As proud owner of an SMME, there are some essential contracts that you will encounter, and we will be discussing four of them today.
- Shareholders’ Agreement
A shareholders’ agreement is a contract that regulates the relationship between the shareholders and the business. Amongst other things, the shareholders’ agreement will detail how the shareholders will work together, outline the basic rights and obligations of the shareholders, how the profits or dividends will be divided, outline voting rights, and detail the selection procedure for the board members of the business. - An Employment Contract
According to South African labour law, all employees must get a written contract outlining the terms and conditions of the job within 3 months of working for a company. The terms and conditions to be listed include job description, working hours, pay, time off, and notice period. There are different types of employment contracts ranging from temporary, fixed term, and permanent contracts.
Section 29 of the Basic Conditions of Employment Act no. 75 of 1997 states that:
(1) An employer must supply an employee, when the employee commences employment, with the following particulars in writing—
(a) the full name and address of the employer;
(b) the name and occupation of the employee or a brief description of the work for which the employee is employed;
(c) the place of work, and where the employee is required or permitted to work at various places, an indication of this;
(d) the date on which the employment began;
(e) the employee’s ordinary hours of work and days of work;
(f) the employee’s wage or the rate and method of calculating wages:
(g) the rate of pay for overtime work;
(h) any other cash payments that the employee is entitled to;
(i) any payment in kind that the employee is entitled to and the value of the payment in kind;
(j) how frequently remuneration will be paid;
(k) any deductions to be made from the employee’s remuneration;
(l) the leave to which the employee is entitled;
(m) the period of notice required to terminate employment, or if employment is for a specified period, the date when employment is to terminate;
(n) a description of any council or sectoral determination which covers the employer’s business;
(o) any period of employment with a previous employer that counts towards the employee’s period of employment;
(p) a list of any other documents that form part of the contract of employment indicating a place that is reasonably accessible to the employee where a copy of each may be obtained.
- Service Level Agreement
When your business is operational and you have clients, more than likely, you will conclude a service level agreement (SLA) with said client. Essentially, an SLA is a contract between service provider and a client, and it outlines the service to be provided and the level of performance to be expected. An SLA also describes how performance will be measured and approved, and what happens if performance obligations are not met. - Non-Disclosure Agreement
You have developed a new cutting-edge innovation and now your company must decide on how to best take the innovation to market. You realise that there is a company that is well known in the field, and they can help you to market your product and take it to the end user. You decide that you will approach this company and outline your idea. However, before divulging your innovation and business methods, it is prudent to request the party you will be negotiating terms with to sign a non-disclosure (NDA)/confidentiality agreement. A non-disclosure agreement is an agreement between parties that certain information will be kept confidential. This agreement prevents any party who has signed it from divulging the confidential information to an unauthorised party. An NDA is used to protect trade secrets and other IP that must be kept confidential. It may seem like a rather expensive exercise but before divulging your innovation, invest in obtaining an NDA, it may work out cheaper in the end.
At Tshaya Mashabela Attorneys, we have the skills and expertise to draft these contracts on your behalf. Contact us to learn more about any of the listed contracts or others that are not listed but still have a significant impact on how you conduct business.
