Corporate Law: A Handbook for Managers: Volume one

By Catherine Mputhia

The Corporate Law Handbook For Managers ™series, are practical handbooks written by an advocate, as a managerial tool on legal issues. Managers are the top decision makers in organizations and in decision making legal issues form a key component of their decisions. The Corporate Law Handbook is written in several volumes covering different managerial issues. The Handbook contains simplified highlights of legal issues, case studies, practical insights and several check lists and questionnaires to aid the managers assess legal issues. This particular Handbook, Corporate Law Handbook For Managers, Volume 1, contains issues to do the law & strategic planning, corporate governance, shareholder and stakeholder management, business incorporation and other key business foundational issues. This book is for non-lawyer managers who aim to equip themselves with some basic legal know how. It is also a useful tool for lawyer-managers who seek to gain insights on practical application of law.

• Language: English
• Publisher: Catherine Mputhia
• Release date: Nov 27, 2023
• ISBN: 9789914497588

Book preview

PREFACE

Dear Reader,

The Lawyer Monthly Magazine identified some of the legal challenges faced by businesses and advised that one response to these issues, is seeking the right legal guidance before the challenges arise.

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The publication highlighted the four main issues as Human Resources, Class Action suits, Compliance and Shareholder Disputes. According to a Fortune 500 article, the annual cost of litigation for companies surveyed was at least 33% of the profits. The total cost of litigation incurred by these companies was a whooping USD 210 billion (KSh29.6trillion)!

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Litigation cost is calculated by adding the total spent on litigation (for example lawyers’ fees, filing fees and others) to the total pay-out. Litigation costs increase when cases are delayed rather than being settled.

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A scholar at a leading American university said, at times managers don’t know what they don’t know and they don’t know when to ask the right questions due to lack of legal awareness.

According to him the cause of a lot of organisational litigation can be prevented.

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Navigating the management function requires a lot of accurate information to guide the manager in making decisions. This book is written with the manager in mind whether they are a lawyer or not. The author has taken a pragmatic approach in writing this handbook by providing practical insights and giving innovative legal solutions. She gives practical insights using actual case studies and brief explanatory notes.

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The Corporate Law Handbook For Managers ™ is written in different volumes to cater for the different types of managerial needs. The volumes cover

Corporate Law Handbook for Managers Vol 1: - Foundational Issues For the Top Executive Corporate Law Handbook for Managers Vol 2: - Human Resource & Employment Law Corporate Law Handbook for Managers Vol 3: - Contracts, Supply & Procurement Corporate Law Handbook for Managers Vol 4: - Corporate Finance & Property

Corporate Law Handbook for Managers Vol 5: - Marketing, Sales & The Consumer Corporate Law Handbook for Managers Vol 6: - ICT, Innovations & Emerging Issues

This Volume addresses foundational concerns and guides the top executive to think through strategy issues, business formation, and setting up structures and procedures.

CHAPTER ONE: THE TOP EXECUTIVE

What’s in a title?

Corporate executives are the senior-most managers in any firm. They carry the highest responsibility in the organization. In some enterprises the top executives are also the owners of the business. This is especially so for privately-held organisations where the structure is such that the shareholders also hold executive roles.

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There are several types of executives as below:

Executive Directors

Chief Executive Officers (C.E.O)

Managing Directors (M.D)

General Managers (G.M)

Roles of top executives

Top executives bear the most responsibilities in the organisation and have several roles that include formulation of a strategic plan, formulation of organisational policies, recruitment and employment, raising capital and finance, oversight over other managers, guidance & direction and the maintenance of shareholder value.

The top executives are often the foundation of the organisation and as such, deal with foundational aspects of the business.

Types of top executives

There are many types of top executives and different ways of classifying them. Classification is important in understanding the roles and therefore the pertinent legal issues that follow. One approach is to classify the top executive using ownership. There are top executives who are also owners of the business otherwise known as owner-managers. There are also top executives who are not owners of the business but are either directors or employees of the business. This distinction between owner and non-owner is important in understanding the needs of the top executives. The Owner-Manager top executive will have more legal matters to tackle when compared to the non- owner top executive.

The Owner-Manager Top Executive

An owner-manager is a business person who both owns and manages a business. He is involved in the daily affairs of the business.

A majority of Kenyan businesses and SME top executives are also owner- managers. Top executives of new businesses and start-ups may also be considered under this category.

Many owner-managers take up the top executive role before the appointment of functional line managers. This is the norm rather than the exception. When filling out business incorporation forms, there is a requirement to indicate the names of the directors and shareholders. In most cases, the owner-managers also take up the role of initial directors before the functional managers are appointed.

It is the norm that the owner-manager will continue to serve in managerial capacity until the business attains growth.

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Executive Directors

Different jurisdictions have different ways of defining the Executive Director. In some jurisdictions the Executive Director and the Chief Executive Officer (C.E.O) are the same. This is especially so for non-profit organisations where the Executive Director takes up the role of C.E.O.

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A more widely applicable definition from the Corporate Governance Institute is that an executive director is a member of the board of directors who is involved in the day to day running of the business.

This definition is widely accepted in Kenya. For the purposes of this Volume, we will adopt this definition of Executive Director.

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Chief Executive Officer (C.E.O)

The term ‘Chief Executive Officer’ has