Embed Size (px)
DESCRIPTION
TLi Newsletters 2009
Citation preview
1
Greg Dix
From: Greg DixSent: Tuesday, May 26, 2009 10:40 AMTo: Edine JordaanCc: Thys Sutherland; Petro JordaanSubject: Draft bulletin
May 2009
Estate agents must be aware of fraudsters and money launderers20
The Cape Times recently reported that according to the Institute of Security Studies (ISS) it is shown that fraud and money laundering are now targeting estates agents. The ISS is an advisory on the measures required to control money laundering in the property industry. Thobani Matheza, a researcher dealing with organized crime and money laundering said that the media and the court reports indicated the involvement of criminals running fraud syndicates and drug trafficking in buying up or developing property. The amount of money to be made in both residential and commercial property is fertile ground for fraud and estate agents should be aware of these activities.
Stamp Duty payable on release
With effect from 1 April 2009, stamp duty is no longer payable. This is in accordance with the Repeal of the Stamp Duty Act. The repealin the Revenue Laws Amendment Act, 2008 as published in Government Gazette 31781 on 8 January 2009. The provisions of the Act still continues to apply to all dutiable instrument executed before 1 April 2009 and to all existing leases.
BY : ALLEN WEST CHIEF DEEDS TRAINING WHICH APPEARED IN SOUTH AFRICAN DEEDS JOURNAL NEWSLETTER IN MARC
2
Section 66 of the Deeds Registries Act 47 of 1937 limits the duration of a usufruct to the lifetime of the person in whose favour it was crefurther restricts the cession thereof to the owner of the land thus encumbered.
Strictly, according to the above section, a contingent usufruct cannot be registered. However, practice does allow for the registration of scontingent night. Contingent is defined in the Concise Oxford Dictionary as: “that can be anticipated to arise if a particular event occurs.”
Before embarking on a discussion of the contingent usufruct and the registrability thereof, a clear distinction must be drawn between a cousufruct and a usufruct in favour of more than one person. In terms of trite law, a usufruct may be created in favour of more than one pewording of the instrument that creates the right will determine the extent of the usufruct in the event of death of any of the usufructuaries by any of them.
Where a usufruct is, for example, ceded to two or more persons in equal, undivided shares and one of the usufructuaries dies, the servitulapse in respect of the undivided share of the deceased, and the property will remain subject to the usufruct in respect of the other holdershare. However, where a usufruct is created in favour of two persons jointly, the principles of the ius accrescendi apply on the death of tdying. In the same vein, where a usufruct is created in favour of spouses married in community of property, the usufruct does not lapse prespect of an undivided half share when one of the spouses dies, but the share of the deceased accrues to the surviving spouse. The uswill only lapse in toto on the death of the surviving spouse.
In terms of trite law, more than one usufruct cannot exist concurrently on the same property. Furthermore, in terms of the maxim nemo palium transferre potest quam ipse haberet, nobody can transfer more rights than he owns. It is thus clear that where a usufruct concernswhich is already subject to a usufruct, the second usufruct cannot be registered. To circumvent this, practice has allowed for the registratcontingent usufruct. Registrars of deeds will allow that the bare dominium be registered subject to the existing usufruct and the deed willmade subject to the condition in respect of the second usufruct (this being the contingent usufruct). The second usufruct is not registeredonly be claimed from the bare dominium owner once the first usufruct has lapsed. In terms of Registrars Conference Resolution 47 of 19registrar of deeds will insist on the cession of the contingent usufruct as soon as he becomes aware of the lapse of the first usufruct.
A further example of a contingent usufruct is an owner of land who bequeaths a usufruct to his son, A who is married out of community oB, subject thereto that should B survive A, she will be entitled to the usufruct after the death of A. As already discussed, two usufructs caconcurrently on the same property. To overcome this problem, the registration of a contingent usufruct in favour of B is the only solutioncreating document for the usufruct must further be made subject to the condition that B may claim her usufruct only after the lapse of theusufruct in favour of A.
Where the contingent usufruct is one which contravenes the provisions of, for instance, the Subdivision of Agricultural Land Act 70 of 197consent from the Minister will have to be lodged when the usufruct is ceded to the contingent usufructuary. Similarly, where transfer dutyon the creation of the usufruct in terms of Section 2 of the Transfer Duty Act 40 of 1949, the transfer duty receipt or exemption certificate lodged. Whether a contingent usufruct can be regarded as a registered real right is a question open for debate. However, from a deeds registry a contingent usufruct is regarded as a real right. For this reason, the practice allows for the application of the provisions of Section 69, 6regulation 41(7) of the Deeds Registries Act 47 of 1937 to property subject thereto.
If property is subject to a contingent usufruct, such property cannot be transferred or mortgaged free from the contingent usufruct. The hcontingent usufruct can, by an underhand consent, waive his right in which case the provisions of Section 68(1) of the Act will be invokedlapsing of the usufruct against the title of the land.
Where the bare dominium owner and the holders of the usufruct and contingent usufruct together sell their respective rights to the properprovisions of Section 69(1) of the Act can be applied, in terms of which the bare dominium owner and both the usufructuary and contingeusufructuary jointly act as transferors to transfer the property to the new owner, free from any usufruct.
Should only the initial usufructuary sell or waive his right, the contingent usufruct will have to be created notarially and the new transfer bsubject thereto.
If in the event of the bare dominium owner wishing to register a mortgage bond on the property, it is debatable whether any bondholder wproperty subject to a usufruct and a contingent usufruct, as security. To afford the bondholder the maximum security, the holders of the ucontingent usufruct may, together with the bare dominium owner, mortgage their respective rights. Alternatively, the holders of the usufrucontingent usufruct can waive their rights in favour of the bond. This can be done either notarially or in the bond agreement in terms of re41(7) of the Deeds Registries Act. Republished with Allen West's permission
The question is whether Agricultural Land still exist and if so, on what basis
3
4
1. The purpose of the Agricultural Land Act The essential purpose of the Agricultural Land Act (Act 70 of 1970) “the Act”) has been identified as a measure whereby the legislative ininterest, sought to prevent the fragmentation of agricultural land into uneconomic units.
2. The definition of Agricultural Land (a) “Agricultural Land” means any land, except –
1. land situated in the area of jurisdiction of a municipal council, city council, town council, village council, local board, health boardcommittee …… but excluding any such land declared by the Minister after consultation with the executive concerned and by notGazette to be agricultural land for purposes of this act;
(f) land which the Minister after consultation with the executive committee concerned and by notice in the Gazette excludes from the
The following proviso was added to the definition by proclamation 100 of 1995 (“the proviso”) issued by the President in terms of section interim Constitution Act (Act 200 of 1993) (“the transitional act”):-
“Provided that land situated in the area of jurisdiction of a transitional council as defined in section 1 of the Local Government Transitiona1993) which immediately prior to the first election of the members of such transitional council was classified as agricultural land and shallclassified as such.”
3. Prohibition of certain actions regarding agricultural land Subject to the provisions of section 2 –
1. agricultural land shall not be subdivided;
1. (i) no portion of agricultural land… shall be sold or
advertised for sale (ii) no right of such portion shall be sold…….
unless the Minister has consented thereto in writing.
4. At issue At issue was the validity of written agreement concluded on 6th of December 2004 in terms of which Stalwo (Pty) Ltd (“Stalwo”) sold a suportion of the farm No 8 Port Elizabeth to Wary Holdings (Pty) Ltd (“Wary”).
Stalwo refused to give transfer to Wary on the grounds that the agreement of sale was invalid. Wary approached the High Court in Port a declaratory order that the agreement was valid and that Stalwo should effect transfer to it.
Wary’s defence that the agreement was invalid was founded in main on the basis of no compliance with the provisions of section 3 of theLand Act.
5. The High Court The High Court upheld the defence and dismissed Wary’s application on the basis that the proviso to the definition of Agricultural Land “ppoint in time with reference to which it must be established if land qualifies as agricultural land. If at that point in time, it is to be regardedagricultural land it remains so notwithstanding any change to local government structures and their boundaries. This point in time is the fof the members of the transitional council. It is common course that at this point in time portion 54 qualified as agricultural land. It followremained so and still was agricultural land at the time the agreement was entered into”.
6. Supreme Court of Appeal Wary then appealed to the Supreme Court of Appeal against the decision of the High Court.
The Supreme Court of Appeal inter alia held that the ‘proviso’ only applied during the existence of the Transitional Councils and did not asale. The Supreme Court of Appeal upheld the validity of the contract and found for Wary.
7. Constitutional Court of South Africa Stalwo was granted leave to appeal in the Constitutional Court of South Africa. Before the Court was the Minister of Agricultural and Land Affairs who was admitted as an intervening party and Trustees of the HaazekrHighlands Trust and Safamco Enterprises (Pty) Ltd as amicus curiae.
5
They supported the view put forward by Wary and raised additional arguments relative to the ‘proviso’ legislative history and the constitutimportance that the Minister should regulate agricultural land. In his judgement which was handed down on 25th of July 2008 Kroon AJ on behalf of the majority finds that in his view the interpretationto the ‘proviso’ is that the duration of the classification of the land as agricultural land was not tied to the life of the transitional council andSupreme Court of Appeal erred in this regard.
The reference in the ‘proviso’ that land within the area of a transitional council was dictated by the factual position existing at the time andwas done, was by pinpointing the stage from which land classified as agricultural land, would remain to be so classified.
