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Mpasiri and Pswarayi hosts of the CSBS focus on whose profit is it?

Tinashe Mpasiri and Chipo Pswarayi co-hosts of the Continental Sunrise Breakfast Show (CSBS) on the 1873 fm radio platform between 7:45 through 8am on Mondays, Wednesdays and Fridays, continued their focus on the relationship between shareholders and profits generated by a company.

Today, the focus was on whether a shareholder has any claim on the profits generated by a company in which he holds shares. Over the weekend, Chipo did pose a question to Tinashe in the following terms: “What is the point that you hope to come out in the discussion?”

In response, Tinashe said: “If it were the case that shareholding is a bridge to profit, would Africa be better if all the shares of companies registered in the continent’s different jurisdictions are owned by blacks? Would that make Africans (blacks) as shareholders richer because they would be entitled to profits?

To which Chipo responded as follows: “Brilliant question…”

This morning Tinashe began the show by saying: “Now turning to our subject of deepening and broadening knowledge about corporate matters. Do you still maintain your position that the purpose of companies is to make profit for shareholders or it is time to sing amazing grace?”

Chipo responded saying that she still holds the view that ultimately shareholders have a claim on the residue being the remaining profit after all the expenses have been paid including taxes. She said that it would be absurd for anyone to be a shareholder without expecting a positive return in form of dividends.

Chipo also confirmed that she had read the article published on the Banking on Africa’s Future website whose main focus was the discussion that took place on the Friday’s CSBS show and she thought that it was on point.

Chipo also conceded that the relationship between shareholders and the profits of a company is an area that needs objective interrogation.  This was so because although the profit of a company can be compared to a harvest, the harvest in respect of juristic person belongs to the entity in the first place. It is so that the control and management of a juristic person is vested in the directors.

The conversation of today also touched on the aspect of limited liability and the context in which shareholders are presumed to be outside the four corners of a company in order for them to be exonerated from any liability that may be claimed by any of a company’s contracting parties.

It was also explained by Tinashe that if shareholders encroach into the spheres reserved for directors and officers of a company, then they cannot escape culpability. If this is the case, then it means that the shareholders outside their roles as officers and directors of a company have no legal mechanisms of ensuring that enforcing any objective to maximize profits as the company’s operations falls outside their jurisdiction.

In the premises, the lesson learned was that the profits belong to the company and shareholders are not entitled at law to claim any profits outside a declaration that may be made by the company’s directors.

Tinashe said: “If the purpose of this show is attained, I am sure you will agree with me that a new perspective or paradigm will emerge that speaks to the truth and perhaps this will have implications on public policy making especially on areas of transformation.”

Chipo did agree that the paradigm that informs many empowerment conversations is centered around the issue of ownership and the need to change it.

In fact, the fulcrum of the mining charters in the case of South Africa is on the issue of shareholding and the implied relationship between shareholding and control of profits.

“If shareholders do not have any legal and enforceable claim on a company’s profits, then why the preoccupation of shareholding as a bridge to prosperity,” asked Tinashe.

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