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PAYROLL MANAGEMENT WITH PAYVIEW PAYROLL

The Payroll management was designed to deal with the financial and Human Resources aspects of employees that is, salary, allowances, deductions, leave days accrual and generation of pay slips. Payroll management dates back to the 19th century where the industrial revolution was experienced and in recent years systems developers have developed new and improved Payroll Systems that assist companies in processing their employee’s payroll in a fast and efficient manner.

In recent years Zimbabwe has experienced an increase in the use of payroll systems by companies both small to medium enterprises and large. An example of a payroll system used in Zimbabwe is the Payview Payroll system that encompasses all the employee statutory requirements as it was developed with an understanding and research on the different statutory and regulatory bodies that govern employees, for Example the National Employment Council (NEC) and the Zimbabwe Revenue Authority (ZIMRA).

Basic Elements of a Payroll System

Payroll cycle

This is the period between payrolls or length of time between payroll for example months, weekly or fortnightly

Calculating salaries

There is the gross pay, which is calculated by multiplying the rate per day and number of hours worked. The gross pay also includes any other overtime pay earned.

The net pay is the remaining pay to an employee after tax deductions

  • Tax calculation is calculated based on gross profit. In Zimbabwe an employee is subject to PAYE, AIDS levy, Withholding tax
  • Reports which will be generated from all the information that would have been captured based on salaries and number of employees.

Advantages of using payroll

  • Less paperwork- the amount of paperwork needed for filing is reduced because most systems are automated hence there is less printing leading to less storage.
  • Updating of employee information- the payroll being automated, it’s easy to update any information provided by the employee. The HR can access the system, enter the information and the system automatically updates the information
  • Time- using a payroll system serves time as one person does all the capturing of data and it reduces errors unlike when two or more people do the capturing.
  • Accuracy- high levels of accuracy when a few people are assigned to access the system hence reducing errors.
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A BRIEF LOOK INTO CR2 SHARE ALLOTMENT (ISSUE OF SHARES)

CR2 is a document used for creating and issuing of new shares, share allotment in a private company means to increase the share capital by issuing new shares after incorporation, Issuing new shares is for many limited companies and it can be for a number of different reasons, such as: raising additional capital from investors, repaying debts, funding a new project, and awarding a bonus share to employees in place of a cash bonus.

FEATURES OF CR2 SHARE ALLOTMENT FORM

  • The registered name and number of the company.
  • The allotment dates.
  • Details of the shares allotted, including: the class, currency and number of shares; the nominal value of each share; and the amount paid or unpaid on each share.
  • Details of any non-cash payments for the shares, for example, awarding bonus shares, or shares given in exchange for anything other than cash.
  • A statement of capital detailing the company’s issued share capital at the date of the return.
  • The prescribed particulars attached to each share.
  • An authorizing signature on behalf of the company.

Before allotting any new shares, it is important to check the company’s articles of association and any shareholders’ agreement for any clause affording pre-emptive rights to existing shareholders. If any such provision is in place, this means existing shareholders have the right to any new shares issued in the company ahead of an incoming shareholder.

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The difference between directors and shareholders

Directors

Directors are known as company officers, can be a natural person (human) or a corporate body. They can also be shareholders. Directors are appointed by the shareholders, they are responsible for managing a company lawfully and ethically in accordance with the Companies Act and the Articles of Association, required to run the business within their powers granted in the articles.

There must always be at least one human director in a company, expected to promote the success of the business with a view to making a profit for the benefit of the company and its shareholders.  Directors receive a salary (and dividend payments where applicable if also a shareholder).

Their rights and powers are determined by the shareholders. Legally responsible for filing true and fair annual accounts, Annual Returns, and Company Tax Returns by the statutory deadlines. Ensuring all required company taxes are paid on time.

They can be removed and disqualified if they are incompetent, display ‘unfit’ conduct or breach their contract in any way. Can be held personally liable and prosecuted if they fail to uphold their legal responsibilities and duties. Normally authorized to issue and transfer shares, but it depends on the powers they are granted in the Articles of Association.

