Johannesburg Business Law Voice

Basically speaking, most of the companies’ philosophy in terms of corporate governance is by achieving the highest possible level of transparency between all the positions (employees), integrity and of course accountability. But what is corporate governance and how is it important in a particular company? To begin with, the true meaning of this includes satisfying or meeting the levels of expectations by stock holders, business partners, employees, leaders, managerial positions and customers and many other people related to the company.

All the rules written and even approved by the board of directors must be able to achieve the goals and meet the vowed objective without any bias, with integrity, accountability and of course transparency all at once. With this type of governance, establishments will be able to manufacture and / or operate smoothly, without even having to put everybody else’s jobs or safety at the same time.

Every company has to become fully aware on the importance and the main benefits of corporate governance. The primary principle and its main objective is to ensure that every shareholder’s value is maximized and being used the most out of it on a long term basis. This simply means that good governance also involves addressing all the problems, issues, concerns and bringing a solution to all the issues that most stock holders have been experiencing, as well as the possible conflicts that employees and customers may experience and encounter along the way.

As mentioned earlier, good governance means that the company is able to achieve the highest possible level of transparency. What does this mean? Simply said, transparency is defined as adequate, accurate and even timely resolutions and closure of significant information to investors, business partners and shareholders.  Without it, it is very impossible to notice good corporate governance. Higher positions of the company also have to understand that with transparency, they are increasing the chances of their company to increase their shareholder’s value. If information is being hidden to investors and shareholders, it is quite impossible to develop a harmonious relationship towards the company and the shareholders at the same time.

Good corporate governance can lead to a successful company. It is not just about the skills of the employee that matters, but it is also important for every company to have leaders that completely understand the importance of good governance, as well as the benefits of understanding how the company can operate without even placing the stocks and the reputation at great risk.

These days, many companies have started concentrating on implementing good corporate governance because recent studies have shown that effective leaders can always bring a company to the top. If you own or manage an entire company, it is understandable that you are in a position where tough decisions have to be made. Nevertheless, with good corporate governance, these companies, regardless of how old or new, or how small or big the establishment is, have greater chances of becoming successful I the industry.

There are many other important aspects to consider implementing good governance, and it is now up to the leaders, managers and owner(s) on how they are going to implement these and how they are going to make one company succeed.

Now that many companies have eagerly decided to tie up with another establishment for both parties to reap the benefits out of it, there have been a lot of reports stating that a huge percentage of mergers fail – and for a lot of reasons.

Most of the reasons are pretty basic, but many companies have started to overlook on the problem, ending to a business / partner relationship that can completely ruin the merged reputation of these two companies.

There are hundreds or even thousands of companies who are now suffering from poor business relations because there are a lot of mistakes that have been happening right after the merger.

These simple reasons are about to be discussed below; these will help business individuals avoid merger failures and how they establish a business that focuses more on helping each other grow and work as one, instead of pulling one down and trying to gain more power over the other.

• Culture Shock – two companies may have different ways of managing their establishment, and when mergers happen, these two establishments may experience culture shock. Come to think of it: if IBM and Google gets involved in a merger, these two huge companies may not click since they have their own way of managing a business. During the first few months of mergers, this is normal, but it is now up to the two or more companies involved on how they can adapt to each others’ managing styles.

• Lack of planning – many people think that mergers may end up perfectly, since two companies will be taking over it – but this is where the problem comes in. majority of companies who merge may lack plan, or may even have different plans resulting for their merger contract completely fail. Communication is a very important aspect when it comes to mergers, and this is one thing that business owners have to bear in mind.

• Lack of Enthusiasm – when it comes to mergers, many companies may hear proposals that sound like a great way to improve the company and to reap the benefits of the tie up. However, as soon as the merger starts, both companies end up lacking enthusiasm, which is one factor of mergers failing completely. Sometimes, one side of the company will show lack of interest in the proposal being made, while some others do not care about the managing system and even how the establishment will be handled. Remember, it is still your company – you own a part of it, and if you want to save your money, time exerted and even effort on this, start by showing enthusiasm. As soon as the other party has noticed your enthusiasm, he / she might just do the same thing, which starts a good business relationship.

• Politics – everywhere we go, politics has always been a major issue, and giving power to people that you “know” causes mergers to fail. Play fair – do not just hire people and promote them simply because you are old friends or you think that he can do it. Establish a good business relationship, give positions to those who are deserving, even if it means giving it to someone from the other part.

Have you ever wondered why there are different companies who are successful in generating revenues, while there are some others who completely fail at it? The most successful companies that are generating a huge amount of profit on a monthly or even yearly basis have the right company structures. This is why it is very important for every business to understand how these structures have to be done. Raising the necessary capital for a starting business may be a bit tough at first, but with the right structures to follow, everything will be done accordingly.

First, let us look at the different things that can possible happen if you don’t have good company structures, hence, no capitals being raised:

• Without sufficient capital, your business will not be able to handle day to day operational expenses. This can be one of the biggest problems that you may encounter whenever managing a business. Not being able to handle your expenses and no capital may even delay your operations. This can make a huge difference to how your company operates, and can even cause more problems in the near future.

• You may lose your clients if you don’t have strong company structures. Most of the time, businesses fail if they were not able to raise the capital that is needed to compensate with the operational costs. Remember, you have your clients to worry about, and your employees at the same time.

