Brian Kazungu, 08/02/2021

Following an announcement by Coca-Cola Beverages South Africa (CCBSA) that it had transferred an additional 10% shares to its employees, members of the Connections2Communities (C2C) community using the theme What Is A Company, discussed the meaning and implications of such a move.

Critical points in the Press Release by Coca Cola were that:

1. The 5% stake already held by employees will increase to 15% following the newly announced additional 10%.
2. When including other partners with a BEE tag, Coca Cola Beverages South Africa will now be 20% black owned.
3. It was also announced that Trade Unions will have the power to appoint two trustees to serve in the Board of Directors on behalf of the employees.
4. According to CCBSA Managing Director, Velaphi Ratshefola, this was more than merely a scheme with financial benefits to workers but rather a real empowerment as employees will have Board Member representation.

Below is a corporate literacy discussion between members of C2C in their search for a shared understanding on matters of interest as well as in their pursuit for corporate excellence.

[2/7, 15:01] Mr Mawere: CORPORATE LITERACY 101 – Case Study 100. Corporate Identity under the spotlight.

It was announced that Coca Cola Beverages SA (CCBSA) would transfer an additional 10% of its shares to its employees.

What is nationality and identity of CCBSA?

[2/7, 15:13] +263 77 299 6425: Nationality of a corporate depends on its registration. If CCBSA is incorporated in SA then it will be regarded South African. However the parantage (DNA) of the company may reflect a strong line of foreign blood. Hence the reason for a purported black empowerment drive.

[2/7, 15:38] +263 77 603 2475: If employees are shareholders I would benefit by understanding how trade unions appoint directors. Whose interest will those directors serve? If any employee wishes to realize part of their shares as an individual, is that possible and if so when and how? These are question around what a company is.

[2/7, 15:48] Mr Mawere: Do you agree that a company is a creature of law? It is the company and not its relatives that exists as a separate and distinct entity. If the above is accepted, the CCBSA is a South African corporate citizen. Once incorporated, its umbilical cord is cut.

[2/7, 15:51] Mr Mawere: The announcement is clear. A trust whose beneficiaries are the employees will hold the shares. The trustees will be appointed by the founders to act on behalf of the employees who stand to benefit.

[2/7, 15:55] Mr Mawere: You ask, whose interests will the directors serve? As you may be aware, directors owe a duty of care to the company they serve. They owe no fiduciary duty to shareholders.

The trust will be entitled to two directors but once the directors are appointed, they cease to represent the trust but the company they serve.

Remember that the directors are part of the company and they possess the power and authority to act on behalf of a company.

[2/7, 15:58] Mr Mawere: You ask if any employee wishes to realize part of the shares as an individual and in so doing expose the need for this group. The correct construction is that employees are not shareholders in the new structure.

It is the trust that has a direct nexus to the employees. In turn, the trust is the registered holder of shares in the company. In short, none of the employees would be registered as direct shareholders of CCBSA.

[2/7, 16:47] +263 77 603 2475:

1. Shareholding. Very correct insights from a legal standpoint and yes, the beneficiaries are the trust which will hold shares in the company.

 The benefit to employees is indirect, and short of a dividend, an employee might get nothing out of this arrangement.  This is an empowerment scheme in which 15% has been issued to a trust not to employees.

Employee interests are now in the hands of the trust. An employee might never realize the benefit possible through leveraging shares as he deems fit in order to buy his family a home or feed himself during pension when he ceases to be employed?

The point is we need to be aware of these potential drawbacks as relates employee freedom of ownership of shares.

2. Directors

He who pays the piper calls the tune. The trade unions appoints these guys and therefore can disappoint them. The director therefore know who the master is. 

The article itself acknowledges that the employees would now chart the future of the company. Is that not implication that the newly appointed directors will bring in employee input onto the board?

I agree with the basic legal interpretation but have expounded further implications as I see them.

