“Seller’s remorse” and “subject to sale of the buyer’s property” – Can they sink the sale?

Logista_Nov2019-01“If you don’t like where you are, move. You are not a tree” (Jim Rohn)

The upcoming festive season, with its mass migrations of happy holiday-makers to their dream destinations, has always been a busy time for both sellers and buyers.

In these hard times however, an increasing number of sellers are feeling pressured to accept offers well under their expectations, so cases of “seller’s remorse” are much more likely now than they have been for many years. The question is, just how easy or difficult is it for a seller to escape a sale agreement signed in haste?

Equally common no doubt are sales “subject to the sale of the buyer’s property” – for a specified amount and within a specified time period. That raises an important question – must the buyer’s transfer actually be registered in the Deeds Office within the deadline period, or is enough that the buyer has signed a sale agreement for his/her property?

A recent High Court decision addressed both those questions, as well as two others relating to defences raised by a seller who changed her mind shortly after accepting the buyer’s offer (the judgment doesn’t say why she changed her mind, but the fact that a bank offered the buyers a bond of R3.9m suggests that the sale price of R2.6m may have been very low).

A serious case of seller’s remorse, and the 3 defences raised

In the case in question the seller had second thoughts shortly after accepting a R2.6m offer for her house from a couple who were married in community of property. When the seller then refused to pass transfer to the buyers, they asked the High Court to order her to do so.

Any one of the three defences put forward by the seller to the buyer’s claim could have sunk the sale, so let’s have a look at how the Court answered the three main questions they raised –

  1. Does “subject to successful sale of the buyer’s house” require transfer?

The sale was subject to the “successful sale” of the buyers’ property within 60 days, failing which the sale would lapse. The buyers had indeed “sold” their house by entering into a sale agreement for it, and their buyers had taken occupation. But, so the seller argued, that was not a “successful sale” because actual Deeds Office transfer hadn’t been registered within the 60 day period.

Bad defence, ruled the Court, commenting: “I cannot think for a moment that the parties had the intention that the [buyers] were to find a purchaser for the property, that they had to sign a deed of sale after a purchaser was found, that possible suspensive conditions in that deed had to be fulfilled, and that the registration of transfer into the purchaser’s name, all had to take place within the limited period of 60 days only … I therefore find that the phrase ‘successful sale’ in the present agreement means nothing more than the successful signing of a deed of sale” (emphasis added).

On a practical note, both seller and buyer in any property sale should have their attorneys confirm that the “subject to” clause specifies clearly what exactly is required. Is a signed sale agreement enough? Must all suspensive conditions have been met? Or must actual transfer have been registered? Provide enough time for your agreed requirements to be met, and cover scenarios like an unexpected glitch or delay in the buyer’s transfer (neither buyer nor seller wants to be in the position where a buyer can’t pay the purchase price when transfer is eventually tendered).

As a less important side note, the sale in this case was also subject to another suspensive condition. This was a “bond clause” requiring the buyers to obtain a bond within 30 days – which clause, held the Court, had been fulfilled by a bank informing the buyers in writing that their application for a mortgage loan was approved for a total amount of R 3.9m, well over the required R2.6m.

  1. Married in community of property – must both spouses sign?

The buyers being married in community of property, the seller argued that the sale agreement was invalid because only one spouse had signed it. Not so, held the Court, “both husband and wife have equal capacity to perform juristic acts and equal powers to manage the joint estate, which powers can in most cases be exercised without the consent of the other spouse”.

The Court found that this was not a case requiring such written consent (there are conflicting court decisions on this point so ask your attorney for specific advice if this question arises in your sale*), therefore the signing spouse “had full capacity to bind the joint estate by signing the Offer to Purchase without the written consent of the Second Applicant”.

*(Best practice of course is to avoid any possibility of dispute by getting both signatures wherever possible!)

  1. Must acceptance of an offer be communicated to the buyer?

The seller claimed to have called her estate agent 30 minutes after signing the agreement, instructing her to withdraw it and terminating her mandate as agent. Thus, argued the seller, the acceptance of the offer was never validly communicated to the buyer and no contract ever came into existence.

Not so, held the Court. Although our law is that “unless the contrary is established, a contract comes into being when the acceptance of the offer is brought to the notice of the offeror”, no communication of acceptance was necessary in this particular case. The offer was headed “Offer to Purchase (This constitutes an Agreement of Sale upon Acceptance by the Seller)” and it stated that “the Seller agrees to sell the immovable property, together with the improvements thereon, to the Purchaser whom purchases from the Seller on the terms and conditions as set out in this Agreement.”

