control of the venture. This can create challenges, particularly when it comes to making decisions. It's important for the parties to establish clear communication channels and decision-making processes to ensure the smooth operation of the venture.

## Risks and Rewards of Joint Ventures

Joint ventures can be a great way for businesses to access new markets, technologies, and resources. However, they also come with risks. Some of the risks include:

1.  Loss of control: When entering into a joint venture, partners must be willing to give up some level of control over the venture. This can be difficult for some partners, especially if they are used to being in charge of their own businesses.

2.  Conflicting goals: Joint ventures often involve multiple partners with different goals and priorities. If these goals are not aligned, the venture may be doomed from the start.

3.  Difficult to dissolve: Joint ventures can be difficult to dissolve, especially if the partners have invested a significant amount of time, money and resources into the venture.

4.  Lack of trust: Trust is a key element in any business relationship, and joint ventures are no exception. Partners must trust each other to work together towards a common goal, and if trust is lacking, the venture is likely to fail.

Rewards of Joint Ventures:

1.  Access to new resources: Joint ventures allow partners to access new resources, such as capital, technology, or expertise, that they may not have otherwise.

2.  Increased efficiency: By pooling resources and working together, joint venture partners can often achieve more than they would be able to on their own.

3.  Reduced risk: Joint ventures can also reduce risk by spreading it out among multiple partners.

4.  Greater market reach: Joint ventures can also help partners expand their reach into new markets, which can help increase revenue and profits.

5.  Learning and growth: Joint ventures provide partners with the opportunity to learn from one another and grow as individuals and as a team.

It's important to consider both the risks and rewards of a joint venture before entering into one, and to have a clear understanding of the terms of the venture, the structure, ownership, and control of the venture, as well as any contingencies and exit strategies.
It's also important to have a well-drafted Joint Venture Agreement that covers all the key aspects and legal requirements of the venture.

## Conclusion

Joint ventures can be an effective way for businesses to expand their operations, enter new markets, or access new technologies or expertise. However, it's important for parties to carefully consider the terms of the JV, including the structure, ownership, and control of the venture, as well as the risks and rewards of the venture. For more detailed information on profit and revenue share agreements and 50-50 partnerships, visit <https://www.hellocontract.co.za/blog/profitrevenueshareagreement/>

It's important to note that this article is for informative purposes only and not meant as legal advice, it's recommended that parties seek professional legal advice to ensure their agreements are legally binding and complies with the South African laws.



What you need to know about a Joint Venture Agreement

eCommerce Returns Policy Template

A refund policy or returns policy is a must-have for any online store. It protects both the buyer and the seller in case of an issue with a purchase. It’s important to have a refund policy that is clear and easy to understand. You don’t want your customers to be confused about whether or not they can get a refund. You also don’t want your policy to be so restrictive that it turns people away from buying from you. The best way to strike a balance is to use a refund policy template. In this guide, we will show you how to create a refund policy south africa template that will protect both you and your customers.

## What is a refund policy?

A refund policy is a statement that explains to customers what conditions must be met in order for them to be eligible for a refund. This can include things like the time frame in which they must request a refund, or what type of proof of purchase they need to provide. A refund policy also outlines how the company will process refunds, such as whether they will issue a full refund, or provide store credit instead.

When crafting your own refund policy, it's important to strike a balance between being fair to your customers and protecting your business. You don't want to offer too generous of a policy that you end up losing money on every return, but you also don't want to be so strict that customers are discouraged from doing business with you. Ultimately, the goal is to create a policy that is clear and easy to understand, so that both you and your customers know what to expect.

## What should be included in a refund policy?

A refund policy south africa template should include the following:

\-The company's name and contact details
\-A clear and concise returns policy that is easy for customers to understand
\-The conditions under which a refund will be given (e.g. if the item is faulty or not as described)
\-How the customer should go about requesting a refund
\-The timeframe in which the refund will be processed
\-Any other relevant information (e.g. whether shipping costs are refundable)

By including all of the above information in your refund policy, you can make it easy for customers to understand your returns process and know what to expect when they request a refund. This can help to avoid any misunderstandings or frustration, and ensure that everyone is happy with the outcome.

## How to create a refund policy template

Creating a refund policy template is simple and easy, and can be done in just a few minutes. Here's how:

1\. First, decide what kind of refund policy you want to create. There are two main types of refund policies: full refunds and partial refunds.

2\. Once you've decided on the type of refund policy you want, it's time to start creating your template. To do this, open up a word processing program like Microsoft Word or Google Docs.

3\. In your word processing program, start by creating a header for your refund policy template. This header should include the name of your business, as well as the words "Refund Policy."

4\. After you've created your header, it's time to start writing out your refund policy itself. When writing your refund policy, be sure to include all relevant information, such as what items are eligible for a refund, how long customers have to request a refund, and what methods of payment are accepted for refunds.

5\. Once you've finished writing out your refund policy template, save it to your computer so you can access it easily in the future. And that's it! You've now created a refund policy template that you can use for your business.

## Tips for creating a refund policy

When you issue a refund, you’ll need to send the customer a Refund Voucher. You can either create your own Refund Voucher template or use our free Refund Voucher Template.

Creating a refund policy doesn’t have to be complicated. Here are a few tips to help you get started:

1\. Keep it simple

Your refund policy should be clear and concise. Avoid using legal jargon or complex sentence structures.

2\. Be transparent

Let your customers know what to expect when they request a refund. Include information on how long the process will take and any conditions that must be met before a refund is issued.

3\. Be fair

Consider your customers’ needs when crafting your refund policy. Avoid making unreasonable demands or setting unrealistic expectations.

## Examples of refund policies

When it comes to refunds, there are a few things you need to take into account. For instance, what is your refund policy for products? Do you offer a full refund or a partial refund? What about digital products? Are there any circumstances in which you would not offer a refund?

It's important to be clear and concise when crafting your refund policy. You don't want to leave customers in the dark about what they can expect if they're not happy with their purchase.

To help you get started, we've put together a few examples of refund policies from South African businesses. Take a look and see what works for you:

Example 1: We offer a full refund on all products, no questions asked, within 30 days of purchase.

Example 2: We offer a partial refund on digital products (excluding shipping costs) within 14 days of purchase. Refunds will only be processed if the product has not been downloaded or used.

Example 3: We do not issue refunds for any reason after purchase has been made. All sales are final.

## Conclusion

A refund policy is an important part of any business, and a South Africa refund policy template can help you get started. Whether you're looking to create a refund policy for your online store or your brick-and-mortar shop, this guide will give you the information you need to create a fair and effective policy. Keep in mind that your refund policy should be clear, concise, and easy for customers to understand. With that in mind, start by outlining the circumstances under which you'll offer refunds, and be sure to include all relevant details such as timeframes and contact information. Once you've got the basics down, put your South Africa refund policy template to good use and make sure your customers know exactly what to expect when they shop with you.