• Without capital, your business will not generate revenues. Without them knowing, their business may fail and even close with poor company structures. This is why it is every important for every business, regardless if it’s big or small, old or new, to always consider thinking or coming up with the most effective structure to operate a business. Even if your company is a huge asset and most investors are even thinking of owning a percentage of stocks with your company, if you have a very poor structure, all these investments will go into waste.

• If you are looking for long term capital growth, it can only be achieved with good company structures. There are different factors that you have to bear in mind, but the important thing is, you have the right company structure to follow, and that your company is well organized in terms of financial returns, investments and profits all at once.

Company structures play a very essential role in every business. It is essential for every company to consider thinking or coming up with the right structure because of two primary things: to generate capital, and of course to generate revenues at the same time.

A successful business starts with a good structure. You will never find a successful business with poor structure. Also, consider some of these factors when coming up with the primary structure of your business: what are your goals? What are your short and long term capital requirements? What is the status of your business today, and how far do you see it in the near future?

Corporate restructuring pertains to the implementation of reorganization in a company from the highest hierarchy going down. This corporate decision can affect areas such as ownership, operations, legal status and financial structure.

This decision is aimed at improving the profitability and reducing unnecessary expenditures to save a corporation. Although corporate restructuring does not always mean that something needs to be done to save a company. More often than not, it is a decision that allows for better organization that can be a result of some market demands and changes. When this happens, the more common term used is repositioning.

Aside from this, restructuring can also be a result of the change of ownership of a corporation or if the owners are still the same, it can be because of a change in the ownership structure. There are some cases when the board of directors or executives would rotate in their main responsibilities by handling different departments every year or every quarter, depending on what was agreed upon. 

With such changes, there are legal implications that need to be considered. The best way to implement this is to consult business law experts and be guided by the rules and laws on implementing such transactions.

Mergers and acquisition can also result to corporate restructuring. The merging companies will come up with a new structure and this should be in accordance with the M & A agreement. Hence, it is necessary to have legal advice and opinion before making moves to make sure that all decisions are in accordance with all contracts associated with the M & A.

Generally, when corporate restructuring is considered, it is a result of an observed timeline of financially unacceptable performance that can be attributed to mismanagement, changes in market conditions or financial crisis. When this happens, the restructuring process will not just involve management restructuring.

It can also result to debt restructuring to make sure that the company will still be viable and sustainable given the prevailing financial and market conditions. Negotiations with debtors or equity holders can transpire to arrange financial viabilities. This is best discussed and handled by a business legal service for a favorable and clear agreement to be settled.

The process of corporate restructuring can be a long one depending on the size of the organization. The planning sessions involved will be rigid so all the aspects of business are touched to align with the new objectives and goals. Priorities will have to be set and timetables need to be defined. Further, deliverables and new job descriptions are defined for the clear implementation of the reorganization process. When a company enters this situation, the guidance and assistance of business legal services will be indispensable.

A reliable law firm is what can make things easy and organized when corporate structuring is implemented. Difficult decisions can be rationalized with the legal perspective being highlighted.

The pros and cons of specific steps and actions as well as implications of different actions will be carefully noted for the appreciation and understanding of management.

The ownership of a corporation lies on the individuals or entities that have shares in the business. The ownership is divided in terms of shares. The shares are attested through a certificate that states the unit of ownership in the business. This share represents the stake of a shareholder in the totality of the business.

This setup holds true not only in private but also in public corporations. The shareholders have their corresponding representation to the corporation based on the number of shares that they hold. This certificate also determines the amount of profit that he is entitled to.

Shareholder transactions are interests that a shareholder wants to undertake in relation to the processing or disposal of his shares. There are certain activities that involve the exercise of the rights and privileges of a shareholder. These transactions may involve financial considerations and would need valuation of the shares and stakes in the company.

For such concerns, a shareholder would need a commercial or business law service to make sure that these will be handled well and the proper representation will be done. Implementing buy and sell agreements, stock possibilities, buyouts, private placements and other interests are shareholder transactions that can be better handled by the legal experts in the area. The proper processing and documentation will be less of a burden when this is raised and delegated to a commercial law service.

Shareholders roles and responsibilities can be varied, depending on the extent of ownership in the business. However, no matter how big or small the interest may be in the corporation, a shareholder can conduct the sale or transfer of his shares. If there are restrictions and complex policies relative to the implementation of this transaction, the proper legal guidance is necessary.

There can also be different shareholder transactions that can transpire for the duration of the shareholder’s engagement in a corporation. For different cases, the guidance of an expert looking at the legal perspective will be necessary. This ensures that the shareholder’s interest is protected – the main reason for getting the necessary legal guidance. When there is somebody who takes care of this responsibility, any shareholder transaction can be executed without worries.

Issues that concern the investors of a corporation are better handled when these are left with the legal experts. The complex and challenging issues that include cross-border communication, board effectiveness, executive remuneration, transparency, risk management, and takeover bids can be put to a lighter and clearer perspective when these are handed to a business law service. Negotiation and coordination with the concerned parties and departments can be done easily with the necessary legal guidance and assistance.

Getting the services of an established business or commercial law service requires careful consideration. It is important to be sure about the credibility of the company. An established service makes available a list of their clients as reference for the quality of the service. When a shareholder transaction needs to be implemented, it is important to get the experienced legal service provider that is trusted and tested.