Shareholders

They are known as members. The first shareholders are known as subscribers, can be a natural person or a corporate body. Own some or all of a company through shares. Liability is limited to the nominal value of their shares. If the company gets into debt, they are only responsible for the value of their shares.

Can also be directors if not otherwise prohibited. Receive a portion of the profits in relation to their shareholdings. Not involved with everyday business activities and management, unless they are also directors. Have the power to appoint and remove directors and company secretaries.

Can choose what powers and rights the company directors have. Proportion of ownership depends on the number, value and class of shares held.

 Their voting rights, capital rights and dividend rights depend on the Prescribed Particulars attached to their shares. Make decisions about significant issues such as changing the company name or structure, investment opportunities, issuing shares, appointing an auditor to inspect the accounts, appointing or removing a director, changing a director’s powers, and changing the Articles of Association or Shareholders’ Agreement.

Normally have a right to any surplus capital if the company is wound up (if Articles permit). If a company is owned and managed by a sole director and shareholder, one person alone will have all of these rights and responsibilities. It is important to be aware of these requirements and obligations before committing to limited company formation.

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Challenges Faced when Companies move from Small Companies to Medium or Large Companies

In every business operation the key most important objective is business growth, but whilst a high rate of growth is almost every business owner’s dream, it can prove to be a nightmare and take the business under if not properly managed. Growth requires preparation and planning and as s result organizations can plan for scaled growth which includes a timeline and milestones to achieve along the way. This will ensure that stakeholders as the company grows are able to meet the increased demands and accommodate the changes. 

It is a norm that businesses often underestimate the intense pressure that comes with rapid growth.

Cash Flow Crunch 

One of the most significant challenges faced by fast-growing organizations is cash flow, this because as the business grows it will have to deal with increased demand for the company’s products or services. At this point the business may be surviving mainly on credit as the business tries to grow sales and revenues. However, pushing of higher sales may result in monthly expenses that might actually exceed revenues that is monthly expenses exceed the companies operating capital 

So as to manage your cash carefully during these times, a business should turn to other channels that produce consistent sales and work to maximize their contributions to your bottom line whilst pushing other sales for rapidly growing markets or aspects of the business. The business can also negotiate favorable payment terms with partners and vendors too.

Leadership

Initially when the business is still small the owner or the brains behind the business tends to be hands on, on all the business activities but as the company grows it will be impossible for them the same level of control of all the activities and there might be need for delegation of duties.

Not only does rapid growth of a business affect the owner of the business, it also affects the leadership team the owner will be working with as they might struggle with managing their increased workload whilst devoting time and energy to the long-term planning needed to keep the business growth on track.

A leader should learn when to delegate and when to get involved this is because there are times when a business owner needs to get personally involved in specific decisions such as strategic planning, However there will be need to delegate some of the duties to managers and trust that they can make the best decisions and perform their work to the best of their capabilities.  

Customer Service 

When a business is still small its customer services will be quite good as they can afford to have one on one relation with their clients which can develop repeat business. As the company grows and have a lot of customers it will not be able to keep the same type of relation and might affect their customer relation. Negative feedback is more likely to increase as business expands rapidly this is an indication that the business is not able to cope with markets expectations in terms of delivery, lack of personnel to manage clients interactions or employees maybe be cutting corners to meet customer demands 

The business should consider hiring a number of people in the customer service department that will be able to try and cater for most of the client’s requests. The company can create and monitor a feedback system regularly and have a plan in place to monitor both positive and negative feedback

Company Culture

Every organization has different cultures and ways of doing business and different communication strategies and as the business is still starting up, the owner is a bit hands on in most of operations and business decision making. The communication line is horizontal at this stage with less line managers.

As the company grows there will be need for more line managers resulting in vertical communication. 