The unavoidable inference, said the Court, was that the parties intended “that the mode of acceptance would be the signature of the First Respondent, and nothing more.”

“Sign in haste, repent at leisure”

Our law as a general rule holds you to your agreements, so sign a sale agreement and you will have an uphill battle getting out of it.

As always speak to your attorney before you sign anything. Proper advice upfront is the best way to avoid seller’s remorse (and buyer’s remorse for that matter), grey areas that risk dispute and litigation, and uncertainty over whether your rights are properly protected in the sale agreement.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Posted in Property | Tagged , , , | Comments Off on “Seller’s remorse” and “subject to sale of the buyer’s property” – Can they sink the sale?

Beplan jy om te trou? Moenie die hvk en die 3 soorte huwelike vergeet nie

Logista_Nov2019-02“And she’s got brains enough for two, which is the exact quantity the girl who marries you will need” (P.G. Wodehouse)

Die lang trouseisoen het met die lente en met die somer aangebreek. Die kans is goed dat selfs indien jy nie self beplan om te trou nie, jy van iemand weet wat op die oomblik oorweeg om in die huwelik te tree. Indien wel, is dit ‘n goeie idee om hierdie artikel vir hulle aan te stuur.

Die beplanning en voorbereiding vir jou troudag is ‘n opwindende en besige tyd, en jou lysie van “Dinge Om Te Doen” / “Aksielys” is beslis reeds lank. Boonop is jy gedruk vir tyd en jou aandag is verdeeld. Dit is dus maklik om die “vervelige” regsaspekte en soortgelyke dinge laag op jou lysie te plaas.

Moet dit nie oorsien nie. ‘n Besoek aan julle prokureur is noodsaaklik. Dit is nie net ‘n nagedagtenis om tussen “Bespreek Airbnb vir Tannie Soekie” en “Was die hond” in te prop nie.  Eerste op die agenda vir jou regskonsultasie is ‘n HVK…

Jou HVK – wat is dit en waarom is dit noodsaaklik

Jou HVK of “voorhuwelikse kontrak” is ‘n ooreenkoms wat jy met jou aanstaande gade sluit, voordat julle trou, wat julle finansiële (en tot ‘n sekere mate julle persoonlike) sake reguleer.

Moenie die idee van ‘n HVK afskiet omdat jy dink dat dit ‘n erkenning is dat jou huwelik kan misluk nie. ‘n HVK is niks meer en niks minder as ‘n uiters noodsaaklike deel van die beplanning van jou toekoms nie. Daar is twee redes hiervoor –

  1. Eerstens, kom ons aanvaar dat julle huwelik gesond en gelukkig gaan wees. Egskeidingstatistieke wys egter dat daar wel ‘n kans is dat, vir een of ander rede, en op een of ander onvoorsienbare tydstip in die toekoms, een of beide huwelikspartye ‘n egskeidingsprokureur gaan besoek. Wie se eerste vraag waarskynlik gaan wees: “Wys vir my julle HVK.”
  1. Onthou die HVK kom ook ter sprake wanneer een van julle tot sterwe kom. ‘n Oningeligte besluit nou kan later ernstige nagevolge inhou, nie net vir jou nie, maar ook vir jou gade en mettertyd vir jou kinders, gedurende jul huwelik en wanneer (nie as nie) een van julle tot sterwe kom.

Kies die gepaste huweliksbedeling wat reg is vir julle.

Ons regstelsel maak voorsiening vir drie opsies, wat ons hieronder bespreek.

Hou in gedagte dat hierdie slegs ‘n opsomming van die verskillende opsies is. Geen artikel kan al die verskillende individuele faktore wat jy in ag moet neem volledig bespreek nie. Daarom is ‘n besoek aan jou prokureur – lank voor die troudatum – noodsaaklik. Vra wat die regte opsie vir jou spesifieke behoeftes en omstandighede is, en maak seker jul HVK word dienooreenkomstig opgestel en aangepas.

Jou drie opsies, en ‘n slaggat vir die wat nie hul situasie bedink nie.  