[2/7, 17:04] +263 77 299 6425: Yes I do agree but the cutting of the umbilical cord is somehow dependent on structure. In our case we have CCBSA which has a parent CCBAfrica which runs the affairs of the company in East and Southern Africa. In such a conglomerate set up, the operations of CCBSA may not be entirely independent of its holding parent.

The reason for the increase in the stakes for employees is something to digest also. It was meant to meet the provisions of the BEE Act as the government holds back the license for merger. It’s not a voluntary offer per se. There’s a forked tongue in the deal.

Brian Kazungu, 03/02/2021

Being a businessperson and running the affairs of your own company can be the wish of so many people across the world but navigating the corporate world is an adventure that must be taken with some knowledge of business dynamics and an exposure to the accounts of those who have walked the path.

A critical understanding of what is a company and what it is not important in helping every entrepreneur to making informed decisions in the business world. Without such knowledge, as a businessperson, you are likely to labour under a mistake at your own expense and at the expense of your stakeholders.

More-so, it is equally important to have an understanding of international legal provisions when you do business in this global village because such an understanding helps you to make the right decisions when there is a dispute where your operations spans across two or more countries.

This is because many countries are governed by different legal provisions and thus when a dispute arises between companies in different countries, you must have an idea on how the laws of these countries will be applied in settling the dispute.

Another important element to consider in the corporate world is to understand what happens to the status of a company when there is a change of a law that governs it. Does the company still continue to exist or it becomes a new creature?

The following account or narration of what happened two companies in South Africa and a company in Zimbabwe is a befitting case study to the issues mentioned above.

It is a story told by Mutumwa Mawere as part of the Connections2Communities (C2C) initiative where corporate and civic issues are discussed so that people may learn from the experiences of others.

Mutumwa Mawere: “As background, three companies play a central role in the facts of the dispute. These companies are: 1. SMM Holdings Private Limited (SMM), 2. Petter Trading Pty Limited (Petter), and 3. Southern Asbestos Sales Pty Limited (SAS).

It is fact that Petter and SAS were incorporated and operated in terms of the laws of South Africa and as such they were South African corporate citizens.

SMM was a company incorporated and operated in terms of the laws of Zimbabwe making it a Zimbabwean corporate citizen.

SMM’s books and records as required by law were kept at the Registrar of Companies in Bulawayo.

Equally, Petter and SAS’ records were kept at CIPC.

It is a requirement that a company being a creature of law, should have its birth certificate and other records kept in a public place that is easily accessible to the general public.

To be a company, the entity must have a unique registration number. One can easily see what chaos can ensue if the birth certificates are messed up or duplicated.

No one can dispute that at the core of the dispute is the allegation that Petter obtained a judgment against SMM on 6 July 2004 permitting it to collect from export proceeds due to SMM from exports collected by SAS as its agent in the event that SMM was unable to make good on what it owed Petter in relation to goods sold and delivered by Petter to SMM.

It is not in dispute that at the material time, SMM owed Petter an amount of about R26 million. SMM could not remit the funds because of the interference by the RBZ that instructed SMM not to make any payment to any company associated with me.

SMM’s was forced to surrender its export proceeds to the RBZ at a fixed exchange rate resulting in the company getting the local currency equivalent.

As an example, if SMM received US$1 million, it would get Z$55 million at an exchange rate of US$1:Z$55, when the market rate was about US$1:Z$150.

This meant that if SMM wished to pay to Petter, it was impossible to get the US$1 million back from the market outside the directive by the RBZ.

This resulted in Petter not being to pay to its SA creditors in the ordinary course of business.

Dr Sanangura who was SAS’ Finance Manager at the material time explained to the Court that the cession agreement and the court order of 6 July 2004 were meant to protect Petter from its SA creidurors who were prejudiced by the actions of the RBZ.

Against this background, a plan was deviaed in Zimbabwe involving state and non-state actors to steal SMM by force of law.

In terms of the Companies Act, the control and management of a company is vested in its directors who are appointed by shareholders.