The business should also strive to ensure that some of its organizational culture is preserved and stay true to their beliefs and main goals but should keep room for adjustments when necessary so as to adapt to the changes being experienced by the business  

 Operational inefficiency

Uncontrolled expansion will cost your company time, money and other resources, this is because when the business starts growing at a fast rate than anticipated the company will be forced to improvise to manage the increased demand for the product or service. The company wont be able to adhere to perfect business plan where operations is smooth, pressured to hire more people sooner than anticipated and maybe be forced to redesign work flow so that it can accommodate increased demand .

While higher demand mainly leads to economies of scale this might be not the case as if rapid growth is experienced, it may result in any of these problems and other:

  • New employees who  are poorly trained and not yet up to speed with the business operations and are prone to errors which can be costly to the business at this stage
  • Manufacturing or buying inventory cannot be done quickly enough to fill orders as suppliers might have not adjusted or the business will still be looking for supplies who can provide the large amount of quantity 
  • Diminishing customer service 

Employees are overworked, putting in long hours and getting ready to jump ship.

A vibrant workplace inspires employees to work their hardest, but when work consumes most of their waking hours, you run the risk of losing your trained and trusted employees. You may find that your business is a revolving door of employees in spite of generous compensation and benefits.

Pay attention to the evolving workplace culture as your business grows. Find the time to discuss quality of life issues during staff meetings. Make sure to address personnel matters as needed, but do it expeditiously.

Infrastructure and Logistics

Rapid expansion of a business brings with it a new level of complexity, and will need robust systems to manage it. As your small business grows, so does demand for your products and services. Expansion which happens rapidly can create challenges with order fulfilment and put enormous pressure on business infrastructure example office space, as more time and resources are required to keep your operations running smoothly. 

The need may arise to invest in tools such as Accounting Systems , Payroll , planning , CRM and time management system.

Quotes 

1. Felix Lluberes, President and Co-Founder of Position Logic

“The biggest challenge is keeping your family happy and constantly deciding when to miss important family events because work demands it. Working hard is not a sacrifice as long as you achieve your ultimate objective.”

2.  Larry O’Connor, Founder and CEO of Other World Computing

“As our organization grows, a key objective for me is to recruit the talent we need to grow and to ensure we have the right programs and benefits to not only retain this talent, but enable them to perform at their best. The things we can control are the easy part; what takes up time are the changes we have no control over. For example, recent government programs and policies, such as the Affordable Care Act, are requiring us to restructure our current programs to ensure we are in alignment.”

3. Dean Parker, Founder of Callis

“The top challenge faced by fast-growing companies is balancing the use of capital with hiring the right talent at the right time. It is a balancing act that an entrepreneur must get right in order to build a highly successful business, not only in profit, but also in culture.”

4. Josh Phillips, President at Pyxl

“Balancing the needs of the business — growth, cash flow, new opportunities — with employees’ needs is the biggest challenge we face. Working with younger employees has presented a whole new set of challenges and opportunities that go back to having a culture of growth that everyone buys into. We are focused on bridging those areas and creating a sustainable business model.”

5. Barg Upender, Founder and CEO of Mobomo

“Our team is growing fast. We are struggling with setting up career tracks for development teams, project/account managers, and sales/marketing teams, and we are trying to set up controls and metrics to run all projects profitably.”

6. Andrew Field, President and CEO of PrintingForLess.com

“When you have a month of 20 percent year-over-year growth, you are scrambling. It’s challenging to get away from the day-to-day tasks and activities and concentrate on the big picture and strategy for future growth.”

7. Matt Grebil, Entrepreneurial Wrangler of Three Twins Ice Cream

“Company culture is generally formed fairly early on by founding members and key management personnel. These individuals work very closely together, making it relatively easy to maintain company culture. But as you start to add new personalities (not to mention additional locations), it can become a real challenge to assimilate all of these individuals and maintain the company culture.”

8.  Tom Sullivan, CEO and President of SoundConnect

“Getting the right people on the bus is hard. I’m picky, but I think that is a good thing. If you don’t have enough of the right people, then you will try to do everything yourself. Startup leaders wear too many hats, and it can prevent you from meeting your goals and growing your company like you should be.”