  1. Getroud in gemeenskap van goed: Al julle bates en laste word in een “gesamentlike boedel” saamgesmelt, en elkeen van julle het ‘n onverdeelde halwe aandeel in hierdie enkele boedel. Alles (met slegs ‘n paar spesifieke uitsonderings) wat jy in die huwelik inbring, of gedurende die huwelik bymekaarmaak vorm deel van hierdie gesamentlike boedel. Jy sal jou gade se skriftelike toestemming vir sekere belangrike transaksies benodig. By beëindiging van die huwelik (egskeiding of dood) word die gemeenskaplike boedel (insluitende winste en verliese) gelykop tussen julle verdeel, ongeag wat elkeen van julle in die huwelik ingebring of daartoe bygedra het. Indien een van julle skuld maak of finansiële probleme optel, is die gemeenskaplike boedel daarvoor verantwoordelik – jy kan dus alles verloor indien die gemeenskaplike boedel gesekwestreer word. Hierdie faktore hou in dat dit nie ‘n geskikte opsie vir die meeste paartjies is nie. Let veral daarop dat hierdie die verstekposisie in Suid-Afrika is. As julle niks doen nie en geen formele ooreenkoms voor julle huwelik sluit nie, sal julle outomaties in gemeenskap van goed getroud wees.
  1. Getroud buite gemeenskap van goed sonder die aanwasbedeling: Jou eie bates en laste, beide wat jy inbring en dit wat jy gedurende die huwelik verkry, bly uitsluitlik joune om mee te handel na jou goeddunke – jy benodig dus nie jou gade se toestemming vir enige van jou eie transaksies nie. Jy is nie vir jou gade se aparte skulde aanspreeklik nie, en indien jou gade se boedel gesekwestreer word kan jy jou eie bates terugeis (jy sal moet kan aantoon dat dit wel aan jou behoort). Let daarop dat die “aanwasbedeling” (sien opsie 3 hieronder) van toepassing sal wees, tensy jou HVK dit uitdruklik uitsluit. Die uitsluiting van die aanwasbedeling sal die regte besluit vir sekere huwelikspartye wees. Veral ouer mense en tweede huwelike waar die partye elkeen reeds bates en boedels opgebou het. Neem net kennis dat sonder die aanwas, die armer gade (dikwels ‘n gade wie se bydrae tot die huwelik meer op die huishoudelike front, en minder finansieël van aard was) die risiko loop om na baie jare in die huwelik in ‘n uiters swak finansiële posisie gelaat te word.
  1. Getroud buite gemeenskap van goed met die aanwasbedeling: Hierdie bedeling word tereg dikwels as die regverdigste en gewildste beskou. Dit is steeds nie noodwendig die beste opsie vir almal nie. Soos by die vorige opsie, bly jou eie bates en laste uitsluitlik joune, en benodig jy nie jou gade se toestemming om daarmee te handel nie. Jy kan ook jou eie bates teen jou gade se skuldeisers beskerm. By beëindiging van die huwelik (egskeiding of dood) deel julle gelykop in die “aanwas” (groei) van julle bates (met enkele uitsonderings) gedurende die huwelik. Die voorbeeld hieronder illustreer die toepassing van die aanwas-

table

 

 

 

 

 

 

 

 

Is julle reeds getroud?

  • Verskillende beginsels is van toepassing indien jy voor 1 November 1984 getroud is. Vra jou prokureur vir meer besonderhede hieroor.
  • Indien jy vir watter rede ookal jou huweliksbedeling wil verander, of indien jy ‘n “nahuwelikse kontrak” wil sluit, mag dit dalk vir jou ‘n opsie wees. Dit is nie ‘n eenvoudige proses nie en ook nie goedkoop nie, want dit behels ‘n volledige aansoek na die Hooggeregshof, voordat die kontrak in  die Aktekantoor geregistreer kan word. Vra jou prokureur vir meer inligting hieroor.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Posted in Contracts | Tagged , , , , | Comments Off on Beplan jy om te trou? Moenie die hvk en die 3 soorte huwelike vergeet nie

Employees on probation: Can you dismiss for poor performance?

Logista_Nov2019-03“… arbitrators should hesitate to interfere with employer’s decisions on whether probationary employees have attained the required performance standard, or with the standards themselves” (extract from judgment below)

Our laws allow employers to hire new employees on a probationary basis, and doing so can give both parties time to assess how good the “fit” actually is and whether the employee should become a permanent one.

Employers must however avoid falling into the trap of thinking that they can dismiss a probationary employee at will; on the contrary they must ensure both “substantive” and “procedural” fairness at all stages of the process.

But how do you ensure fairness?