The intention of the legislature with the introduction of the ‘proviso’ was to ensure the continued existence of ‘agricultural land’ and the Mcontinued control over it through the provisions of the Agricultural Land Act thereby achieving the purpose of the Act despite the establishtransitional councils.
The enhanced status of present day Municipalities and the fact that they have extended powers is not enough reason for the doing awayMinister’s control over agricultural land.
The order of the Supreme Court of Appeal was accordingly set aside and the order of the High Court reinstated.
The position is now clear in that any agricultural land which was classified as such immediately prior to the time of the first election of thethe transitional council shall remain classified as such and any subdivision thereof shall be subject to the Minister’s approval, failing whicagreement shall be null and void ab initio in terms of section 3 of the Act.
Contribution by Thys Sutherland of our property law department.
6
Key Contact:Email: www.tli.co.za
__________ Information from ESET NOD32 Antivirus, version of virus signature database 4788 (20100120) __________ The message was checked by ESET NOD32 Antivirus. http://www.eset.com
June 2009 www.tli.co.za
OVERVIEW OF THE CONSUMER PROTECTION ACT NO. 68 OF 2008 (“THE ACT”)
Introduction
The Act will come into effect from October 2010 and will have far reaching consequences on the South African economic landscape and consumers in general. The purposes of the Act are, amongst others, to protect consumers from exploitation and unfair marketplace practices, to promote and advance the social and economic welfare of consumers, to empower consumers and to develop a culture of consumer responsibility. The purpose of this article is to briefly set out the application of the Act.
Application of the Act
The Act will apply to all transactions concluded in the ordinary course of business of a supplier, “occurring” within South Africa, for the supply to the consumer, or at the direction of the consumer, of goods or services in return for a consideration. The Act will also apply to goods and services which are “promoted” within South Africa to the extent to which such goods and services are reasonably capable of being subject to any transaction as mentioned above. Goods and Services
The Act casts a very wide net in respect of the goods and services which are subject to its provisions. Goods are defined as any tangible goods “marketed” for human consumption, tangible objects including any medium on which anything may be written or recorded, any intangible product as well as the license to use same, a legal interest in land and gas, water and electricity. Services are defined as any work or undertaking for the direct or indirect benefit of another, the provision of education, information, advice or consultation (excluding advise which is subject to the Financial Advisory and Intermediary Services Act), banking services and related services including the assumption of risk on behalf of another (excluding advise which is subject to the Financial Advisory and Intermediary Services Act or the Short and Long Term Insurance Acts), the transportation of goods and people, the provision of a right of occupancy of any land regardless of whether or not such can be classified as a lease agreement, rights of franchise and, the provision of accommodation, entertainment or similar intangible product, electronic communication infrastructure, a right of access to any event, premises (regardless of whether such can be classified as a lease agreement), activity or facilities Exempt Transactions
The following transactions are amongst those exempt from the Act: 1. Where the consumer is a juristic person and its annual turnover or asset value at the time of the conclusion of the transaction exceeds an amount published by the Minister responsible for consumer protection matters (the Minister has not yet determined the threshold). It is important to note that this exemption will not apply to Franchise offers or agreements;
2. Transactions which are subject to the National Credit Act No. 34 of 2005; 3. Services supplied in terms of an employment contract. Conclusion
The Act has a very wide ambit and contains provisions that will bring about a drastic reform in the manner in which businesses are conducted in South Africa. The Act provides for, amongst other non-compliance provisions, imprisonment of up to 10 years and administrative fines of up to R1, 000, 000.00. Over the coming two months we will provide subsequent summaries of the fundamental consumer rights, protection of consumer rights, national protection institutions and the enforcement provisions of the Act.
Article by Dean Milton CAN SOUTH AFRICA ADDRESS THE CURRENT SKILLS SHORTAGE CRISIS?
Our young economic and democratic dispensation is facing a major threat from the shortage of relevant and adequate skills required to support our economic growth. This problem is exacerbated by the reluctance of large corporate entities to invest in apprenticeship programs. Their argument is that the length of time and large amount of financial resources spent on individuals were often lost when competing companies poached them.
In an effort to reduce the skill shortage currently experienced in South Africa, our previous deputy President, Phunzile Mlambo-Nguka in 2006 launched the Joint Initiative on Priority Skills Acquisition (JIPSA). JIPSA compiled a data base of skills currently needed with the focus on engineering and planning skills for the transport, communication and energy industries; city, urban and regional planning and engineering skills; artisans and technical skills; concentrating on infrastructure development; management and planning skills and education, health and municipalities; teacher training in math, science, ICT and language competence; specific skills needed by the tourism and business process outsourcing sectors; and skills relevant to the local economic development municipalities. So far JIPSA has achieved great successes with the implementation of the abovementioned initiative. However, the JIPSA program is a long term orientated goal and does not address the current skills shortage in South Africa. Maria Ramos, Transnet’s Chief Executive, said in an article published on the web by Business Report on the 24th May 2007 that: “the skills challenge was a temporary thing. People often confuse the existence of people with degrees and qualifications with people with experience. Having many people that have graduated with an engineering degree does not mean having experienced engineers. I would hate to be a young engineer, because you are in so much demand. Everybody is quite happy to pay you a lot of money, they expect the world from you and you do not have the experience to deliver the world.”
How can South Africa address the current skills shortage crisis? Sourcing skills from abroad seems to be the obvious short term solution. Government has already realized that importing skills can and should be a rational and well managed strategy aimed at competing vigorously in the Global market for talent and will contribute to South African’s human capital and therefore will accelerate and lead to sharing of economic growth. Foreign skills are the quickest way to expand our skills base and develop our own human capital. Sourcing skills from abroad will help build South Africa just as other countries have done the same, and will lead to South Africa reaping the benefits. They are no threat against which South African’s should have to be protected. South Africa currently is most in need of millwrights, electricians, fitters and turners, patron makers and injection molders and tool, jig and dye makers. Industry figures also predict that the demand for skilled artisans is approaching the 30 000 mark, while the need for semi skilled labor was increasing by more than 20% per year. In the late 1970’s early 1980’s, there were 30 000 annual registered apprenticeships. That number decreased to 3 000 two years ago and last year to 1 400. In conclusion, the remedy to our skills shortage is, in essence, two tiered: 1) to address the current skills shortage, skilled workers may be sourced from countries abroad. This will help to ensure that our burgeoning economic growth is not stifled by the skills shortage.
2) to address our long terms skills shortage, the Government initiative program JIPSA is focusing on improving the level and quality of education so that people can graduate with skills useful skills in our economy. By addressing the skills shortage problem in South Africa all the key players involved can assure that despite the current economic turmoil, South Africa can move forward by positively expanding its economic growth with the necessary skills as may be expected from a developing country.
Article by Maritza Breytenbach
Broad Based Black Empowerment Act No. 53 of 2003: Sector Charter for the Construction Industry
1. SECTOR CHARTER
1. In terms of the Sector Charter all enterprises that are involved in the design, planning, expansion, creation and/or maintenance of fixed assets related to residential or non-residential buildings, infrastructure or any other form of construction works in South Africa fall under this Sector Charter. The Charter is structured according to a 7 (seven) year time frame.
2. This includes civil engineering contractors and build environment professionals such as consulting engineers, architecture and quantity surveyors.
3. The Charter sets out the obligations on participants within the construction sector and enshrine targets across the seven BEE elements that will be measured according to a scorecard. The Sector Charter aligns with the Generic Code of Good Practice in terms of the BEE Act but with sector specific peculiarities.
2. 7 BEE ELEMENTS The 7 BEE elements are:
1. Ownership; 2. Management control; 3. Employment equity; 4. Skills development; 5. Preferential procurement; 6. Enterprise development; 7. Socio-economic development initiatives.
See Scorecards below setting out the Compliance targets for the 7 BEE Elements. 2. SCOPE
The scope of application covers various industries within the construction sector that broadly align according to two disciplines, namely the build environment professionals such as consulting engineers (“BEP”) and the contracting fraternity. The proposed codes differentiate in certain instances between these two disciplines on the basis of differentiated organizational structures and business models. See attached Annexures for the weighting points and compliance targets in respect of the seven BEE elements. Johan Kruger 3. THE OWNERSHIP SCORECARD
Category
Ownership Indicator: Black people
Weighting points
Compliance Target
1.1 Voting Rights
1.1.1 Exercisable Voting Rights in the Enterprise 4 30%
1.1.2 Exercisable Voting Rights in the Enterprise 2 10%
1.2 Economic Interest
1.2.1 Economic Interest in the Enterprise 5 30%
1.2.2 Economic Interest of Women 2 10%
1.2.3 Economic Interest of the following Black Natural People in the Enterprise: 1.2.3.1 Black Designated groups; 1.2.3.2 Black Participants in Employee Ownership Schemes; 1.2.3.3 Black Beneficiaries of Broad Based Ownership Schemes; 1.2.3.4 Black Participants in Co-operatives
5 10% Contractors 5% BEP’s
1.3 Realisation Points
1.3.1 Ownership fulfillment 1 Release of all Black participants from third party rights arising from
financing of the shares
1.3.2 Net Value 6 Points are determined on a graduation factor based on a loan repayment period – Code 100
4. THE MANAGEMENT CONTROL SCORECARD
Category
Management Control Indicator
Weighting points
Compliance Target
1.1 Board Participation:
1.1.1 Exercisable Voting Rights of Black Board Members using the Adjusted Recognition for Gender
5 40%
1.2 Top Management:
1.2.1 Black Senior Top Management using the Adjusted Recognition for Gender
5 25% (Year 0 – 4)
40% (Year 5 – 7)
5. THE EMPLOYMENT EQUITY SCORECARD
Contractors
Measurement Category and Criteria: Black Employees
Weighting Points
Compliance Target
Years 0-4
Years 5-7
1.1.1 Senior Management Category as a percentage of all such employees using Adjusted Recognition for Gender.
3.5 25% 40%
1.1.2 Middle Management Category as a percentage of all such employees using Adjusted Recognition for Gender.
3.5 30% 40%
1.1.3 Junior Management Category as a percentage of all such employees using Adjusted Recognition for Gender.
2.5 65% 65%
1.1.4 Disabled Employees as a percentage of all office based employees using the Adjusted Recognition for Gender.
0.5 1% 2%
BEP
= 1.1.5 Disabled Employees as a percentage of all office based employees using the Adjusted Recognition for Gender.