It was common cause that the three entries involved were under the ultimate control of me.

The Chairman of SAS and Petter when the court order of 6 July 2004 was Mr. Mariemuthu, who was only joined in the suit after its commencement.

The Chairman of SMM was Dr. William Mudekunye whose freedom and life was under threat in Zimbabwe as he was being accused of complicity in obtaining a fraudulent judgement to prevent export proceeds from being paid by SMM.

The claim was premised on the allegation that in relation to SMM, it was me who controlled the three companies and not their directors as per the prescripts of the law

The directors were regarded as puppets.

Without alienating me from the affairs of SMM, it was deemed that there was no way the alleged externalization or prevention of the flow of funds in lieu of the cession court order from SAS to SMM was to change the control and management of SMM in the first instance and then use the dismembered SMM to litigate against me in SA.

This is how the reconstruction decree was conceived and born.

As a consequence of the decree, an Administrator was appointed extrajudicially on 6 September 2004.

The question is what was the legal standing of SMM as at the time the directors of the company were dismissed by the operation of the decree?

In terms of the Companies Act, the right to appoint and remove directors is vested in the shareholders.

It is common that SMM’s directors were removed by the Minister without the involvement of the Court in Zimbabwe.

Public power was used to divest and deprive shareholders of SMM of the right to dismiss the directors of the company.

Absent consent, what follows is force and theft. The government acquired the right to choose to dismiss directors of a private company by virtue of the exercise of public power.

A law had to be created allowing the government to exercise jurisdiction over a private company in the case the company targeted was deemed at the sole discretion of the Minister of Justice to be not only state indebted but Insolvent.

Although the constitution of Zimbabwe provides for the equal treatment of creditors and debtors, this law violated this principle by purporting to make the state, an undefined creature, a party in the affairs of a company on the premise that a state controlled company like the electricity supplier, ZESA, was deemed to be the state for the purposes of giving life to the scheme.

In other words, it is law in Zimbabwe that if a company owes any funds in the ordinary course of business, this Reconstruction Act applies. It is significant that the law applies retrospectively.

The transfer of control from the directors of SMM to a creature of statute, the office of the Administrator, was done without the consent and knowledge of the rightful parties who were related to SMM.

The decision to strip the shareholders of the legal nexus to SMM was done in an open and brutish manner.

The question that arises is whether after the implementation of the reconstruction decree, what became the legal status of SMM?

In terms of the operation of the reconstruction decree, the company was referred to as a company under reconstruction akin to the nomenclature used in relation to a company under liquidation save to say that liquidation is provided for as a remedy following a company’s inability to pay its debts.

In relation to liquidation or judicial management, it is the court that has the discretion to order the placement of a company under a new regime.

This regime change has to be preceded by an independent and impartial determination of the existence of indebtedness and then the quantum of such Indebtedness which steps were not taken.

In fact, there is no provision in the decree for any involvement of the courts in determining the existence of Indebtedness prior to the issuance of an order.

It is also worth highlighting that the state is vested with the power to unilaterally and arbitrarily determine that a targeted company is indebted and proceed to issue an order that limits the constitutional rights of the affected parties.

Can a company whose shareholder are stripped of their inalienable rights be considered to remain a company?

In the same vein, can a human being stripped of his right to enjoy a relationship with his property and freedom to prevent draconian measures being applied to him be considered to be human in a constitutional democracy?

Al these events occurred in the territory of Zimbabwe.

Can Zimbabwean law have extra-territorial application? The answer is no.

In terms of international law, the Administrator’s powers was supposed to be limited in operation to the jurisdiction of Zimbabwe.

Absent authority, a company cannot act let alone institute legal proceedings.

It is not in dispute that the litigations in South Africa after the placement of the control and management of SMM under the control of the Administrator at the instigation of the Minister of Justice to whom the Administrator reported to.

This made SMM automatically an organ of the state of Zimbabwe.