Your guide to a refund policy south africa template

This Movables or Equipment Rental Agreement is perfectly suited to rent out any movable object such as medical, commercial, heavy, film or photography equipment and vehicles or items of any size.



Movables or Equipment Lease Agreement

Documents Related to this post

The equipment rental agreement south africa is one of the most important documents that you will need to have in place when renting equipment in South Africa. This document outlines the terms and conditions of the rental agreement between you and the equipment owner. It is important to ensure that you understand all the terms and conditions of the agreement before signing it. Failure to do so could result in you being held liable for damages or loss of the equipment. In this blog post, we will provide a guide to the equipment rental agreement south africa in 2023. We will cover what should be included in the agreement and some tips on how to negotiate the best terms for your needs.

### What is an Equipment Rental Agreement?

An equipment rental agreement is a contract between a person or company that owns equipment and a person or company that wants to use that equipment. The agreement outlines the terms of the rental, including the duration of the rental, the price, and any other conditions.

### Why Do You Need an Equipment Rental Agreement?

When you rent equipment, you need a contract that sets out the terms of the rental arrangement. This agreement should spell out what is being leased, how long it will be used, who is responsible for maintenance and repairs, and other key details.

An equipment rental agreement helps to ensure that both parties are clear about their roles and responsibilities in the arrangement. This can help to avoid misunderstandings or disagreements down the road. Having a written agreement also provides a record of the terms of the rental should there be any disputes later on.

### What Should Be Included in an Equipment Rental Agreement?

When renting equipment, it is important to have a detailed and enforceable agreement in place. This will protect both the owner of the equipment and the person renting it. The agreement should include:

\-The names and contact information of both parties
\-The dates of the rental period
\-A description of the equipment being rented
\-The rental fee and any other associated costs
\-The terms of use for the equipment, including any restrictions on hours or usage
\-Who is responsible for maintenance and repairs during the rental period
\-What will happen if the equipment is damaged or lost
\-Signatures from both parties agreeing to the terms of the agreement

### How to Draft an Equipment Rental Agreement?

When it comes to renting out equipment, it is important to have a detailed and legally binding agreement in place. This will ensure that both parties are clear on the terms of the rental and can avoid any misunderstandings or problems down the road.

### Here is a step-by-step guide on how to draft an equipment rental agreement:

1.  Define the scope of the rental - What equipment is being rented? For how long? What are the conditions of use?

2.  Include all pertinent details - be sure to include the full names and contact information of both parties, as well as a description of the equipment being rented.

3.  Agree on terms of payment - when is payment due? What methods of payment are acceptable? Are there any late fees or penalties?

4.  Get signatures from both parties - this will make the agreement legally binding. Be sure to keep a copy for your records.

### Enforcing an Equipment Rental Agreement

It is important to have a detailed and enforceable equipment rental agreement in place before any equipment is rented out. This agreement should spell out the terms and conditions of the rental, including the duration of the rental, the amount of rent to be paid, the security deposit, if any, and who is responsible for maintenance and repairs. The agreement should also state who has responsibility for insurance and liability in case of damage or injury.

### Conclusion

It's important to have a clear and concise equipment rental agreement in place before renting out any equipment. This guide has provided you with everything you need to know about crafting an effective agreement for your business in South Africa. By following the tips and advice laid out here, you can be sure that both you and your customers will be protected in the event of any damages or disagreements. Do you have any other questions about equipment rental agreements? Let us know in the comments below!


The guide to equipment rental agreement south africa in 2023

In business, there might come a time when either you owe another party money, or another owes you money, which the debtor might not immediately be able to afford.

In this instance, an Acknowledgement of Debt comes in handy. It records that the debt is owing and sets out a legally binding payment plan.



Acknowledgement of Debt

If you’ve ever been in debt, you know how it feels to owe someone money. The stress of it all can be overwhelming, and the constant reminder from your creditor doesn’t make it any better. In this blog post, we will explore everything you need to know about an Acknowledgement of Debt. We will discuss what it is, when you need one, and how to go about getting one. This information will help you understand your rights as a debtor and give you some peace of mind the next time you receive a call from a creditor.

## What is an Acknowledgement of Debt?

An Acknowledgement of Debt, also known as an "IOU", is a formal document in which one party acknowledges that they owe money to another party. The document typically contains the amount owed, the date by which it is due, and the signature of the person acknowledging the debt.

An Acknowledgement of Debt can be used in a variety of situations, such as when one person owes money to another person, or when a business owes money to a vendor. It is a legally binding document, and should only be used after all other options for payment have been exhausted. If you are considering using an Acknowledgement of Debt, you should consult with an attorney first to ensure that it is the best option for your situation.

## What is included in an Acknowledgement of Debt?

An Acknowledgement of Debt is a document that outlines the terms of a loan or debt. It includes the amount owed, the interest rate, the repayment schedule, and any other relevant terms. This document is used to protect both the borrower and the lender, and to ensure that both parties understand the terms of the debt.

## What are the requirements for an Acknowledgement of Debt?

An Acknowledgement of Debt is a legal document that states that you owe a debt to someone. It can be used as proof of the debt in court if necessary.

The requirements for an Acknowledgement of Debt vary from country to country, but in general, it must be in writing and signed by both parties. The date and amount of the debt should also be mentioned in the document.

If you are unsure about the requirements for an Acknowledgement of Debt in your country, it is best to consult with a lawyer before signing anything.

## What are the benefits of an Acknowledgement of Debt?

An Acknowledgement of Debt is a formal document that confirms that a debt exists and that the person who is owed the money agrees to repay it. This type of agreement can be used in many different situations, such as when a company lends money to an employee or when an individual takes out a loan from a bank.

There are many benefits to using an Acknowledgement of Debt, such as:

1\. It provides clarity on the terms of the agreement between the parties involved.

2\. It can help prevent misunderstandings or disputes down the road.

3\. It can make it easier to collect payments if the debtor defaults on their obligations.

4\. In some cases, it may be required by law in order to enforce a debt.

5\. It can give the creditor some peace of mind knowing that they have a written agreement in place.

## How to create an Acknowledgement of Debt

When you owe money to someone, you may be asked to sign an Acknowledgement of Debt (AoD). This is a legal document that confirms the debt and states how and when you will repay it.

The AoD should include:

\- The amount of money owed
\- The date the debt was incurred
\- Who is owed the money (the creditor)
\- Your full name and signature
\- The name and signature of a witness

At Hello Contract we have an AoD available on our [shop](https://shop.hellocontract.co.za/financialandsecuritieslaw/agreements-money-lending/acknowledgement-of-debt-acknowledgement-of-debt-template-agreement)

## Pros and Cons of an Acknowledgement of Debt

An Acknowledgement of Debt, also known as an "IOU", is a legal document that acknowledges that a debt exists and that the person signing the document is responsible for repaying the debt.

