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A Quick Guide to what all shareholders must know to avoid Fronting accusations

A Quick Guide to what all shareholders must know to avoid Fronting accusations

During one of the Broad-Based Black Economic Empowerment (B-BBEE) Commission information sessions, it was once again emphasised that they will clamp down on any Fronting practices.

To ensure that no entity is at risk, it is important for all shareholders in the business to familiarise themselves with the relevant company documentation applicable to their shareholding, such as:

  1. Shareholders agreements
  2. Share Certificates
  3. Financing Agreements
  4. Share Registers
  5. Companies Memorandum of Incorporation

It is very important that all shareholders are fully informed of their responsibilities as a shareholder of the company, as well as all the risks associated with being a shareholder (such as possible responsibility for repayment of company debt should the company be dissolved). Shareholders must also be informed of their debt towards their share (if there is any) as well as the amounts already repaid towards their shares. A clear indication must also be provided regarding payment of dividends and profit sharing. They need to be aware and informed at all times of the company’s activities and governance matters, and the company must ensure that cooperative governance is applied at all times.

ABOUT THE AUTHOR

Geralene van Wyk obtained her BA (Psychology) and LLB degrees from the North-West University. After her studies she completed her articles in Pretoria and was admitted as a practicing attorney in 2006 and a conveyancer in 2007. She joined SEESA BEE in 2011 as a legal advisor and is currently a SEESA BEE National Training Senior Legal Advisor at the Pretoria Head Office.

 

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