0.5 1% 2%
1.1.6 BEP: Employees in all Management Categories as a percentage of all such employees using the Adjusted
9.5 30% 40%
Recognition for Gender.
6. THE SKILLS DEVELOPMENT SCORECARD
Category
Skills Development Element
Weighting Points
Compliance Target
Contractors
BEP
1.1 Skills Development Expenditure on any programme specified in the Learning Programmes Matrix (Code 400, P57)
1.1.1 Skills Development Expenditure on all employees as a percentage of Leviable Amount.
2 2.5 1.5%
1.1.2 The portion of Skills Development Expenditure, spent on Black Employees, as a percentage of Skills Development Expenditure on all employees using the Adjusted Recognition for Gender.
3 4 70%
1.1.3 The portion of Skills Development Expenditure, spent on Black Employees in all Management Categories, as a percentage of the portion of Skills Development Expenditure spent on Black Employees, using the Adjusted Recognition for Gender.
1.5 2 25%
1.2 Learnerships
1.2.1 Number of Learners participating in Learnerships or Category B, C and D programmes as a percentage of total employees.
1 1.5 2.5% Contractors/ 1.5% BEP’s
1.2.2 Black Learnership and/or Black Category B, C and D programme participants as a percentage of total Learnerships and Category B, C and D programme participants using the Adjusted Recognition for Gender.
2.5 3.5 70%
1.2.3 Black People with disabilities participating in Learnerships and/or Category B, C and D programmes as a percentage of Black Learnships and Black Category B, C and D programme participants using the Adjusted Recognition for Gender. This Item only applies to office based employees.
1 1.5 5%
1.3 Bursaries
1.3.1 Scholarship and/or Bursary Expenditure on Black Students, as a percentage of Leviable Amount
2 2.5 0.3%
1.4 Mentorship
1.4.1 Implementation of an approved and verified mentorship programme
2 2.5 Yes to all criteria as set out in the
Sector Charter=
7. THE PREFERENTIAL PROCUREMENT SCORECARD
Criteria: B-BBEE=
Weighting points
Compliance Target
1.1 Procurement Spend 0-4 Years 5-7 Years
1.1.1 Spend on all Suppliers based on the 12 50% 70%
Procurement Recognition Levels as a Percentage of Total Procurement Spend
1.1.2 Procurement Spend from Qualifying Small Enterprise or Exempted Micro Enterprise based on the applicable Procurement Recognition Levels as a percentage of Total Measured Procurement Spend
3 10% 15%
1.1.3 Procurement Spend from any of the following Suppliers as a percentage of Total Measured Procurement Spend:
1.1.3.1 Suppliers that are 50% black owned. 3 9% 12%
1.1.3.2 Suppliers that are 30% black women owned. 2 6% 8%
8. ENTERPRISE DEVELOPMENT (ED) SCORECARD
Criteria
Weighting Points
Compliance Target
Contractors
BEP’s
1.1 Enterprise Development Program
1.1.1 Compliance with the Requirements and Guidelines for an Enterprise Development Program for at least one recipient. The Measured Entity must submit an annual portfolio of proof indicating compliance with the pre-requisites as well as adherence to the Guidelines for an Enterprise Development Program.
5 5 Yes to all program requirements and pre-requisites
1.2 Enterprise Development Contributions
1.2.1 Average annual value of all Enterprise Development Contributions and Sector Specific Programmes made by the Measured Entity as a percentage of NPAT/Leviable Amount.
10 5 3% of NPAT (Contractor)/0.75% of Leviable Amount (BEP)
9. SOCIO ECONOMIC DEVELOPMENT SCORECARD
Criteria
Weighting
Compliance Target
Average annual value of all Socio-Economic Development Contributions by the Measured Entity as a percentage NPAT/Leviable Amount.
5 1% of NPAT(Contractor)/ 0.25% of Leviable
Amount (BEP)
Article by Johan Kruger
Key contacts: Theunis Liebenberg Email: [email protected]
TLi Group Companies
www.tli.co.za wwwlisinfo.co.za wwwtheperformancegroup.co.za
July 2009 www.tli.co.za
Owner or Seller of property liable for misrepresentation made by the estate agent on his/her behalf
In the hereinafter mentioned decision of Odendaal v Ferraris, the Court also came to the conclusion that the Seller is answerable for the misrepresentation by the agent in the course of execution of his mandate.
Conclusion:
It is advisable to include a clause in the agreement of sale to the effect that the Purchaser acknowledges that no representations, undertakings, etc have been made by the Seller or any agent or person on his behalf other than those contained in the agreement of sale.
Contribution: Thys Sutherland
Fulfillment of suspensive conditions in an agreement of sale
In the case of Marais v Kovacs Investments 724 (Pty) Ltd (“Kovacs”) [2009] I Ali SA 174© Kovacs purchased a property from the Seller, Marais.
In terms of the agreement of sale it was subject to the suspensive condition that the Purchaser is granted a loan for a specified amount by the 15th of August 2005 in order to pay for the balance of the purchase price.
The agreement further stipulated that the suspensive condition is inserted for the benefit of both the Seller and the Purchaser and that the agreement could only be varied or terminated by mutual agreement between the parties.
A loan was granted to Kovacs prior to the stipulated date of 15th of August 2005, but for a lesser amount than that stipulated in the agreement.
Kovacs advised the Seller that the suspensive condition had been fulfilled and he remained in the property and continued to pay the occupational interest.
He however failed to mention that the bond was granted for a lesser amount than was stipulated in the agreement.
Months later Marais applied for a declaratory order that the agreement had lapsed. In a counter application Kovacs sought interim relief in the form of an interdict to restrain Marais from alienating the property and an order to have the agreement declared valid and binding.
The issues before the Court were whether there had been “substantial” fulfillment of the suspensive condition, alternatively whether the parties, by mutual agreement, waived compliance with the suspensive condition, alternatively whether Marais was estopped from denying that the suspensive condition had been fulfilled due to the time lapse.
The Court found that “it is now settled Law that if a suspensive condition in a contract has not been fulfilled by the date stipulated for its fulfillment, the agreement automatically falls away”.
There was no evidence before the Court to indicate that Marais waived his right to the fulfillment of the suspensive condition and it is agreed that even if the suspensive condition was inserted for the exclusive benefit of Kovacs, Kovacs was still obliged to communicate his waiver thereof to Marais by the 15th of August 2005.
The Court further held that:
(i) the agreement lapsed on the 15th of August 2005 and such contract could only have been reinstated by the entering into of a new agreement of sale “to breathe new life into the corpse”
(ii) Kovacs’ defense that a tacit agreement existed between the parties to waive fulfillment of the suspensive condition is also not acceptable in that the agreement contained a non-variation clause whereby any variation had to be in writing and signed by the parties to be of any force or effect. It is further argued that in terms of the Alienation of Land Act 68 of 1981, an amending agreement must comply with the provisions of the Act.
Conclusion:
If the suspensive condition in an agreement is not fulfilled by the date stipulated in the agreement, the agreement automatically falls away.
In the words of the Judge - one cannot “breathe new life into the corpse”.
Contribution: Thys Sutherland
Property sold voetstoots – immovable property defects not limited to physical condition
It would appear that the final word has not yet been spoken about the nature of the defects which are covered by the voetstoots clause in an agreement of sale.
In a recent Supreme Court of Appeal Case of Odendaal vs Ferraris [2008] 4 All SA 529 (SCA) this came to the fore whether a “defect is to be restricted only to the physical attributes of the merx or to apply more broadly to extraneous factors affecting its use or value,”
The facts of the Court case were briefly –
(i) Ferraris purchased a property from Odendaal; (ii) After taking occupation of the property Ferraris discovered various defects in the property which were not disclosed to him and suggested that these defects were purposely not disclosed to him; (iii) He also discovered that some of the improvements to the property were done without approved plans by the Local Authority and these facts were also not disclosed to him; (iv) Ferraris put a stop to the transfer and Odendaal applied for eviction of Ferraris on the basis that Ferraris’ failure to allow transfer to proceed constituted a repudiation of the agreement of sale on the strength of which Odendaal cancelled the sale; (v) Odendaal applied to the High Court for the eviction of Ferraris; (vi) The High Court declined such order of eviction, it is not clear on what grounds or whether the Court found Odendaal concealed certain defects, nor does the Court deal with the legal principles of the voetstoots clause; (vii) Appeal was noted against the High Court’s refusal to grant an application for the eviction of Ferraris by Odendaal; (viii) Odendaal’s submission was that Ferraris’ defence of non-disclosure of defects is not valid in that the voetstoots clause in the agreement specifically protects Odendaal against any non-disclosure; (ix) In the Supreme Court of Appeal, Counsel for Ferraris relied on a new point of law, namely that the voetstoots clause did not protect the appellant from her failure to obtain statutory approval for the construction of the improvements that were not in accordance with approved plans. The Court found support for its submission in the decision of Goldblatt J in van Nieuwkerk vs McRae where the judge held that in a sale of residential property a buyer is entitled to assume that the buildings on a property were erected in compliance with all statutory requirements and that it could be used to its full extent. Goldblatt J went on to hold that a Seller cannot in these circumstances rely on a voetstoots clause since it excludes liability for any latent defects of a physical nature, but does not apply to “the lack of certain qualities or characteristics which the parties have agreed the merx should have.”