However, the judgment sought and obtained in SA related to the affairs of a company called SMM.

The reality is that the SMM, the real claimant against the Defendants, was killed on 6 September 2004 by an act of state.

What followed is that it was the government of Zimbabwe using the company as a vehicle to directly claim on behalf of a company?

Against this backdrop, the decree clearly undermined public policy principles on which international law is premised.

In this case, the operation of the decree was exported to the territory of Zimbabwe with ease.

The SA Judiciary was used to recognize and enforce this draconian and satanic decree.

The question of judicial tolerance in the forum country comes to the fore.

Would you expect a forum country to recognize tolerate and give life to a law that offends its public policies? International law is clear on this issue.

Is the reconstruction law so iniquitous that it should be rejected as being law because it attacks doctrine of separation of powers and equality?

It is fact that before the judgment was granted, the Court a quo, the Judicial Services Commission, and the parties representing the government of Zimbabwe were fixed with the knowledge as to how the control and management of SMM was changed yet there was no judicial sanction.

On the contrary, the SA judiciary acquiesced and delivered the promise of injustice.

What are the facts that could have led the SA judiciary to be blind to the obligations placed upon it as the guardians of constitutionalism to end up being complicit in this travesty of justice.

It is law that a company’s authority can be recognized even if not supported by a resolution of directors appointed by shareholders.

It is now law that a foreign law that offends the constitution of SA can be recognized and enforced.

Ordinarily the Willis J judgment would be considered as falling outside the four corners of legality in that it awarded a monetary judgment to a party disguised as a corporate entity when in truth and fact, what was before the Court was an organ of state.

It would be absurd to imagine SMM suing its own shareholder and the fact that this matter was successfully prosecuted by SA courts must mean that something is fundamentally flawed in the administration of justice in SA.

How many other cases of similar nature have been processed with impunity in SA?

I would be grateful for any comments that may flow from the above. Learning has no limits.”

Munyaradzi Zindi Chikomba

Employment is one stage of life that you may never escape from unless you are a self-made entrepreneur who found his/her area of business interest at a very early stage and then invested your time, energy and resources to establish your own business.

Over the years, I have seen a lot of young people being tossed around as if they are worthless and what hurts the most is that they hang on until they end up feeling hopeless.

However, it is important to understand that signs and symptoms which shows that all is not well in a company are visible from the onset and you must be aware of them.

I have been to several job interviews and judging from my personal experience, the disorganization of a company is visible as soon as you get there since companies make you wait for hours before they start their interview.

What this simply shows is that such a company doesn’t respect time and as such, you must ask yourself what is it that will make them respect the time you will offer them. A job is a transaction where one sells his time, expertise and knowledge in exchange of monetary value.

As such, when a company officials cannot respect time on important issues like an interview, what gives you the audacity of believing that they will respect the time your offer to them in the course of your duties?

Many organizations may take interviews lightly because they regularly get a lot of applicants but you must take a good look at the person conducting the interview. Do you see yourself aspiring to be like that person because when someone is given the role to conduct interviews it means that person is one of their best?

After passing an interview, one is expected to sign a contract that binds the employer and the employee but unfortunately, many companies have since absconded from that practice because of the nature of the current business environment.

A contract is a must because every nitty-gritty of the exchange between the employer and the employee should be written in that document and as such, a big sign of future problems is the denial of issuing a legal contract to employees.

Contracts protect both the company and the employee and if the company is legit, it should also want to protect their reputation and future by securing a legally binding document between them and the new employee.

In the midst of having a new job, you may be too excited but it’s critical to ask your new employer to sign a contract with you and this contract should include expected conduct, nature of your work and most importantly, your salary.

This is because if such things are not written down, you will not have a good basis of argument since in the business world, oral agreements may not be that binding.

Disorganization is even visible when a company has no clear structure. A structure is fundamental because it shows the power dynamics of an establishment. It reveals whether power centralized on one person or not.