There are some advantages to using an Acknowledgement of Debt, such as:

\-It can be used as evidence in court if the debtor fails to repay the debt.

\-It can help to speed up the repayment process, as the debtor is likely to be more motivated to repay a debt when there is a formal document in place.

\-It can be helpful in situations where oral agreements have been made, as it provides a written record of the agreement.

However, there are also some disadvantages to using an Acknowledgement of Debt, such as:

\-If the debtor does not repay the debt, they may still be liable for interest and other charges.

\-The debtor may be able to dispute the debt if they feel that they do not owe it, or if they believe that the amount owed is incorrect.

\-The Acknowledgement of Debt may need to be registered with certain organisations in order for it to be legally enforceable.

## Alternatives to an Acknowledgement of Debt

In some cases, an acknowledgement of debt may not be the best option for your business. There are a few alternatives that you can consider:

1\. Negotiate with the debtor: If you feel comfortable doing so, you can try to negotiate directly with the debtor. This could involve coming to an agreement on a payment plan or accepting less than what is owed.

2\. Use mediation: Mediation is a process where an impartial third party helps to facilitate communication and negotiation between two parties. This could be helpful if you are unable to come to an agreement with the debtor yourself.

3\. Take legal action: If all else fails, you may need to take legal action against the debtor. This could involve going to court or hiring a debt collection agency.

## How to sign an Acknowledgement of Debt

If you have been asked to sign an Acknowledgement of Debt, it is important that you understand what this document entails. An Acknowledgement of Debt is a legal document which confirms that you owe a debt to another party. This document will outline the terms of the debt, including the amount owed, the interest rate, and the repayment schedule. It is important to read over this document carefully before signing, as it will be legally binding.

If you agree to the terms of the debt outlined in the Acknowledgement of Debt, you will need to sign and date the document. Make sure that you understand all of the terms before signing, as you will be held responsible for repaying the debt according to these terms. Once you have signed the Acknowledgement of Debt, keep a copy for your records and return the original to the other party.

## Conclusion

Assuming you have read and understood this article on Acknowledgement of Debt, you should now have a clear understanding of what it is and when it would be used. This document can be extremely useful in a number of situations, so it's definitely worth having in your repertoire. Do you think an Acknowledgement of Debt could come in handy for you? Let us know your thoughts in the comments below!

 


Everything you need to know about an Acknowledgement of Debt

Vaccination policies in South Africa remain controversial however they are not illegal if the policy is implemented in a manner which conformed with the laws in South Africa. 

Many companies followed the Department of Employment and Labour *Amended Consolidated Direction on Health and Safety *which provided the circumstances under which an employee may implement a mandatory vaccination COVID 19 policy in their workplaces. 

However, now that South Africa is no longer in a National State of Disaster, is your vaccination policy still legal? We seek to provide you with the answer in this article and to assist you in drafting a legally enforceable vaccination policy.  

> To be clear, the law in South Africa still allows for vaccination requirements / policies in the workplace even outside of the National State if Disaster.   
>
> ** **
>
>  

**What does the law say? ** 

Even before COVID, the Occupational Health and Safety Act, 1993 (**OHSA**), provided for guidelines on vaccination policies in South Africa.  

Under OHSA, an employer in a company has a legal duty to ensure a working environment that is safe and without risk to the health of its employees.  

Under OHSA various regulations are published which help employers understand and practically implement the provisions of OHSA.   

For example, the Hazardous Biological Agents Regulations (**Hazardous Regulations**) were recently amended to state that the SARS-CoV-2 virus is classified as a Group 3 hazardous biological agent. The Hazardous Regulations further confirm that a registered vaccine for the SARS-CoV-2 virus (COVID) is available in South Africa. 

The law in South Africa states that employers are to conduct a risk assessment to determine if any employee could be exposed to a hazardous biological agent. If after conducting the risk assessment it is found that employees may be exposed to COVID or another hazardous biological agent at the workplace the employer must take steps to control such exposure in the workplace. 

The Hazardous Regulations go on to provide that, such control measures must include **making available effective vaccines** for employees who are not immune to the hazardous biological agent in question. 

How does an employer being to implement such control measures? 

**The Code of Practice** 

The Code of Practice: Managing Exposure to SARS-CoV-2 in the Workplace” (**Code**) is now in force. The Code states that every employer must undertake a risk assessment and based on the risk assessment must develop a plan to include** steps to be taken relating to the vaccination of its employees**.  

A vaccination policy is only necessary and therefore legally enforceable as a “reasonably practicable control measure” which the employer will determine based on its risk assessment. 

 

**What is a Risk Assessment?** 

What is a risk assessment and how do you go about doing one?  

Before developing a policy on vaccination, an employer needs to conduct a risk assessment. You can find our suggested risk assessment document here \[=].  

Legally an employer must inform all employees of the results of the risk assessment, and the employees must be given an opportunity to comment.  

If there is an employees’ union representing the majority of employees the employer must also consult with the union regarding the outcome of the risk assessment. To the extent that there is a health and safety representative/committee, the employer must also consult with the committee.   

**What does a Vaccination Policy look like? ** 

Once the risk assessment has been completed and the employer has determined that there is a need for a policy to ensure a safe working environment, the employer must draft a policy describing the steps to be implemented for vaccinations in the workplace.  

But what does this policy look like? You can find our suggested vaccination policy document here \[=]. 

The Code states that an employer must provide employees with information about:   

*   the nature of vaccines used in the country; 

*    the benefits of the COVID-19 vaccines;  

*   the nature and risk of any serious side effects; 

we would suggest providing employees with the following fact sheet – \[=].  

**Objections to vaccination: ** 

Employers are advised to note that an employee can object to a vaccination on medical and constitutional grounds.  

The Vaccination Policy must make provision for an objections process. Our Vaccination Policy sets out clear guidelines to be followed when an employee refuses a vaccination.  

 


Vaccination Policy South Africa

##### **WORKPLACE POLICIES** 

The Team at Hello Contract aim to ensure that each workplace is as safe as possible. This article was written for the benefit of both employers and employees. It is critical that the following workplace policies are in place in any South African work environment.  

Our workplace policies and procedures are set out in a template from for easy use. Simply answer a few questions and receive your very own customised workplace polices. A set of policies is a guiding principle used to provide guidance for your organization or company. The workplace policies are  usually published in a booklet or online and are widely accessible to all within the company.  

> Workplace policies are the most underestimated documents we see when practicing employment law. It is very easy to take control as an employer, but a significant number of employers do not have workplace policies in place.