The Appeal Court looked at various other decisions of the Courts and the nature of the various defects covered by the voetstoots clause.
On Page 536 the Court found that “This conclusion raises the more general question of the nature of the defect that would fall within the scope of a voetstoots clause. Its ambit was left open in Ornelas, though the Court rightly emphasized that the exclusionary scope of a voetstoots clause in any particular case must be decided on its own facts. In a broad sense, any imperfection may be described as a defect. Whether the notion of a “defect” is to be restricted only to physical attributes of the merx or to apply more broadly to extraneous factors affecting its use or value has generated discordant judicial and academic opinion. In relation to a voetstoots sale of land, for example that is sale of land “as it stands”; it has been held that the language is wide enough to cover not only any hidden defect in the property itself, but also any defect in the title to, or area of, the property”.
The Supreme Court of Appeal was rather hesitant to formulate a general rule and stated as follows “but I refrain from expressing a view thereon since, as pointed out, the basis of the decision thereto [referring to another case] was that something entirely different was delivered from what has been sold.”
The Supreme Court of Appeal found that the improvements were effected without the Council’s approval and that “in my view…. the absence of statutory approval such as at issue here…. constitutes a latent defect”. This resulted in Odendaal’s argument being correct in that he was protected by the voetstoots clause.
This however is not the end of the matter it is “trite” law that if the Purchaser wishes to circumvent the reality of the voetstoots clause, the Purchaser is obliged not only to prove that the Seller had knowledge of such undisclosed defect and failed to disclose it, but also that the Seller purposely withheld such information with the intention to defraud.
It follows that the appeal was upheld.
Conclusion:
The Supreme Court of Appeal has really gone overboard, unless one can prove that the Seller had knowledge of the latent defect and not only did not disclose it, but also that he/she deliberately concealed it with the intention to defraud. This places an impossible burden on the Purchaser in that it is almost impossible to proof that the Seller had deliberately concealed the defect with the intention to defraud the Purchaser.
We can only say “Quo Vadis” Appeal Court
Contribution: Thys Sutherland
Key contacts: Edine Jordaan Email: [email protected]
Thys Sutherland Email: [email protected]
www.tli.co.za www.lisinfo.co.za www.theperformancegroup.co.za
September 2009 - Issue2 www.tli.co.za
Is the registration of a Mortgage Bond regarded as a disposal of the assets if the major portion is bonded in terms of Section 228 and will a shareholders resolution be required?
In the High Court of South Africa (Western Cape High Court) Case No 15427/08 in the matter between – The Standard Bank of South Africa Limited as the Plaintiff
and
Hunkydory Investments 188 (Pty) Ltd as First Defendant
In this yet unreported judgment which was delivered by Owen Rogers A.J on the 1st of June 2009, the facts were briefly that:-
1. The Plaintiff, a Bank, seeks summary judgment against the Defendant, a Company, on the strength of four mortgage bonds. The action was instituted by simple summons.
2. Copies of four bonds were attached to the summons and an order was sought declaring the hypothecated property executable together with costs of suit.
3. Notice of intention to defend was delivered in response to which the Plaintiff applied for summary judgment.
4. The issues before the Court were -
4.1 The constitutional challenge that it is unconstitutional for the National Credit Act to exclude juristic persons from its ambit in the manner set out in Sections 4(1)(a) and 4(1)(b). The Judge found:- “Precisely the same point had been raised in a Court Case 6408/08 on 10 October 2008, my colleague Elize Steyn A.J gave judgment in case 6408/08 rejecting the constitutional challenge and granting judgment. The Defendant in the present matter was aware of this case …”
4.2 Turning to the other grounds of opposition the Judge continued “I shall consider first the Defendant‟s contention that the mortgage bonds are not binding on it because the passing of the bonds constituted disposal as contemplated in Section 228 of the Companies Act 61 of 1973 and because shareholder
resolutions as required by that section were not procured…. In addressing these questions I shall assume in Defendant‟s favour that the property was at all material times the Defendant‟s only or major asset.”
Clause 11: “As to the legal question, the issue is whether registration of a mortgage bond over a Company‟s major asset constitutes an act whereby the Company “disposes of” the whole or greater part of the assets within the meaning of Section 228(1). The range of transactions encompassed by the phrase “dispose of” has been the subject of some discussion in academic writing. Since the issue is one of considerable practical importance, it warrants careful consideration.”
The Judge continues under Clause 12 on Page 6 of the judgment:- “The ordinary meaning of the phrase “dispose of” is “to make over or part with by way of sale or bargain, sell”, “to transfer into new hands or to the control of someone else (as by selling or bargaining away)”. [see Kinloch NO and Another v. Kinloch 1982 (1) SA 679 (A) at 697H–698C]. “The Afrikaans text uses the verb “vervreem” which was said in Grobler v Trustee Estate De Beer 1915 AD 265 to mean the act of transferring ownership (at 274). I do not think that one would ordinarily describe a transaction whereby a debtor agrees to the hypothecation of his property as one whereby the debtor disposes of the property to the creditor or to anybody else. True, if the debtor defaults and the creditor becomes entitled to execute on his security, the property may then be transferred and lost to the debtor, but the object of the transaction from the debtor‟s perspective is not to part with his property and if all goes well the property will stay with him. If the property is eventually disposed of, it will not be because it is the wish or intention of the debtor, but because the creditor has rights under the bond which, because of the debtor‟s default, can be enforced by the creditor no matter what the debtor‟s wish may be. Moreover, when property is sold in execution, the person who sells the property is the sheriff, not the debtor.”
The Council for the Defendant also submitted that prohibition on alienation also prohibits hypothecation, but on this the Judge reflected as follows: “The case of Estate Foley Alias Melville v Natal Bank (1883) 4 NLR 26 concerned a statutory provision to the effect that no transfer of shares would be valid until approved by the Director. The Court held, with reference to certain old authorities, that when alienation is prohibited, so is pledging or hypothecation…I can understand that in certain contexts the same reasons which justify limitations on an outright disposal would also apply to hypothecation, but it is not of much assistance in interpreting the words “dispose of” in the Companies Act. I may add that a restriction on the “transfer” of shares may potentially have a different meaning from a restriction on the “disposal” of shares.”
“In any event, I consider the description of a mortgage as „the first step towards a disposal of the hypothecated property‟ as not really accurate. Whenever a Company borrows money or incurs a debt, the Company‟s assets are exposed to the risk of attachment and disposal by judicial sale…… The only real difference the mortgage makes is that if the Defendant were to have other creditors apart from the Bank, the mortgage would give the Bank preference in the judicial sale….”
Section 70(dec)(2), which was the predecessor of Section 228, in the 1926 Companies Act was introduced therein by Act 46 of 1952. In terms of the Millin Commission and its Report in 1948, the need was recognized to give shareholders greater protection from potential abuses of powers of directors, but in its final report it specifically stipulates “we have been urged to recommend a provision in the act to restrict the borrowing powers of directors on behalf of the Company, but on consideration, we think this is a matter which can be left, as in the past, for regulation by the Articles of Association. See Section 51 of Table A”.
The Judge continues with his judgment in Clause 21 on Page 12 “This makes it clear, I think, that the mischief at which the new section was directed was a disposal in the form of a transfer of ownership rather than a transaction which exposed the Company‟s assets to the risk of forced disposal because of borrowings.”
In Clause 23 on Page 15 of the judgment the Judge concluded: “Accordingly, and accepting for the moment that in certain contexts the words “dispose of” might be given a wide meaning that could include hypothecation, I see no warrant for adopting the wide meaning in Section 228(1). The meaning I favour is the one espoused by the authors of Henochsberg on the Companies Act at Page 444. It is supported by the prima facie view expressed by Basson A.J in Advance Seed Company (Edms) Bpk v Marrok Plase (Edms) Bpk 1974 (4) SA 127 (NC) at 132E…… I thus conclude that in Law the Section 228 point is bad.”
Judgement is granted in favour of the Plaintiff declaring the hypothecated property executionable.
I trust that this decision will put to rest the uncertainty that existed regarding Section 228 of the Companies Act
insofar as bond registrations are concerned and whether the registration of the bond constitutes disposal as contemplated in Section 228 to which the shareholders are obliged to consent.
It is to be pointed out that this is a decision by the Western Cape High Court and is not binding on other Provincial High Courts, but I am of the opinion that this is a quality decision and likely to give a clear direction to the other divisions of the High Court and the High Court of Appeal.