There should be clear structures whether the company is big or small because when one individual is everything in a company, there is no accountability since such people merely report to themselves.

Some companies may be SMEs which are still in their formative years, and thus lacking resources to have more employees and to create a perfect structure but, regardless of the size, there should be a clear light that this company is going somewhere.

More-so, every worker deserves orientation of some soft because you need to understand a clear path of where the company is coming from, where it is and where it is going. You also need to understand the company’s vision and the mission since without these, your full potential will be at stake.

Modern day businesses have shifted from the ancient way of doing things and have gone digital.

As such, an organized company should at least have a functional website, and they should also be visible on various social platforms because that’s how modern businesses operate. A company which has no trace and history is very. A company should be traceable because if anything wrong happens, there should be a clear path to trace.

Some people have been trafficked because of lack of proper diligence in finding finer details of what the company they are joining really do. Never be too excited to run into committing to something you are not understanding especially if there is no proper explanation when you ask relevant questions.

It’s your right to know and understand what you are about to commit yourself to. In the business circles there is something called the recycling strategy which has been used recently by most companies especially SMEs.

The strategy is meant to give more profits to the company at a minimum cost and so, what they do is that they continuously employ new employees and frustrate old employees by not giving salaries and proper working conditions.

When someone is new to the company, they give their one hundred percent so they continue putting new people on board.

A red flag to new employees depending on the years of operation and the size of the company is lack of long time serving members because a business should have a couple of veterans who have been with the company for a while.

The moment that you see new employees every time, you ask yourself why unless the business is expanding.

Even though in these modern times people may not believe in working for one company forever, there must be at least some people who have been committed to that company for a while since no-one wants to leave the best. If the company doesn’t retain most of its employees, it means something is wrong.

Most of the modern day companies may be new kids on the block especially with our country economic environment but however, in business we have something called an organizational culture.

An Organization Culture is a way in which things are done at a certain institution or company, whether good or bad. A company may not be paying that much but it may have a good organization culture which is progressive.

A company should teach you conduct, basic principles of life, grooming and etiquette. Those things are important because what impresses clients is the way you package yourself first before the service. If you look to your boss, do you see a raw model or you see the person you don’t want to become?  

Leadership should be exemplary by conduct. Everyone has weaknesses but if you see more bad than good in them, it’s a ticking bomb because behavior is contagious.

No matter how big or small every, company should have a clear vision, they should also make their new employees believe in the vision too. A company that jumps in and out of things has no vision, a company that doesn’t have a vision has no future.

The vision statement should be there for all to see since companies that don’t have vision statements are most often opportunists who jump onto every boom in an industry. During the Covid-19 pandemic we saw a boom in the fumigation, sanitizers manufacturing and masks industry.

The above scenario is a good sign of opportunity grabbing by entrepreneurs because they solve problems but it is important to ask yourself if in the long run, it sustainable or its seasonal business which will dwindle in the near future. A person committing to a new company should see all that and then make an informed decision.

Another way of analyzing the direction of where a company is headed is to look at the way they conduct their meetings.

I have seen companies that run without proper meetings and everything is done haphazardly. There is no progress checks and it’s just beating around the bush like a headless chicken. Meetings are important because they map the trajectory of the team and that’s where employers have an opportunity to ask and question procedures and understand the way of doing things in any institution.

As such, before you make any commitment to any institution, you must think through and see if your efforts will be appreciated.

Yes, money is important and everyone needs it, but one has to see if they can exchange their dignity and future for a couple of dollars. Most young people are at risk of abuse and bad conduct at work places and as such, you must do your own due diligence before any commitment because you still have a long way to go.

Munyaradzi Zindi Chikomba (The Social Architect) is a Columnist, Author, Youthful Leader who specializes on Personal and Social  Development. He is a Co-founder and current Executive Chairperson of a Youth Development oriented organization called Shanduko Foundation. He can be contacted on [email protected] +26319103604