9. Mark Miller, Vice President of Marketing at Emergenetics International

“As a fast-growing company, the biggest challenge we face is capacity. We have increasingly been able to build our demand, but ensuring we have the right people to execute on this demand is really tough. There are brilliant potential employees, but truly understanding what kind of hires we need and how to get people up and running quickly, effectively, and productively is our biggest challenge.”

10. Vinny Antonio, President of Victory Marketing Agency

“Cash flow management for a rapidly growing, bootstrapped company can be harder than the world’s most difficult Sudoku puzzle. It’s almost a full-time job staying on top of who owes you what and who you owe, and then prioritizing those payments. All the while, you’re pushing for more growth, but with that comes additional expenses — most notably, your executive team. Good talent doesn’t come cheap, and you often have to find creative ways to lure the right personnel to your team.”

11. Gopi Mandela, President and CEO of Remote Tiger, Inc.

“When founders of companies are experiencing fast growth, it is easy to get entrenched in the daily grind and lose track of the big picture. The challenge lies in building the right management team so you can stop playing the contextual role of a COO and start being a CEO.”

12. Todd Palmer, Owner and President of Diversified Industrial Staffing

“The biggest challenge faced by fast-growing companies is a lack of employees with the skill sets needed to continue to drive revenue. The public school system in America is failing miserably to build the next generation of working professionals at a rate to match businesses’ needs. Combine this lack of homegrown talent with the visa challenges to bring in skilled talent from outside the U.S., and American small businesses are battling for talent on a daily basis.”

Zimbabwe New Companies Act

Zimbabwe’s New Companies Act [Chapter 24:31] of 2020. All You Need To Know

The long-awaited Companies and other Business Entities Act [Chapter 24:31] (the new “Companies Act”) is expected to come into force in the first quarter of 2020. The new Companies Act cancels the Companies Act [Chapter 24:03] (“Old Act”) and introduces a number of important new concepts and far-reaching changes to company law in Zimbabwe. This note seeks to highlight only those key changes introduced by the new Companies Act which impact on companies

Shares and share capital

The new Companies Act abolishes equality value as a concept in share capital (funds raised by a company in exchange of shares). From the effective date of the new Companies Act, shares will no longer have equality or nominal value and pre-existing companies may not authorise any new equality value shares or shares having a nominal value.

Despite the abolishment of the concept of equality value, all shares issued with nominal value (value or price of a share) by a pre-existing company, and held by a shareholder will, subject to any regulations to be made by the Minister, continue to have the same rights associated with them, including that the shares will remain to have a equality or nominal value.

The new Companies Act also departs from the general practice under the old Act where the terms of certain classes of shares, particularly in preference share funding structures, could be recorded in agreements or other documents, separate from the memorandum or articles of association. The new Companies Act requires that all preferences, rights, limitations and other terms associated with a class of shares must be contained in the memorandum of association, failing which they may not be enforceable.

Under the new Companies Act, the board will have the right to increase or decrease the number of authorised shares of any class, to reclassify any authorised but unissued shares, to classify shares that are authorised but are unclassified and unissued and to determine the preferences, rights, limitations or other terms of shares which have been authorised but not issued.

Beneficial ownership register

For the first time under corporate law in Zimbabwe, the new Companies Act prescribes detailed requirements to identify and record those individuals who ultimately own or control the company. Companies will be required to keep and maintain a register of beneficial owners of the company and to file such information with the Registrar of Companies.

The new Companies Act defines a ‘beneficial owner’ to include, without limitation, an individual who directly or indirectly holds more than twenty percent of the company’s shares or directly or indirectly holds more than twenty percent of the company’s voting rights. The new Companies Act further provides that not more than twenty percent shares in a company may be held by a nominee on behalf of a beneficial owner.