Key Contact: Thys Sutherland (Director: Property Department). Email: [email protected] Tel: +2711 326 1330
YOU NEED A BIGGER DEPOSIT TO GET A HOME LOAN (appeared in THE SATURDAY STAR of 22 August 2009)
The prime lending rate has dropped to 10.5%, its lowest level in three years, but banks are tightening up their lending criteria and you will need to put down a sizeable deposit if you want to qualify for a home loan. You will also have to pay the transfer and registration costs from your own pocket. Saul Geffen, the chief executive of mortgage originator Ooba, says the latest oobarometer (Ooba‟s house price index) shows a trend of diminishing average bond amounts month-on-month. In July, the size of the average approved bond dropped by 7.7% to R 587 222.00 from R 636 169.00 in June.
”The continuing drop in the average bond size is a reflection of the banks‟ increased deposit requirements” Geffen says. Year-on-year, the average deposit as a percentage of the purchase price, continues to show a significant increase: it was up by 30.8% from July last year. According to the oobarometer, buyers are putting down an average deposit of 24.2% of the purchase price to secure a bond, compared to 18.5% in July last year. The oobarometer shows that, month-to-month, the required deposit has increased by 28% since June. However, Personal Finance has it on good authority that at least one of the four big banks will be taking a more favourable stance on deposits for home loans from next month. The current lending criteria of the major banks are:
STANDARD BANK
Standard Bank is not granting 100% mortgage bonds, regardless of the property value. For properties valued at up to R 300 000.00, you can get a 95% loan. For properties valued between R 300 000.00 and R 2.5 million, you can get a 90% loan, and for properties valued at R 2.5 million and more, you can get an 80% loan. These terms are much tighter than they were in June last year when Standard Bank announced that it would grant 100% home loans for properties valued up to R 750 000.00. For properties valued between R 750 000.00 and R2.5 million, you could get a 95%, and for properties valued between R2.5 million and R 3 million, you could get a 90% loan. Currently, if you are purchasing vacant land, you can get a loan of 75% if you are an existing Standard Bank customer. If you are not a Standard Bank customer, you can get a 75% loan if the land has a value of under R 1 million and a 60% loan if the value is more than R 1 million. Last year Standard Bank sold repossessed properties for a total of R 131 million (this amount was set off against the outside debt on the properties), which is 42% higher than the 2007 amount of R92 million. ABSA BANK
Absa requires a 15% deposit on a home loan if you are an existing client and a 30% deposit if you are not an Absa client. If you are buying vacant land you will have to put down a 40% deposit. The average deposit on an Absa home loan is 22.6%, up from an average of 14.4% last year. Luthando Vutula, the managing executive of Absa Home loans, says the tighter deposit requirements have been implemented as a result of the declining property market. “The extent of the deposit requirements are directly related to the performance of the property market in the different property value segments and the pace with which property prices have declined in these segments” he says. However, Vutula adds that if you cannot meet the deposit requirements, the bank will accept other forms of collateral, such as your retirement savings. FIRST NATIONAL BANK
Jan Kleynhans, the chief executive of First National Bank (FNB) Home Loans, says the bank is repossessing about 40 properties a month, or about 480 properties a year at a total value of about R 300 million. Repossessions have nearly doubled since a year ago, he says. “Despite the drop in interest rates, real disposable income in the household is declining, and with it the capacity to reliably service debt in the future,” he says. If you buy a property valued below R1.5 million, you can get a loan of 90% with FNB and if you buy a property valued at more than R 1.5 million, you can get a loan of 80%. Kleynhans says FNB is offering higher loans than other banks as it is confident that the current environment is a good opportunity to attract “good risk” customers. The bank has introduced a “quick sell” programme to help customers who are battling to meet their bond repayments to fast-track the sale of their homes before their homes are repossessed. If you purchase a “quick sell” property, FNB will give you a 100% loan, which means you only need cash to pay for transfer and registration costs. For a list of the properties available, go to quicksell.co.za. NEDBANK
Clive van Horen, the managing executive of retail secured lending at Nedbank, says the bank offers 90% loans on properties valued at under R 3 million and loans of 85% on properties valued at more than R 3 million (these terms apply whether or not you are an existing Nedbank client). “The volume of new home loan applications has dropped by more than 50% from the first half of 2008 to 2009, suggesting that consumers‟ concerns about the broader economic environment are causing them to hold back on buying houses” he says. Van Horen says the bank tightened its lending policies in the second half of last year in anticipation of the increased risk levels and higher cost of funding. “We believe this was the only logical response to protect the bank‟s capital and depositors,” he says. Nedbank‟s home loan approval rate has declined since last year from an average of one of three applications to one out of four applications. Van Horen says the rate is likely to improve only once consumer indebtedness declines, economic growth resumes, discretionary incomes increase and house prices stabalise. Nedbank offers 100% loans on repossessed properties and properties sold via the Nedbank auction programmes, where distressed homeowners can sell their properties to avoid repossession.
Key Contact: Arnold Schoombee Email: [email protected] Tel: +2711 326 1330
THE CAUSALTHEORY vis-à-vis THE ABSTRACT THEORY OF TRANSFER OF OWNERSHIP OF IMMOVABLE PROPERTY
A critical part of the Registrar‟s duty in the process of conveying property is to ascertain whether there is a valid causa for the
transaction and more specifically whether the transferor had the locus standi to transfer the property in question. The court case Legator MvKenna v Shea (143/2008) (2008) ZASCA 144 (27 November 2008) virtually transforms the concept of a valid causa
into an aspect of controversial dimensions by triggering the long standing debate around the feasibility of the abstract theory of transfer as compared to the causal theory of transfer.
For the sake of clarity the basic semantics of an Abstract and a Causal theory are now briefly discussed: Abstract Theory: according to this theory, the legal ground giving rise to delivery plays no essential role in the transfer of property and as such it is irrelevant whether the causa is defective or faulty. All that is required is
the intention to pass and receive ownership; furthermore the transaction must contain an obligation-creating agreement. The said agreement comprises the reason for passing of ownership and the real agreement in which consensus for transfer is achieved. Whether or not the causa is defective, ownership passes if the real agreement is essentially valid. Causal Theory: according to this theory a valid underlying transaction known as the iusta causa is a pre-requisite for the passing of transfer. Simply put, the causal theory lays down that if the causa for the transfer of ownership is defective, ownership will not pass; notwithstanding that there has been delivery in the case of movables or registration in the case of immovable property, resulting in a registered deed of transfer being cancelled and the property being transferred back to the real owner. On 8 March 2002, McKenna was appointed as curator in the estate of Ms. Shea as the latter had suffered brain injuries in a motor car accident which rendered her incapable of managing her own affairs. The appointment of the curator was not given in the form of Letters of Authority/Curatorship. On 22 April 2002, McKenna sold the property to the Erskiness family (even though he was not yet in possession of the requisite letters of appointment); and claimed that the sale was urgent as he had discovered that Ms. Shea was afflicted by numerous pressing debts that could only be defrayed by the sale of the immovable property. The Master of the High Court eventually issued the Letters of Curatorship in terms of Section 72(1)(d) of the Administration of Estates Act 66 of 1965(3 June 2002); however the requisite consent from the Master was only received on 17 July 2002. The registration of the transfer was effected at the Pietermaritzburg deeds registry on 27 July 2002. On 10 March 2003 the Durban High Court declared Ms. Shea capable of managing her own affairs based on her impressive recovery. Almost a year later she instituted action in the Durban High Court for the return of her immovable property. This action was granted by the court based on the following reasons:
1. The sale agreement entered into between McKenna and Erskiness was invalid because Mckenna had not received the requisite Letters of Authority from the Master of the High Court (although he was appointed as curator bonis).
2. On further inspection it is clear that the Letters of Authority (issued on 3 June 2002) and Consent (given on 17 July 2002) were obtained after the Agreement of sale was entered into on 22 April 2002; therefore the curator had no authority to enter into the said agreement. The decision of the court is therefore in line with the Causal Theory.
Mckenna appealed the Durban High Court decision and based his contention on the Abstract Theory. The Appeal Court held that Mckenna had not entered into a valid agreement with the purchaser because he made the sale subject to a suspensive condition that the sale was subject to approval by the Master, but however failed to make the suspensive condition a condition of sale in terms of the Alienation of Land Act 68 of 1981 and also because the purchaser had not expressly accepted the condition, thereby, in the absence of the express acceptance rendering the agreement invalid. The appeal court then gave the following ruling: “If both parties to an invalid or purported invalid agreement have performed in full, neither party can recover where the lawful purpose of their transaction, common to them both, has been achieved.” Therefore Ms. Shea could not
claim her property back as the intentions of the parties to the transaction had been achieved (the Abstract Theory). Accordingly the court upheld McKenna‟s appeal. With regards to the transfer of movables, the South African courts have long ago opted for the Abstract Theory in preference to the Causal Theory; however some uncertainty remained regarding the transfer of immovable property. In the High Courts that uncertainty has now been eliminated in various recent decisions, most notably Legator McKenna v Shea (143/2008) (2008) ZASCA 144 (27 November 2008) where Brand, JA, writing for a unanimous court stated that “the time has come for [it] to add its stamp of approval to the viewpoint that the Abstract Theory of transfer applies to immovable property as well”.
Key Contact: Arnold Schoombee Email: [email protected] Tel: +2711 326 1330
TLi Group Companies
www.tli.co.za www.lisinfo.co.za www.theperformancegroup.co.za
K
K
1
2
King Report
King III Repo
1. INTRO
The Ki
addres
Act in
purpo
of som
III.