##### **Anti-Fraud and Corruption Policy**;

An Anti-Fraud and Corruption Policy aims to ensure that all employees are made aware of the exact actions that constitute fraud and corruption in a particular workplace and generally. 

An Anti-Fraud and Corruption Policy further seeks to explain the exact steps that will be taken in instances of suspected fraud or corruption in a workplace.  

The Anti-Fraud and Corruption Policy also provides a mechanism for employees to follow when they suspect that there may be fraud or corruption in the workplace.  

The Anti-Fraud and Corruption Policy further provides protection for “whistle blowers” i.e. those who seek to report fraud and corruption in the workplace.  

This is an essential workplace policy for all private companies in South Africa.  

Get your Anti-Fraud and Corruption Policy here: [Anti Corruption and Fraud Policy](https://shop.hellocontract.co.za/employmentandlabourlaw/hr-policies/anti-corruption-and-fraud-policy)

##### **Employment Policy - Conflict of Interests Policy** 

A conflict of interest occurs when an employee or its employer are compromised as a result of a clash between their personal (or self-serving) interests and their professional duties or responsibilities to act in the best interests of another (e.g. their employer or company).  

Problems arise when an employee or employer chooses personal gain over their duties to conduct themselves in the best interests of the company. When such a situation arises, the employee or employer is usually asked to remove themselves, and it is often legally required of them.   

A Conflict of Interest Policy applies to the following persons: 

1.  all Company employees (fixed term and permanent); 



1.  supervisors and management; 



1.  directors, public officers; and 



1.  consultants/contractors contracted by the Company. 

A Conflict of Interest Policy is informed by the South African Companies Act 71 of 2008 (Director’s fiduciary duties)  

By way of example a conflict of interest may arise when an employee, has a family member which he suggests should be used as a supplier by his or her new employer. This conflict of interest has arises as the employer is now unsure if the employee’s conduct, judgment and/or decision-making is unbiased. 

However, if an employee suggests a new supplier, which happens to be his or her family member, it does not necessarily imply wrongdoing on anyone’s part. 

However, the Conflict of Interest Policy is there to ensure that when a conflict of interest arises, it must be recognized, disclosed, managed, reduced and/or eliminated.  

Without a Conflict of Interest Policy in place, a company cannot manage conflicts of interest that may arise and therefore cannot determine which Conflicts are serious enough to warrant a dismissal or which Conflicts are to be simply disclosed and filed in the employees HR file. 

The Hello Contract Conflict of Interest Policy  is ready to be tailored to your company’s needs and should be considered a starting point for setting up your employment policies.  

Get your Conflict of Interest Policy here:  https://shop.hellocontract.co.za/employmentandlabourlaw/hr-policies/conflict-of-interests-policy

##### **Employment Policy - Human Immune Deficiency (HIV) & Acquired Immune Deficiency Syndrome (AIDS)** 

An HIV Policy is drafted to ensure that employees who have been medically diagnosed with or who are suspected of having the HIV virus and the AIDS virus are respected and measures are put in place to prevent the spread of the HIV virus and the AIDS virus.  

HIV and AIDS are serious public health problems in South Africa that have socio economic, employment and human rights implications.  The HIV and AIDS epidemic will affect every workplace, with prolonged staff illness and absenteeism and will impact on productivity, employee benefits, occupational health and safety, production costs and workplace morale.  

HIV and AIDS are still a disease surrounded by ignorance, prejudice, discrimination and stigma.  

One of the most effective ways of reducing and managing the impact of HIV and AIDS in the workplace is through the implementation of a HIV/Aids policy and programme. In the light of this, this policy has been developed as a guide to the Company’s management and employees. 

The purpose of this HIV Policy is to reassure employees that AIDS is not spread through casual contact during normal work practices and to reduce unrealistic fears about contracting an AIDS virus-related condition.  

In addition, the HIV Policy is there to protect the legal right to work of employees who are diagnosed with an AIDS virus-related condition and provides guidelines for situations where infection with the AIDS virus is suspected as to ensure individuals with HIV infection are not unfairly discriminated against in the workplace. 

##### Employment Policy - IT Policy 

The use of technology in the workplace is an integral part of modern working live as it provides employees the opportunity to perform their daily tasks more efficiently and effectively, whether out in the field or in the office. 

This IT Policy draws on the relevant legislation in South Africa, in particular the Regulation of Interception of Communications and Provision of Communication Act (“RICA”), the Protection of Personal Information Act (“POPIA”) and the Electronic Communications and Transmissions Act (“ECTA”).  

The IT Policy will apply to all company personnel, employees, contractors etc. who make use of the company’s IT equipment as well as external third parties who may from time to time make use of the company’s IT equipment.  

The IT Policy will further go on to explain what exactly constitutes the company’s IT. For example, it will differentiate between hardware, software and telecommunications related tools etc.  

An IT policy is essential as it ensures that all employees, even when working from home, have guidelines to follow when using the company’s IT.  

##### Q & A ON WORKPLACE POLICIES 

Q: Why does a company need workplace policies?  

A: Workplace policies are essential to ensure a safe work environment for all. Workplace policies provide guidelines for the relationship between the employee and the employer and ensure that both an employer and employee are made fully aware of their duties and obligations.

Workplace Policies you need for your business

## Whether you are a start-up or have been in the business game for years, the right business contracts are vital and can, quite frankly, make or break your business.

> Contracts are there to protect your interests, although some may dispute the need for them, thread carefully and get things in writing.

![Placeholder Image](https://assets.stackbit.com/components/images/default/post-4.jpeg)

When it comes to contracts, it’s safe to say most entrepreneurs would far prefer spending their time doing something different. 

Contracts always seem to get in the way of getting on with daily business. It is, however, incredibly vital that one dedicates enough time to preparing their contracts. By making the necessary preparations in advance, you will be able to determine the rules of your engagement and ensure that these rules fall in your favour. Additionally, you can avoid ambiguity and prevent future fall outs as all parties entering into the agreement will have a clear idea of what is required of them.

At [Hello Contract,](https://www.hellocontract.co.za/) we deliver high-quality contracts through our automated document platform at highly reduced costs when compared with traditional law firms. As contracts are at the core of our business, we want our customers to fully understand the risks and obligations arising from them.

Below, you will find the 6 most essential contracts that all businesses should have in place from the very beginning. 

#### **Table of Contents:**

1.  Terms and Conditions

2.  Non Disclosure Agreement (NDA)

3.  Website Privacy Policy

4.  Employment Agreements

5.  Copyright Assignments

6.  Independent Contractor Agreement

#### **1.  Terms and Conditions**

Regardless of the kind of business you run, every entrepreneur will need to pull together a set of Terms and Conditions.

The stipulated terms and conditions are essentially your *rules* – your way of doing business. From quotation to termination, you determine how you provide your products and/or services whilst being strict but fair. By laying down the terms and conditions, you make it clear to your customers how you conduct business and specify the details regarding what you charge, price increases, delivery times, limitations of liability and the like.