While these disclosure requirements are welcome and could go a long way in exposing corporate secrecy, compliance with the same could prove to be difficult in some cases. This is particularly because nominee agreements by their very nature are confidential and the company is not a party to such agreements. A nominee agreement is an arrangement between two parties where one person consents to acting as a director, secretary or shareholder for a company which is owned by someone else. The company is therefore left to assume the existence of such nominee arrangements and unless investigated, there is no obligation on shareholders to disclose these nominee arrangements or beneficial ownership. The fact that a director can be removed without reason under the New Companies Act could also be a disincentive for the proper implementation of these requirements.

Failure to comply with these disclosures and filing requirements is an offence and companies will need to carefully consider these requirements and put in place appropriate measures to comply. In the long run, amendments may be required to these disclosure requirements to give them teeth.

Companies to re-register

The new Companies Act requires all existing companies to re-register with the Registrar of Companies within a period of 12 months from the date on which the new Companies Act becomes effective. The re-registration by companies will not create a new legal entity or remove completely the company’s existing rights and obligations in any way. The re-registration exercise is an administrative process aimed at establishing a new and updated register of companies as well as to remove inactive companies from the same.

Directors’ duties

Sections 54 and 55 of the new Companies Act make provision for the partial laws or rules of directors’ duties. At common law, directors are subject to fiduciary duties requiring them to exercise their powers in good faith and for the benefit of the company. They also have the duty to display reasonable care, skill and diligence in carrying out their duties. As such, a director will need to comply with both the duties set out in the new Companies Act and in terms of the common law, except where the common law duty is specifically amended or conflicts with the new Companies Act.

It is important to note that, for purposes of the new Companies Act, provisions which spell out directors’ obligations, also apply to managers and ‘officers’ of a company who are not directors but persons in managerial positions in the company who, amongst others, represent and bind the company in transactions. The extension of duties and responsibilities to persons in managerial positions means that companies should take steps to ensure that those in managerial positions are informed of their duties and obligations as well as the consequences that may arise from a failure to properly perform these duties. A breach of these duties may render a director or an officer of the company personally liable to the company or third parties regardless of the director or officer’s knowledge of these obligations.

Disclosure of Financial Interest

In addition to the laws or rules of directors’ duties, the new Companies Act also introduces significant changes to a director’s duty of disclosure and requires directors to disclose their ‘personal financial interests’ in certain circumstances. While the concept of disclosure is not new in our law, the new Companies Act goes a step further and expands on the director’s duty of disclosure making it more difficult than before.

In terms of section 57 of the new Companies Act, a director of a company will be required to disclose any “personal financial interest” that the director or an associate (of that director) has in a matter to be considered by the board of a company. For purposes of section 57 of the new Companies Act, an associate includes, but is not limited to, a second company which is controlled by the director either alone or together with others. Without being thorough and complete, the nature of ‘interest’ considered in section 57 of the new Companies Act is that which relates to matters of a financial, monetary or economic nature, or to which a monetary value may be regarded.

It is recommended that companies carefully consider these disclosure provisions as they impact on structuring and more importantly, board composition. For group companies and where applicable, these provisions also require a re-look at the concept of mirror boards. Failure to disclose a financial interest is a criminal offence punishable by a fine not exceeding level fourteen or imprisonment for a period not exceeding two years or both such fine and imprisonment. A breach of these disclosure provisions, in appropriate circumstances, could also result in the director being liable to the company in accordance with the common law principles relating to the breach of a fiduciary duty.

Mergers and acquisitions

The new Companies Act introduces a new form of statutory merger which is designed to ease the implementation of business combinations. Section 228 of the new Companies Act provides that two or more public companies or any combination of companies consisting of at least one public company and at least one private company may undertake a merger. A merger is defined in section 226 of the new Companies Act as a transaction resulting in one or more existing companies joining into another existing company, or two or more companies consolidating into a new company. Under the new Companies Act, companies proposing to combine, or merge must enter into a written agreement setting out the terms and means of effecting the merger. This includes the manner in which the shares of each merging company are to be dealt with.

The statutory merger regime also prescribes extensive disclosure requirements. For instance, the merging companies must publish notice of the proposed merger in the government gazette and in a daily newspaper circulating in the district in which the registered office of the company is situated.