2. DUTIE
2.1.
2.2.
www.tli.
on Governa
ort
ODUCTION
ing III Report (
ss the provisio
relation to co
se of this Artic
me of the mos
ES OF COMPAN
Environmen
becoming m
life. The gl
of socio a
and environ
clean and
“green” con
The primary
a business e
TL25FeRaT:F:
.co.za
ance for Sou
(King III) has b
ons of the ne
orporate gover
cle is to provid
st important a
NIES
ntal and Socie
more importa
lobal trend ha
nd economic
nmental prote
renewable
nsciousness.
y reason for th
enterprise is to
Li Inc. 51 Main Avenuerndale andburg +27 11 326 1 086 651 6813
th Africa:
een drafted to
ew Companies
rnance and the
de an overview
aspects of King
ety Issues are
ant in modern
s become one
sustainability
ection through
energy and
he existence of
o create value
e, corner Repu
1330 3
o
s
e
w
g
e
n
e
y
h
d
f
.
ublic Road
Tr
p
fo
ev
th
b
e
2.3. K
of
in
an
b
su
C
af
an
raditionally th
erceived narro
or Shareholde
volved along
he notion of va
ottom line –
nvironmental
ing III requires
f Directors (“T
ntegrated repo
nnual basis
ottom line. Th
ufficient info
ompany has p
ffected the en
nd economic l
Corp
he notion of
owly as financia
ers. This n
with global t
alue in terms o
– social, econ
performa
s that a compa
The Board”) p
ort to sharehol
addressing t
he report shou
rmation on
positively and
vironment and
life of the com
porate Gove
Afri
Key Co
NEWS
value was
al value
otion has
rends into
of the triple
nomic and
ance/value.
ny’s Board
provide an
ders on an
the triple
uld provide
how the
negatively
d the socio
mmunity in
This issrnance for S
ca: King III R
ntact: Johan K
+2711 326
johan@tli
BULLET
sueSouth
Report
Kruger
6 1330
.co.za
TIN
which it operated during the year under
review. The report should also provide
foresight on how positive aspects can
be enhanced and negative aspects
eliminated. Reporting should be
integrated with other aspects of the
business process and managed
throughout the year.
3. GOVERNANCE FRAMEWORK “APPLY OR EXPLAIN”
Companies should report to their
stakeholders on an “apply or explain” basis.
This means that Companies must apply King
III and best practice recommendations in
King III and where those charged with
governance decide not to apply a specific
principle and/or recommendation, they
should explain such decision fully to their
stakeholders. King III distinguishes between
the words “should” and “must”, the former
referring to a recommendation and the latter
to an obligation.
4. AUDIT COMMITTEES
4.1. Audit Committees are appointed by the
Shareholders and not the Board. A
member of the Audit Committee may,
however, be liable on the same basis as
a Director may be liable (even if such
member is not a Director). Audit
Committees are therefore responsible
to the Company and not to the Board.
4.2. The Audit Committee must:
have a good understanding of
financial risks, financial reporting
and internal controls;
possess sufficient and relevant
knowledge of corporate law;
have a thorough understanding of
accounting standards (such as
GAAP) or any other financial
reporting framework or set of
standards applicable to the
Company; and
maintain overview of the internal
audit department or processes.
5. NON‐EXECUTIVE DIRECTORS
Non‐Executive Directors should not receive
share options.
6. IT GOVERNANCE
IT governance is dealt with in detail in King III for
the first time. Directors should ensure that
prudent and reasonable steps have been taken
with regard to IT Governance. IT Governance is
particularly important in respect of the risk
management of the company. sdffsfsfsdfsdf
ALTERNATIVE DISPUTE RESOLUTIONS (“ADR”)
King III recognizes that ADR has become an
important element of good governance. This is
also in line with the new Companies Act which
offers parties the option of resolving disputes by
way of ADR. King III favours mediation or
conciliation and, failing that, arbitration. In
some countries it may take several years before
a matter can be heard before a Court of Law. It
is therefore advisable to have an ADR system in
place in order to ensure the expeditious
resolution of disputes.
7. REMUNERATION SCHEME
King III provides for the approval by
Shareholders of a remuneration framework
which binds Directors and Management in their
determination of remuneration packages.
8. LEAD INDEPENDENT NON‐EXECUTIVE DIRECTOR
(LID)
King III recognizes that companies may have
sound reasons for appointing a Chairman who
does not satisfy the requirements of
independence or who is non‐executive.
Notwithstanding the fact that the company must
be able to prove the existence of such reasons,
King III provides for the concept of a LID to
assist the Board in dealing with any actual or
perceived conflict of interest that may arise in
these circumstances. The main function of the
LID is to provide leadership and advice to the
board (without detracting from the authority of
the Chairman) when the Chairman has a conflict
of interests.
The LID may provide assistance in:
Board meetings;
any meeting which the Chairman initiates
with the LID;
any consultations that any other director or
executive of the company may initiate with
the LID; and
in any consultation that the LID may initiate.
The term of appointment of the LID is
circumstance dependant but should generally
endure for the duration of any actual or
perceived conflict of interest of the Chairman.
9. DIVISION OF FUNCTIONS
King III provides that the Chairman of the Board
and the Chief Executive Officer should be two
separate persons. The Chief Executive Officer
should be responsible for management and for
providing all necessary information to the Board.
The Board, under the direction of its Chairman
decides on the direction and strategy of the
Company.
10. INTERNAL AUDIT
King III provides for internal audits to ensure
that the external audits match the internal
audits and to ensure the adequacy of internal
controls in respect of risk assessment in relation
to the strategic planning of the Company.
Persons tasked with the internal audit of the
Company should then report to the Board.
11. EFFECTIVE DATE
King III will be published on 1 September 2009
and will be effective as from 1 March 2010. This
will give Companies sufficient time to prepare
for the implementation thereof as well as to
prepare for the implementation of the new
Companies Act which will probably become
effective on 1 July 2010.
12. CONCLUSION
In the following months we will include a
“Directors Corner” section in our monthly
newsletter which will focus on setting out the
rights and obligations of the board in relation to
corporate governance in terms of King III.
For more information contact our Commercial Team:
Contact person: Theunis LiebenbergEmail: [email protected]
Johan Kruger Email: [email protected]
Maritza Breytenbach Email: [email protected]
Dean Milton Email: [email protected]
Directors: Theunis Liebenberg B.Proc.LLB Dip Tax Prac., Donna-Lee Smith B.Proc LLB, Edine Jordaan B.Com LLB, Thys Sutherland Dip Proc
Consultant: Madelein Lindeque BLc LLB LLM Associates: Elna Snyman BLc BA (Hons) LL.B, Joeleen Booyens BLc LL.B
Professional Assistants: Maritza Breytenbach LLB, Carel Visser LLB Financial Manager: Lelanie Jacobs
Theunis Liebenberg Incorporated – Registered shortened name: TLi Inc.
TLi Group Companies
www.theperformancegroup.co.za www.lisinfo.co.za www.tli.co.za
KING III: THE AUDIT COMMITTEE
INTRODUCTION
King III will be effective from 1 March 2010 and imposes an obligation on Companies to appoint an audit committee (“committee”) to enable it to perform its functions. The purpose of this article is to set out the King III obligations of the audit committee. MEMBERSHIP
A holding company’s committee must have at least 3 members who are independent non-executive directors. The chairman of the committee and the chairman of the board of directors cannot be the same person. Certain Minimum qualifications and experience are required in respect of corporate law, financial risk and sustainability reporting as well as international and other reporting standards. Public companies must ensure that committee appointments comply with qualification criteria to be established by the Minister as contemplated in section 95 (4) of the Companies Act No. 71 of 2008, and any premature termination of the services of any committee member must be approved by the relevant executive authority of the (public) company. RESPONSIBILITIES
The committee should meet at least twice per annum and should oversee stakeholder reporting, including:
1.Financial reporting:
evaluate management judgements; and
scrutinise all relevant narrative information so as to ensure it presents a balanced view of the company’s performance.
2. Interim results:
Consider whether there are reasons for internal and external auditors to perform assurance procedures (quarterly or 6 monthly); and
make recommendations to the Board.
3.Summarised Financial Information: engage external
auditors to provide assurance.
4.Integrated sustainability reporting:
assist the Board in reviewing sustainability reporting; and
consider and recommend the necessity of engaging external auditors to provide assurance.
5. Expertise, resources and experience of management:
annually consider the appropriateness of the expertise, resources and experience of the management component responsible for financial duties.
In Public companies the committee must also evaluate the suitability of the finance director and recommend changes to the Board where necessary.
6. Combined Assurance Model:
The committee is responsible for ensuring that assurance by management and internal and external auditors sufficiently satisfies the committee that significant risk areas are adequately addressed and that suitable risk reduction controls are in place.
The committee is responsible for monitoring the relationship between external assurance providers and the company and for recommending to the Board the need for external assurance.
INTERNAL ASSURANCE
The committee is responsible for overseeing the internal audit; and
should be an integral component of the risk management process comprising:
o financial reporting and risks,
o the reviewing of internal financial controls, fraud risks and information technology risks.
REPORTING
The committee should report to the Board and stakeholders as to how its duties have been carried out.
DIRECTORS APPOINTMENT: (CM 29) DOES ONE REQUIRE A CM29 CONFIRMATION FROM
CIPRO AS PROOF OF DIRECTOR CHANGES?