A comprehensive, well-written Terms and Conditions provides clarity between you and your potential clients while also preventing disputes. In the event that a dispute does arise concerning a subject which is clearly outlined in your Terms and Conditions, the dispute can be settled immediately as the subject and its contents have been recorded and agreed to in black and white.

You can view our Website Terms of Service [here](https://shop.hellocontract.co.za/permalink/b8ba15c6-73fd-4295-b25f-9c73b257af5d).

#### **2. Non Disclosure Agreement (NDA)**

Before setting out with your epic world-changing product or service, you will naturally want to be able to talk to your customers, partners or suppliers in confidence – without fear of your confidential information being used by them and especially, without gaining your permission first.

The legal instrument used to help enforce and protect this is known as a Non-Disclosure Agreement or an NDA for short. An NDA prevents confidential details of your conversation being used or leaked. This includes preventing parties from sharing confidential information with other persons who they have been introduced to in confidence during the business endeavour.

 You can view our Mutual NDA [here](https://shop.hellocontract.co.za/permalink/4101e7cc-7044-479a-8457-3abbb76ad616)

#### **3. Website Privacy Policy**

We know – a Website Privacy Policy isn’t exactly a contract, but it is a requirement by law. If you own a website – regardless of whether you’re selling products or services from it or not – chances are, you need a Website Privacy Policy. A Privacy Policy records, among other things, exactly what personal information you collect from users, who you share that personal information with, and what you use it for.

A Privacy Policy need not be signed to be agreed to, but a user needs to have the opportunity to view it, should they wish, and is required to consent to it before you can process their personal information.

Take a look at ours [here](https://shop.hellocontract.co.za/permalink/ba81b288-0e26-45da-91c1-0233b63e424b).

#### **4.   Employment Agreements**

Congratulations, you have employed staff! You trust them completely, and can only hold thumbs that it won’t come back to bite.

Often, this is the thought process that one goes through when hiring someone, however, setting clear expectations of salary, leave, duties, notice periods and the like is absolutely vital and should not be overlooked.

Below are a few employment agreements to help you get started:

*   [Casual Employment Agreement](https://shop.hellocontract.co.za/permalink/24e44a17-edcd-4c4e-825d-1d677321992d)

*   [Fixed Term Employment Agreement](https://shop.hellocontract.co.za/permalink/c278f21b-7cd6-4421-90ab-ced0634a4aef)

*   [Indefinite/Permanent Employment Agreement](https://shop.hellocontract.co.za/permalink/7966044c-0d04-4ee9-8f6c-22f90dddb974)

#### **5.  Copyright Assignments**

Over the lifespan of your business, you will most likely outsource hundreds of tasks to independent parties and freelancers. These tasks could include anything from software development and blog content to logo creations.

Outsourcing tasks of your business to external individuals who are not employed by you has one main unintended consequence – Despite paying the outside party for the work done, you do not own the work that they create. This is because the works created are all owned by the person who authored them and thus, the external party.

A Copyright Assignment Agreement is a legal document which is required to transfer the above ownership to you. For an assignment of copyright to be valid, it must be in writing and signed by, or on behalf of, the external party.

Feel free to purchase one [here](https://shop.hellocontract.co.za/permalink/6650d424-5ac9-4c0c-a50f-4f7d3c848b12).

#### **6. Independent Contractor Agreement**

In today’s interconnected world, where freelancers are available from all corners of the globe, bringing together expertise on a vast array of topics has never been easier. In this regard, you will – throughout the duration of your company – engage with external service providers that you do not employ. These relationships are typically regulated by an Independent Contractor Agreement.

An independent contractor differs from an employee in that when you employ an employee, you have control over their day-to-day services. However, if and when an independent contractor is required, you generally do not have much control over their day-to-day service renderings.

It is important to regulate the relationship between you and your independent contractor by recording obligations, expectations, time for delivery, payment guidelines, intellectual property ownership and the like.

You can purchase our fully automated Independent Contractor Agreement [here](https://shop.hellocontract.co.za/permalink/03574d1f-b195-4091-a59e-b4aa84139b32).


Contracts needed to start your business

Freelancer Agreements in South Africa

##### Sharing profits or revenue between business partners is a key element of a successful business. A Profit or Revenue Sharing Agreement outlines how to share profits or revenue between business partners and in some cases, how to divide any losses.​

If you already know what you’re looking for, an automated [Profit Share Agreement](https://shop.hellocontract.co.za/permalink/7e07a82d-de78-4cde-b059-28bccf536b5b) or [Revenue Share Agreement](https://shop.hellocontract.co.za/permalink/109f40a1-5e3c-494a-a8bf-b71141904908) is available on our shop page. Otherwise, enjoy our blog!

#### **Profit or Revenue Sharing**

Sharing profits or revenue between business partners is a key element of a successful business. A Profit or Revenue Sharing Agreement outlines how to share profits or revenue between business partners and in some cases, how you will divide any losses. Although neither of these agreements are legal requirements, they are an incredibly useful tool for your business and can be used from start to finish.

#### So firstly, what exactly is a Profit Share Agreement?

A Profit Share Agreement is a legal document or contract which allows for profits between business partners, along with the potential losses, to be shared between themselves.

#### **Here is an example:**

Assume you and your business partners plan to purchase an item for R50 and sell it for R100. In this scenario, R100 is the revenue and the profit would be sale price – cost price (R100 – R50), which would total R50.

If you have three partners along with you, you can’t each receive 100% of the profits. Split evenly, each business partner would receive 25% of the R50 profit. However, it is not always as simple as this. 

Perhaps you created the company or invested significantly, and may now want to split profits so that you receive 50% (R25) and your other partners receive the remaining share (R8.33 each). This type of agreement is achieved using a profit share agreement. 

#### What then, is a **Revenue Share Agreement?**

Similarly, a Revenue Share Agreement is a legal document or contract which allows for revenue between business partners to be shared between themselves, along with potential losses.

The main difference between a Profit Share Agreement and a Revenue Share Agreement is that a Profit Share Agreement allows for your business expenses to be deducted from revenue prior to the profit being split between business partners. 

A Revenue Share Agreement, on the other hand, does not allow for this deduction.

#### Here is an **example of a Revenue Share Agreement** in practice:

Again, you and your business partners plan to purchase an item for R50 and sell it for R100. In this scenario, R100 is the revenue.

If you and your three partners agree to an equal share of the revenue, then you will all receive 25% (R25). Similar to the Profit Share Agreement, the total revenue may be shared unequally as agreed upon by all business partners.