On 25 February 2009 Cipro posted a notice on its website informing its clients that the service whereby a CM29 can be electronically lodged are temporarily suspended until further notice since it came to the Registrar’s attention that certain areas on their website are not well protected against fraud and consequently require system changes. This resulted in the Registrar being inundated with manual applications. Unfortunately for companies, Cipro does not have the manpower to deal with the processing of these lodgments in an effective and time efficient manner. Currently one can expect to wait between 10 to 12 weeks before receiving a CM29 confirmation. Praise must go to the officials tasked with processing the overwhelming manual lodgments of CM29's as they will go out of their way to assist those clients who urgently need a CM29 confirmation if shown good cause. However, many companies are experiencing the frustration of this unfortunate time consuming process since other entities such as SARS, auditors and financial institutions request a CM29 confirmation as proof that a director is newly appointed or has resigned. This can have unfortunate financial and other implications for companies. But is this abovementioned requirement fair and legally correct? When is a director regarded as appointed/ resigned legally? Is it when one receives the CM29 confirmation from the Registrar or when appointed/ resigned by the company by way of an ordinary resolution/ letter of resignation? In the absence of any provision in the articles of a company or the Companies Act, No 73 of 1963 (hereinafter referred to as the “Act”), in dealing with the appointment of directors, the common law will apply. According to the common law the members of a company in general meeting have the power to appoint directors by ordinary majority. Directors will become validly appointed through the act of appointment. No other formalities are prescribed.
So, if a resolution of the members provides simply that Mr X is appointed as director and he consents to his appointment, he will, according to the common law, henceforth be a validly appointed director. Of course the members can provide for appointment to take effect at another point in time, but it is submitted that this will occur only where express provision is made for it or where it can be inferred clearly from the circumstances. To what extent is this rule affected by a company’s articles and memorandum of association or the Act? The articles of a company normally determine the procedures for the appointment of directors in some special circumstances (see Schedule 1 Table B art 67-71), but this ordinary power of members, namely to appoint
- Section 215 then obliges a company to keep a register of directors and it sets out the requirements for
such a register, but again it assumes that the name of the person entered into the register is already a director of the company. It imposes a criminal sanction for non-compliance, but clearly does not prescribe a precondition for appointment. - Section 216(1)(a) also requires that persons whose details need to be entered into the register of directors, must provide the information necessary for
keeping the register to the company within 21 days of appointment. The observations made with regard to s 211 will also apply here. Although the form CM27 does not explicitly mention, it the lodging of a properly filled out form CM27 with the company will also constitute compliance with this provision. - Sections 216(2) and 216(3) then dictate that the
company must within fourteen days of receiving the particulars that it will have to enter into the register, established in terms of s 215, lodge a return with the Registrar on form CM 29. Again it is clear from ss 216(2) and 216(3) that this provision does not affect the validity of appointment.
Conclusion The scheme clearly only requires that information about a particular fact, ie is the appointment of a director, must be communicated to the Registrar. It assumes that the
details provided will be of a person who is already a director. Non-compliance does not lead to invalidity of appointment, but to criminal sanction. Notice of
appointment and changes in the particulars treated are in the same manner according to s 216(3). This clearly indicates that proper appointment is not affected by furnishing of details to the Registrar (or Cipro). It is clear that this is how these provisions are generally viewed. A cursory glance at the information kept by Cipro clearly indicates that very many directors are not accurately reflected in the records kept by Cipro, yet these persons remain effective directors of the companies to which they have been appointed. Nevertheless, other entities still demand a CM29 confirmation from the Registrar before acknowledging that a Director is appointed/ resigned by the company. Hopefully the Registar’s proposed “proof of concept of the customer verification” system will finally be tested and effectively implemented soon and provide relief for all those affected.
Key Contacts: (+2711) 326 1330 Theunis Liebenberg: [email protected]
directors, is seldom affected by the articles. The Companies Act itself also does not prevent the immediate appointment of a director by the members. - Section 211 provides for the formal consent to appointment by a director. It provides that a director
must give written consent to appointment (on form CM27), but it is clear that this is not a prerequisite for valid appointment. The Act states merely that written consent must be given within 21 days of appointment or a longer period provided by the Registrar. Failure to comply with the provision is visited with criminal sanction, but it does not affect the validity of an appointment.
Johan Kruger: Johantli.co.za Maritza
Breytenbach : Maritzatli.co.za
Dean Milton : Deantli.co.za
TLi Group Companies
www.tli.co.za www.lisinfo.co.za www.theperformancegroup.co.za
This issue
The New Companies Act
Who will be affected?
TLi Lawyers 251 Main Avenue, corner Republic Ave Ferndale Randburg T: +27 11 326 1330 F: 086 651 6813
SHORT NOTES ON THE NEW COMPANIES ACT, NO. 71 OF 2008
1. THE ACT
The Companies Act No. 71 of 2008 (“the Act”) has been signed by the President on 8 April 2009. The commencement date still has to be promulgated, but it will not be before April 2010.
2. REGULATORY AGENCIES
The Regulatory Agencies created by the Act are:
The Companies and Intellectual Property Commission (“the Commission”) headed by the Commissioner – will mainly be responsible for the registration of companies, to maintain information in connection therewith and enforcement of the Act;
The Companies Tribunal – will mainly be responsible for adjudication and provision of dispute and resolution;
The Takeover Regulation Panel – will mainly be responsible for the provision of the regulations of transactions and offers; and
The Financial Reporting Standards Council ‐ responsible for receiving and considering information regarding the
3. TYPES OF COMPANIES
The Act provides for two types of Companies, namely:
Non‐Profit Companies: companies incorporated for a public benefit or an object relating to one or more cultural or social activities, communal or group interests where the income and property are not distributable to its incorporators or members, except as permitted by the Act. Non‐Profit Companies will have the words “NPC” at the end of their names; and
Profit Companies: companies incorporated for the purpose of financial gain for its shareholders and will either be:
‐ State Owned Companies – “SOC Limited”;
‐ Private Companies – “Proprietary Limited” – (Pty) Ltd;
‐ Personal Liability Companies – “Incorporated” or “Inc”; or
‐ Public Companies – “Limited” or “Ltd”.
4. FORMATION: MEMORANDUM OF INCORPORATION AND RULES
A Company will have a Memorandum of Incorporation which will set out the rights, duties and responsibilities of the Shareholders, Directors and others.
A Company may also make rules relating to the governance of the Company which rules must be filed with the Commissioner. The Rules may not be inconsistent with the Act or the Memorandum of Incorporation.
Shareholders may enter into a Shareholders Agreement but if such Agreement is inconsistent with the Act or the Memorandum of Incorporation, such inconsistency will be void.
www.tli.co.za
Key Contact
Johan Kruger
+2711 326 1330
.:NEWS BULLETIN
5. AUDIT
Only Pubbut reguother typ
6. SHARE
The Act aproperty
A Compasubscript
•
•
A Compacertain cof the Co
7. FINANOFFICER
A CompaPrescribeMember
•
• t
TED FINANCIAL
blic Companiesulations promupes of Compan
ES
acknowledges y. Shares will n
any may providtion of shares,
such assistanc
‐ an Employee
‐ Special Resotwo years; an
the Board is s
‐ that the Comliquidity tests;
‐ the terms ar
any may, undeconditions, acqompany may a
NCIAL ASSISTANS
any may give fied Officers or rrs of such relat
such assistanc ‐ an Employe
‐ Special Resotwo years; an
the Board is sa
‐ the Companliquidity tests;
‐ the terms ar
L STATEMENTS
s need auditedlgated in termnies to be audit
that shares aro longer have
de financial ass provided that
ce is pursuant t
e Share Schem
olution adopted
atisfied:
mpany would s; and
re fair and reas
er certain circumquire its own shcquire shares
NCE TO DIRECT
inancial assistarelated Compated Companies
ce is pursuant t
e Share Schem
olution adoptedd
tisfied that:
y would satisfy; and
re fair and reas
S
d financial states of the Act mated as well.
re considered aa nominal or p
sistance with tt:
to:
e; or
ed within the p
atisfy the solve
sonable to the
mstances and hares and any of that Compa
TORS AND PRE
ance to Directoanies or Corpors, provided tha
to:
me; or
d within the pr
y the solvency
sonable to the
ements, ay require
as movable par value.
he
revious
ency and
Company.
subject to subsidiary ny.
SCRIBED
ors or rations or t:
revious
and
Company.
8. GOVE
Certain gwith onlyDirector annual g
The Act communmeetingmay be sexercise Meeting
A Comparights in lower pealways aOrdinary
9. DIRE
Board commuIncorpoadoptepersonstandaperformcommi
Public appoinextendAuditoCompathe releand eameetindesignafinanci
RNANCE AND
governance reqy one Sharehoof the Compa
general meetin
now provides fnication or ones by electronicsubmitted for cvoting rights i
gs.
any is allowed respect of ordercentage in rea margin of at ly Resolution an
ECTORS, COMP
Meetings of Diunication and, oration provided by written cn or by electronrds of Directormed. These staittee members
Companies annt a Company Sded accountabirs and Audit Cany Secretary mevant Law. Audch year thereang. The same iated Auditor oal years.
MEETINGS
quirements areolder or where ny. Only Publicng of Sharehold
for meetings te or more Sharc communicaticonsideration nstead of a for
to require a hidinary resolutioespect of Specieast 10% betwnd a Special Re
PANY SECRETA
irectors may bexcept where es otherwise, aconsent of the nic communicar’s conduct andandards also aps of the Compa
d State OwnedSecretary and aility requiremeommittees. Thmust be knowlditors must beafter at the Comndividual may of a Company f
e not applicabevery Sharehoc Companies mders.
o be held entireholder may pon. Decisions bto the Sharehormal voting at
igher percentaons and may aal Resolutions,ween the requiesolution.
RY AND AUDIT
e conducted bthe Memorana Meeting of tmajority of Diration. The Act cd how duties apply to Prescriany.
d Companies aan Auditor andents for Compahe Act also reqedgeable and ee appointed upmpany’s annuanot serve as thfor more than f
le to Companieolder is also a must convene a
rely by electroparticipate in by Shareholdeolders entitledShareholders
age of the votinlso provide for, provided therrements for an
TORS
by electronic ndum of he Board may rectors given incontains certaiare to be bed Officers o
re obliged to d there are certany Secretariesuires that a experienced inpon incorporatial general he auditor or five consecutiv
es
an
nic
rs to
ng r a re is n
be n in
r
tain s,
n ion
ve
10. TAKEOVERS AND OFFERS
The Act provides for the procedure to be followed for amalgamation or mergers as well as schemes of arrangement. The Takeover Regulation Panel is responsible for co‐ordinating and regulating such transactions.
11. BUSINESS RESCUE AND COMPROMISE
The rehabilitation of Companies in financial distress is completely different from the requirements for judicial management under the present Companies Act. The Act provides for procedures for the business rescue of a Company in terms whereof a Business Rescue Practitioner is appointed to oversee the business rescue process.
The effect of a business rescue procedure is that:
• No legal proceedings may commence or proceed unless:
‐ with the consent from the Business Rescue Practitioner;
‐ with leave of a Court;
‐ for set‐off against a claim made by the Company in legal proceedings; or
‐ in criminal proceedings;
• No guarantee or surety by a Company may be enforced (except with leave of the Court); and
• Any time limit as to the right to commence proceedings or to otherwise assert a claim against the Company, is suspended during the rescue proceedings.
The Board of Directors may resolve that the Company begin rescue proceedings or a Shareholder, Creditor or Trade Union may apply to the Court to place the Company under supervision and commence rescue proceedings.
12. ENFORCEMENT AND COMPLIANCE NOTICES
The Act has various procedures for the enforcement of any provision or right in terms thereof or of a Company’s Memorandum of Incorporation or Rules, namely:
Alternative dispute resolution;
Adjudication by the Companies Tribunal;
Application to the High Court;
Filing a complaint to the Commission or the Takeover Regulation Panel.
The Commission or the Takeover Regulation Panel may issue Compliance Notices to a person whom they may on reasonable grounds believe to have contravened the Act or assented to, was implicated in or directly or indirectly benefited from a contravention of the Act.
Failure to comply with a Compliance Notice as aforesaid may result in an application to a Court for the imposition of an administrative fine or the matter may be referred to the National Prosecuting Authority. Administrative fines which may be imposed will be an amount not exceeding the greater of 10% of the Company’s turnover for the period during which the Company failed to comply with such Compliance Notice or the maximum amount prescribed in terms of the Act, [presently R1,000,000.00 (One Million Rand)].
13. TRANSITIONAL ARRANGEMENTS
All pre‐existing Companies continue to exist as a Company as if registered and incorporated in terms of the Act.
Pre‐existing Companies may, within 2 (two) years immediately following the general effective date of the Act, file (without charge) an amendment to its Memorandum of Incorporation to bring it in accordance with the new Act.
Close Corporations may still be registered up to the date that the Act becomes operative. The Act makes provision for a Notice of Conversion to be filed by a Close Corporation in order to convert the Close Corporation to a Company. No Close Corporation will be registered after the effective date of the Act. Existing Close Corporations will be allowed to continue trading as a Close Corporation, but it is possible that close corporations may in future be incentivized to convert to a Company.
TLi Group Companies
www.tli.co.za www.lisinfo.co.za www.theperformancegroup.co.za
TLi Lawyers 251 Main Avenue, corner Republic Ave Ferndale Randburg T: +27 11 326 1330 F: 086 651 6813 www.tli.co.za
14. CONCLUSION
The Act will definitely impact on the business of companies and there are some interesting changes and new challenges to the governance of companies. The above mentioned are only some of the important aspects and you are welcome to contact us for further information.
ADDITIONAL TLi CONTACTS
Theunis Liebenberg [email protected]
Dean Milton [email protected]
Maritza Breytenbach [email protected]
TLi Inc.
251 Main Avenue, corner Republic Road
Ferndale, Randburg
South Africa
T: +27 11 326 1330
F: +2711 326 1359
www.tli.co.za
.: TLi COMPANY PROFILE
TLi Company Profile - 2009
Service Portfolio
The TLi Group of Companies
The TLi Group of Companies include, TLi Inc (Corporate, Tax, Immigration and Labour
Lawyers), TLi Corporate Law Advisors (mainly focused on mergers, acquisitions and
structuring of various transactions), SLi (Property Lawyers), The Performance Group (IT
Solutions, Contract Management) and Legal Information Services (Company Secretarial and
Document management).
TLi - Company, Tax, Property and Labour Lawyers
The culture bred in TLi since its inception in 1995, is one of hard work and passionate
dedication in the pursuit of providing our clients with sound, innovative and tailor made legal
products and services.
It is this culture, combined with the outstanding legal practitioners and a wealth of
experience, which has led to TLi’s remarkable success as a client orientated legal service
provider amongst the cream of the crop in the legal industry.
TLi (a company duly complying with the Broad Based Black Economic Empowerment Act and
its regulations) is part of the TLi Group of Companies that forms a competitive structure of
Lawyers that service their clients’ commercial, labour, property, commercial litigation and
immigrational needs.
MUTUALLY PROFITABLE
AND LONG LASTING
BUSINESS RELATIONSHIPS
Sound legal advice is an asset to
any business. TLi has the skills
and expertise to provide a one
stop legal service to clients. Our
aim is to add value to our clients’
businesses by delivering the best
legal services and products
available in the market, and in so
doing, build up lasting mutually
profitable relationships.
SPECIALIST LEGAL TEAMS
Commercial Law
Property Law
Labour Law
Litigation
Tax Law
Immigration Law
WHY CHOOSE US?
Our firm’s attention to detail
and commitment to
understanding the business
needs of our clients within the
broader legal and corporate
perspective has led to us
earning the trust of some of
South Africa’s largest
commercial players.
Commercial Law
Listing of Companies on the JSE Turnkey Companies Shareholders/Joint Venture
agreements Liquidations Mergers and Acquisitions Commercial Contracts BEE Structures
Legal Information Services Company Registers Personal attendance on statutory
audit Company Secretarial Services Assistance with Directors/
Shareholders meetings Amendments to share capital
structures New Shelf Companies/CC’s Cipro annual returns
TLi Group Companies www.tli.co.za www.lisinfo.co.za www.theperformancegroup.co.za
TLi Company Profile - 2009
Property Law Property Transfers Bond Registrations Township Registrations Sectional Title Registrations “Bare Dominium” Transfers Purchase Agreements Commercial Property Finance
Labour Law Labour Management and Advice CCMA and Labour Court Litigation Disciplinary Hearings Negotiations with Trade Unions Human Resource Training Employment Contracts Litigation Litigation supporting the abovementioned
disciplines High Court and Magistrate Court litigation Banking Law Immigration Law Insurance Law Commercial Law National and Cross Border Recoveries
Tax Law Trusts and Wills Estate Planning Tax Planning, especially with regard to property Risk Management Business Planning & Structuring
Immigration Law
Corporate Permits Business Permits Work Permit s Intra Company Transfer Permits Permanent Residence Permits
We work closely with the Department of Home Affairs and the
Embassy of South Africa in various countries to assist our clients with
their immigration needs. We assist our corporate clients with
applications for Intra Company Transfer Permits (a permit that allows
employees from a Company abroad to work for a South African based
Company) as well as Corporate permits (a permit that allows a
Company to bring in a fixed amount of skilled workers from abroad).
For more information contact our Immigration team.
Email: [email protected]
Contact person: Maritza Breytenbach
For more information contact our Commercial Team:
Email: [email protected]
Contact person: Theunis Liebenberg
Company Secretarial / Commercial Services
The new Companies Act promises the beginning of a new era of
statutory compliance and Directors’ responsibility for non-compliance
with laws and to ensure good corporate governance.
The King III Report stands in conjunction with the new and current
Companies Act and cautions Directors on awareness of laws, rules and
standards applicable to Companies.
Directors of Public Companies must appoint a Company Secretary
who, in their opinion, has the requisite knowledge and experience to
carry out their duties.
Legal Information Services (Pty) Ltd, in association with TLi Inc, consist
of Lawyers with the necessary legal expertise to advise and assist
corporate clients on all the laws, rules and standards applicable for
the management and compliance with Company Law and Corporate
Governance requisites.
Apart from the infrastructure cost and time saving benefits of
outsourcing this responsibility to a capable legal firm, another benefit
is that the Directors of a Company re-direct their legal responsibility
and mitigate the risk of offences stemming from incorrect statutory
decisions.
TLi Inc is proud to say that as a niche firm, it has mastered the art of
providing tailor made commercial law and company secretarial
services to clients and by doing so have become an indispensible part
of their client’s legal solutions.
TLi Immigration