Understandably, you may not be aware of all the differences between a Profit Share Agreement and a Revenue Share Agreement. To better explain the key differences and similarities between the two agreements, have a look at the figure below:

#### **The Main Benefits of Profit and Revenue Share Agreements**

*   Provides financial security for both parties. By legally agreeing to Profit or Revenue sharing terms and conditions, you may all proceed with your business venture with peace of mind



*   Prevents future misunderstandings and disputes. By making sure all partners are on the same page and understand their respective responsibilities, you negate future disputes or potential conflicts



*   Specifies how partners may or terminate the agreement, and what constitutes a breach. Should issues arise, both parties will have a copy of the contract to refer to and be aware of the grounds on which the agreement can be ceased



*   Establishing a Time Frame. The point at which partners begin sharing Profits or Revenue can disproportionately and significantly affect specific partners or parties. Negotiating a fair commencement date is key, as is the duration of the agreement. Specifying the full timeline, in detail, benefits all partners.

Quite simply, if you are entering into a business agreement, you are most likely going to have to negotiate how you and your partners split your business’ earnings. If this is the case, either a Profit or Revenue Share Agreement is indispensable.



#### The 50-50 partnership or 50-50 profit share Agreement

Typically most joint ventures will start with a 50-50 partnership. This is a type of business partnership where each partner holds an equal share of the partnership's assets, liabilities, and profits. This means that both partners have equal decision-making power, equal access to the partnership's resources, and are equally responsible for the partnership's debts and obligations. This type of partnership is often used when starting a new business or when two existing businesses decide to merge. A 50-50 partnership can provide a balance of power, as well as a sense of shared ownership and responsibility. However, it is important to have a clear partnership agreement in place to define the terms and conditions of the partnership, including decision-making processes, dispute resolution procedures, and financial and management responsibilities. This will help to ensure that the partnership runs smoothly and that both partners are on the same page.



##### Key advantages of a 50-50 partnership


A 50-50 partnership can provide a number of advantages, including:


1.  Shared ownership and responsibility: Both partners have an equal stake in the business, which can foster a sense of shared ownership and responsibility. This can lead to a more committed partnership and greater investment in the success of the business.

2.  Balance of power: With both partners having equal decision-making power, there is a balance of power that can prevent one partner from having too much control over the business.

3.  Shared expertise and experience: With both partners bringing their own skills and experiences to the table, the partnership can benefit from a broader range of expertise and experience.

4.  Shared financial risk: With both partners sharing the financial risks of the business, the burden of financial loss is spread out, reducing the risk for any one partner.

5.  Increased capital: A 50-50 partnership can bring together two sets of assets, which can increase the capital available to the business.

6.  Better decision-making: Two heads are often better than one and having two partners with different perspectives can lead to better decision-making and problem-solving.

7.  Increased accountability: With both partners having an equal share of the business, they are both accountable for its success, which can lead to increased productivity and a stronger sense of commitment.

8.  Better Business Continuity: When both partners are present, the business can continue to operate in case one partner is unavailable, this can be important for long-term sustainability of the business.

It's important to note that a 50-50 partnership is not the best fit for all businesses or all partners, it's crucial to have a clear partnership agreement in place and evaluate if it will work for the specific business and partners



##### Disadvantages to a 50-50 partnership

There are several risks associated with a 50-50 partnership that should be considered before entering into such an arrangement. Some of these include:

1.  Decision-making paralysis: With both partners having equal decision-making power, it can be difficult to reach agreements on important matters. This can lead to delays in making decisions, which can negatively impact the business.

2.  Deadlock: If both partners are unable to reach an agreement, the partnership may become deadlocked, which can result in the inability to make important business decisions.

3.  Equal liability: Both partners are equally liable for the partnership's debts and obligations, which can be a significant risk if the business is not successful.

4.  Lack of incentives: With both partners having equal ownership, there may be a lack of incentive for one partner to work harder or take on more risk than the other.

5.  Personal conflicts: A 50-50 partnership can be affected by personal conflicts between partners, which can be difficult to resolve and can negatively impact the business.

6.  Conflicting visions: Partners may have different visions for the business, which can lead to disagreements and tension, which can be detrimental to the partnership.

7.  Legal disputes: Without a clear partnership agreement, legal disputes can arise, which can be time-consuming and costly to resolve.

It's important to be aware of these risks before entering into a 50-50 partnership and to have a clear partnership agreement in place that addresses these issues and defines the terms and conditions of the partnership. Additionally, choosing the right partner with complementary skills and values can reduce some of the risks and make the partnership more successful.


It is of utmost imporant to discuss these advantages and disadvantages with both principal shareholders before comiting to a joint venture agreement. Everyone needs to understand what they are in for, to avoid costly legal actions when things go wrong. 
The purpose of this agreement is to detail what happens when things go wrong, keep that in mind.

#### &#xA;&#xA;**Key Elements You Need to Understand about Profit and Revenue Share Agreements**

Understanding contracts is an undeniably daunting task, so we’ve explained a few terms to help you simplify the process.

#### \*\*#1: Commencement \*\*

There are a number of important dates in a contract – one of them being the Commencement date or clause. This date specifies when the contract will begin or commence and may also be initiated by a defined event. It is important that all partners are aware of and agree upon this date. 

**Example:**

Partner A is selling hats and Partner B is developing an online webstore. The partner who is selling hats has developed the product, invested in building a brand and has covered all the costs thus far. Partner A (the hat seller) wants to negotiate a greater share of the profit or revenue and only wants to begin the sharing process once he/she is certain that the webstore and business endeavour will be rewarding. 

In this scenario:

*   The Profit or Revenue Share Agreement will commence on a date agreed upon by both partners, or 

*   The commencement date may be negotiated to begin only when the webstore is determined to be fully operational.

Failure to include a defined commencement date may result in your business losing out on profits or worse, also enduring unwarranted losses. 

#### **#2: Duration & Termination**

Duration outlines the term of a contract and therefore, how long a contract is valid – in this case, the Profit or Revenue Share Agreement. Simply put, it is the amount of time that the agreement will remain in effect or continue to apply. Once again, this may be a predefined length of time or underpinned by a defined event. 

Termination of an agreement or contract refers to the legal process of ending contractual duties before they have been fulfilled or once they have been fulfilled. There are numerous reasons for why partners may choose to terminate or end an agreement. 

However, not all terminations of agreements may be mutual so it is important to note that partners intending to terminate may not be able to escape liability or continuing to have to part with profits or revenue. 

\*\*Example: \*\*

Partner A intends to advertise their products on a popular billboard and has entered into a partnership with Partner B, who owns a billboard advertising company. The Profit or Revenue Share Agreement is due to commence from the date agreed upon by both parties and will be valid for the duration that the product is advertised on the billboard which is, in this case, an agreed upon period of two years.   

In this scenario:

*   The Profit or Revenue Share Agreement will be valid for two years, or 



*   The Profit or Revenue Share Agreement will only be valid whilst the billboard exists, or



*   Both partners can agree to terminate the agreement

It is very important that all partners agree upon and are aware of the duration of the agreement. Failure to include clear terms, may result in the agreement being valid indefinitely, terminated prematurely or may lead to potential misunderstandings. 

#### **#3: Profit Share and Deductions**

“Profit Share” clauses in a Profit or Revenue Share Agreement form the meat of such an agreement. It is probably the first clause that you, a business partner entering into an agreement, would want to read. It details how the profits will ultimately be divided between partners or parties.

This clause provides clarity on how exactly partners will divide the profit.

The Profit Share will also detail the expenses that will be deducted from revenue to arrive at the profit, which will then be split between the partners. This was illustrated in detail in [Example 1](https://hellocontract.co.za/profit-share-and-revenue-share/#Example1)

This clause records all expenses and deductions which need to be deducted from the revenue to arrive at the profit to be split. This is an important detail, as you do not want to have ambiguous recordings of expenses which might cause a dispute at a later stage.  

#### **#4: Breach**

In the unfortunate case that a partner or party is found to be in breach of an agreement, it is important that you have taken the necessary measures to prepare beforehand.

This includes all partners drawing up and agreeing upon potential remedies that should be made available to those who were not in the wrong. 

This clause will usually provide that a partner or party has a right to claim specific performance or even cancel the agreement in some instances where another partner is found to be in breach. 

**Example:**

In the case of the person selling the hats partnering with the owner of the webstore in the previous example. If the web store owner refuses to sell the hats or fails to declare correct profits/revenue as initially agreed upon in the contract, he/she will be in breach of the contract.

#### **#5: Force Majeure Event**

This is somewhat of a technical legal term. 

It simply means an incident or event beyond the reasonable control of all partners or parties which has a significant impact on the ability of one or both of the parties to be able to perform in terms of the agreement.

The force majeure clause will normally state that the interrupted party may be relieved of their duties and obligations for the duration of the force majeure event and its consequences, provided that the interrupted party notifies the other of the event.

In the event that a force majeure event continues for a prolonged period of time, this clause would normally specify how long the force majeure event may continue for before the parties would be permitted to either negotiate a reconstruction or terminate the agreement.  

**Example:**

An example of a force majeure event may be a pandemic such as COVID-19 which may make it impossible for you to meet the commitments of the agreement you previously negotiated with your partners. 

#### **#6: Boilerplate clauses**

Apart from the above, all Profit and Revenue Share Agreements should contain standard boilerplate clauses (also commonly referred to as standard or general clauses). These clauses are included in the agreement to ensure certainty and prevent ambiguity. 

These clauses would include, for example:

1.  Domicilium and Notices 

2.  Governing Law and Jurisdiction 

3.  Dispute Resolution Procedures

4.  Non-Variation of Agreement Provisions

5.  Severability Provisions

6.  Whole Agreement Provisions

7.  Non-Waiver

8.  Assignment

Boilerplate clauses, although commonly included at the end of agreements, are just as essential as the other clauses. They are often varied and may be confusing which is why we have written another full blog dedicated to explaining just these, [here](https://hellocontract.co.za/boilerplate-clauses-what-are-they-and-why-are-they-important/). 

#### **Over to You**

We know that drawing up any legal contract or entering into a business agreement is daunting. What we also know is that proper contracts are the essential building blocks of your business. 

But, the task of producing a Profit or Revenue Agreement (or any business contract for that matter) should not deter you from taking the necessary steps in your business’ journey.

In the past, you had two options. The first included exorbitant legal fees and the second involved you drawing up your own agreements (and possibly excluding key clauses). 

Hello Contract is changing all of that for the ordinary South African business.

At Hello Contract we believe in an entrepreneurial future. By generating professionally automated and affordable contracts, we strive to provide people with the tools necessary to build their company, and take control in building their own future.

Shop Now, for an automated [**Profit Share Agreement**](https://shop.hellocontract.co.za/permalink/7e07a82d-de78-4cde-b059-28bccf536b5b) or [**Revenue Share Agreement**](https://shop.hellocontract.co.za/permalink/109f40a1-5e3c-494a-a8bf-b71141904908).

Everything you need to know about Profit and Revenue Share Agreements in South Africa

##### In South Africa, a shareholders agreement is an agreement entered into by the shareholders of a private or public company.;Even without a shareholders’ agreement in place, shareholders of a company are bound by the provisions of the Companies Act, no. 71 of 2008 (also known as the “**New Companies Act**”). In addition to being bound by the conditions of the Companies Act, shareholders must comply with their obligations under the Memorandum of Incorporation (MOI). Although the Companies Act is unique to South Africa, most of the mechanisms discussed here are of global nature.

> Shareholders agreements can become quite complex, the ideal SHA is both easy to execute and covers interest of all parties.

![Placeholder Image](https://assets.stackbit.com/components/images/default/post-4.jpeg)

What you can find in this blog:

*   6 Reasons to have a Shareholders Agreement
*   Shareholders Agreement or Memorandum of Incorporation?
*   Written shareholders Agreement v Verbal Agreement or Handshake Agreement
*   Minority shareholder protections –
*   Appointment of Directors
*   Dividend Policy
*   Conflict Resolution
*   Valuation Methodology
*   Financing the Company
*   Tag Along
*   Come along / Drag Along

#### The Memorandum of Incorporation of a company prevails over the shareholders agreement.

In terms of the Companies Act, the MOI is a company’s most important founding document.The Companies Act states that any shareholders agreement must be in line with the company’s MOI and the Companies Act.

Although having a shareholder agreement is not mandatory, having a well-prepared agreement provides shareholders with a host of benefits. A well drafted shareholders agreement provides shareholders with guidance when it comes to voting, buying and selling additional shares, valuing the company, resolving disputes between the shareholders and much more. 

In this blog we discuss both the reasons to have a shareholders agreement in the first place, and we explain the basic elements of a well written shareholders agreement.

### 6 Reasons to have a shareholders agreement

Before we explain the legalities of the SHA, we’d to address the 6 reasons that could make the difference in your situation 

#### **Control over valuing the shares.**

The Shareholders Agreement contains provisions for how the shareholders are to  value or price the shares in the Company. The Shareholders Agreement can stipulate that the shareholders must either reach agreement as to the value of their shares or use a predetermined formula. Furthermore, the Shareholders Agreement can require the use of an independent expert if the Shareholders cannot reach agreement.

#### **Regulate management of the Company**

The Shareholders Agreement should contain provisions dictating how the Company should be operated which should include detail as to the Shareholders’ rights and obligations. It is also important to contain provisions in the Shareholders Agreement that regulate how the Company Shareholders are to appoint directors of the company.

#### **Control the transfer of shares**

Your Shareholders Agreement should contain mechanisms to prevent a Shareholder from selling shares in the Company without the consent of the remaining Shareholders. Therefore, such mechanisms ensure that both minority and majority shareholders are protected. These mechanisms are often described as come-along and tag-along clauses and are described in greater detail in this article.

#### **Resolution of disputes**

Your Shareholders Agreement must contain provisions as to how the shareholders are to resolve disputes that may arise between them as to the management of the Company. 

#### **Can be used to secure funding and offer investors insight into your business**

If you are looking to raise capital in order to start your business or you are looking to bring on investors or friends, a well drafted Shareholders Agreement can often seal the deal. Investors will often require a written Shareholders Agreement to ensure that their investment is secured and to ensure that there are certain protection mechanisms in place. With a well drafted Shareholders Agreement in place,

#### **Can regulate a varied dividend policy**

Your Shareholders Agreement must contain provisions which direct when and how dividend is paid out to the shareholders. Such a provision can include directions for the time and circumstances which need to be met before a dividend is paid out.

#### **Breaking down the Shareholders Agreement more**

##### **Shareholders Agreement vs Memorandum of Incorporation**

Every company requires a Memorandum of Incorporation (MOI). The MOI contains the rights, duties and responsibilities of shareholders, directors and others within a company. It is a public document and is submitted to the Companies and Intellectual Property Commission (CIPC). 

When deciding if you need a shareholders agreement, we suggest you ask yourself the following questions: 

Q – \*Are there certain issues which we (as shareholders) would like to regulate privately? \*

If you answered **yes** to the above, then you require a shareholders’ agreement. 

Q –  *As a shareholder, do you want to prevent your fellow shareholders from selling their shares to third parties without your knowledge or consent?*

If you answered **yes** to the above question, then you require a shareholders’ agreement.

Having a right to purchase your fellow shareholders’ shares, when they are looking to sell, is known as a pre-emptive right. Therefore, in order to ensure that you are first in line when your fellow shareholders are looking to sell their shares,  you need a “pre-emptive right” to make an offer on said shares, before any third party is able to purchase such shares. When you have a “pre-emptive right”, if your fellow shareholder wants to sell shares, such shares must be offered to the other shareholders in the company first (i.e. yourself).

Therefore, ensuring that you have a pre-emptive right in respect of your fellow shareholders’ shares, ensures that you retain a certain level of control over who could potentially purchase shares in your company.

In terms of the Companies Act, pre-emption rights only apply to a fresh issue of shares and not to the transfer of existing issued shares. Therefore, the default position is that you as a shareholder are not automatically, by virtue of your shareholding, entitled to a pre-emptive right to your fellow shareholders’ shares.

In order to ensure that you have the above-mentioned pre-emptive right you need to include provisions in your shareholders’ agreement which deal with such pre-emptive rights. This provides existing shareholders with greater certainty and protection. 

> If there are any differences between the MOI (Memorandum of Incorporation – the statutory document which per the Companies Act “sets out the rights, duties and responsibilities of shareholders, directors and others within and in relation to a company”) and the shareholders' agreement, the MOI will prevail.

#### **Written shareholders Agreement vs Verbal Agreement or shareholders agreement versus Handshake Agreement**

Before exploring the benefits of a shareholders agreement, it is important to understand the benefits of having a written agreement in place (as opposed to a handshake or verbal agreement). Here are the three main benefits of having a written shareholders agreement:

1.      **there is a single source of truth, one document which all the parties can turn to when a dispute or confusion arises;**

2.      **having a single source of truth provides clarity in instances of disputes; and**

3.      **the written agreement can be shown to third parties, such as investors when attempting to raise capital for your business.**

#### Minority shareholder protections

Where a company has minority shareholders, their rights can be protected through a variety of mechanisms in the shareholders agreement to prevent abuse and oppression from a majority shareholder.

If you are looking to get into business as a minority shareholder we suggest that you insist on entering into a written shareholders agreement, which contains provisions that protect your interests as a minority shareholder.

#### Appointment of directors

A shareholders agreement can be used to regulate the appointment of directors by the shareholders. This allows you as a shareholder to have even greater control over the business and who makes decisions in the business.

Remember, as a shareholder, you aren’t responsible for the day to day running of the business. Therefore, this gives you the opportunity to have your say in the business.

#### **Dividends policy**

As a shareholder it is important to remember that dividends are not guaranteed. When starting out with your business it is often important to ensure that early dividends are used to reinvest in the business. Deciding when and how dividends are paid out is often a point of contention between shareholders.

The shareholders agreement provides shareholders with an opportunity to decide when and how dividends are to be paid out to shareholders.

One’s shareholders agreement is the perfect place to determine when you and your fellow shareholders are to receive dividends. For example, you can stipulate that ordinary dividends will be paid 100 days after the financial year end of the Company. 

#### **Conflict resolution and a reduction in conflict** 

A well drafted agreement has the ability to reduce the amount of potential conflict between shareholders. This is important because disputes are hugely distracting, and ultimately can affect the company and its viability. Clear mechanisms should be included in your shareholders agreement for the swift resolution of the disputes between the shareholders. 

#### **Valuation methodology**

When looking to sell your business or entice investors to invest in your business it is important to ensure that you know how to value your business. Valuation of a business is often determined by the industry you are in or the type of business you run. However, it is  important to agree on a valuation methodology with your fellow shareholders, to avoid unnecessary disputes and to avoid your fellow shareholders attempting to sell their shares for below market value.

The shareholders agreement will include a valuation methodology in order to regulate how the shares are to be valued in the event of a sale of any shares for whatsoever reason. 

#### **Financing the Company**

Your shareholders agreement can also contain provisions dealing with when and how the business is to be financed. You can stipulate the requirements for financing by shareholders and financing by third parties, banks etc. 

It is important to agree with your fellow shareholders as to when shareholders will be expected to loan money to the business.

#### **Tag Along**

A **tag along** provision is a clause in your shareholders agreement that provides for minority shareholders to ‘**tag along**‘ with a larger shareholder if they find a buyer for their shares. The **tag along** provision provides minority shareholders with some security in that they are afforded an opportunity to not be left behind should a major shareholder decide to exit the business.

#### **Come Along, or Drag Along**

A **come**–**along clause** allows a select number of  shareholders, usually majority shareholders, the right to force other shareholders to sell their shares when those certain shareholders decide to sell theirs.

#### **Insurance, Tax and Licences**

The shareholders agreement should also contain provisions dealing with insurance for the company, tax obligations of the company and any licences which the company will need to maintain and update. 

**Over to you**

A Shareholders agreement is an absolute necessity in many situations. At Hello Contract we aim to provide you with the tools to take control of your contracts. 
You can find our fully customisable Shareholders Agreement for South African law here


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