The Labour Relations Act’s “Code of Good Practice: Dismissal” provides important guidelines in this regard (note that what is set out below is of necessity only a summary so be sure to take full legal advice on how the Code’s detailed requirements will apply to your specific case) –

  • It entitles employers to require new employees to serve a probationary period “before the appointment of the employee is confirmed”. It must be for a “reasonable duration”.
  • The employer must use the period of probation to assess performance. What does that mean? Per the Labour Appeal Court (LAC) in the recent decision discussed below “…the purpose of a probationary period is not only to assess whether the employee has the technical skills or ability to do the job. It also serves the purpose of ascertaining whether the employee is a suitable employee in a wider sense. This allows consideration of matters of “fit” – aspects of demeanour, diligence, compatibility and character”.
  • The employer must give the employee reasonable assistance, training and guidance.
  • An employer is entitled to extend the probationary period in order to complete any performance appraisal.
  • Importantly, a lower standard of substantive fairness applies during the probation period than would be the case with permanent employment: “Any person making a decision about the fairness of a dismissal of an employee for poor work performance during or on expiry of the probationary period ought to accept reasons for dismissal that may be less compelling than would be the case in dismissals effected after the completion of the probationary period.”

    That provision, held the LAC, “is a clear indicator that arbitrators should hesitate to interfere with employer’s decisions on whether probationary employees have attained the required performance standard, or with the standards themselves”.

Let’s have a look at that LAC decision as it provides a good example of these principles in action…

Dismissed for poor work performance 

  • A non-profit organisation employed a supply chain coordinator under an employment contract which required a 6 month probationary period to give the employer time to assess the employee for suitability for permanent employment.
  • Concerns over the employee’s performance arose during her probationary period, she was consistently made aware (in eight performance meetings and appraisals over a three month period) that her performance was not up to standard, and eventually a hearing concluded that she “lacked the understanding and ability to carry out her assigned tasks despite having been given assistance and a reasonable opportunity to improve”.
  • When she was dismissed for poor work performance she referred her dismissal to the CCMA (Commission for Conciliation, Mediation and Arbitration). The commissioner held her dismissal to have been unfair and ordered her reinstatement retrospectively to the date of dismissal. The Labour Court declined to reverse this decision.
  • Importantly, the commissioner had concluded that the employee automatically became a permanent employee when her probation ended (her actual dismissal took place only after expiry of the probationary period) and that this indicated that her employer was satisfied with her performance and that she had satisfactorily completed her probation period. Moreover, held the commissioner, the employer had not properly considered sanctions or remedies other than dismissal and the employee should have been retrained and her responsibilities adjusted.
  • Not so, held the LAC on appeal. When the probation period came to an end the employer was engaged in an ongoing review and evaluation process and by inference intended to extend the probation period until the review and evaluation process was completed. The lower standard of fairness accordingly applied and the evidence revealed “a performance problem that sufficiently justified the [employer]’s decision, after extensive evaluation, counselling and guidance, not to confirm [the employee]’s suitability for permanent appointment.” As an NPO with limited resources, the employer had no obligation to re-write the employee’s job description.
  • The dismissal was accordingly fair and the CCMA’s reinstatement award set aside.

A final thought – as always, our labour laws being so complex and the penalties for getting them wrong so severe, take specific legal advice on your particular matter!

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Posted in Employment | Tagged , , , | Comments Off on Employees on probation: Can you dismiss for poor performance?

Dit is die moeite werd om misdaad aan te meld! 20 Jaar gevangenisstraf vir eerste oortreder se bedrog van R4.9m

Logista_Nov2019-04“The scourge of white collar crime, especially fraud, is currently the order of the day in our country. Fraud is a cancer that is crippling our country from the core and takes away from the poorest of the poor” (Geneem uit hierdie uitspraak.)

‘n Mens kan soms dink dat die hoë vlakke van misdaad, wat ons oënskynlik om elke hoek en draai in vandag se samelewing aantref, hier is om te bly en dat dit sinneloos vir slagoffers is om dit aan te meld.

Indien almal van ons nalaat om misdaad aan te meld wanneer dit gebeur, en indien ons nie deurlopend opvolg om te verseker dat behoorlike ondersoeke en vervolgings plaasvind nie, word ons howe hierdeur belemmer. Dit is nie konstruktief nie. Wanneer ons howe die kans gegun word, tree hulle wel streng teen misdadigers op. ‘n Onlangse uitspraak van die Appèlhof is maar een van vele sulke voorbeelde –

Die SETA werknemer wat R4.9m gesteel het 

  • Die bedrieër ter sprake was vir twee jaar lank in diens by ‘n Sektorale Onderwys- en Opleidingsowerheid (SOOO). Een van die SOOO se funksies was om toelae aan werkgewers, onderwys- en opleidingsverskaffers en werknemers toe te wys. Een van die werknemer se pligte was om die bankbesonderhede van toelaag-begunstigdes op die SOOO se betalingstelsel te laai.
  • Hy en twee medepligtes (een van hulle was ‘n bankamptenaar) het die toelaes op 26 geleenthede en op bedrieglike wyse na ‘n ander bankrekening herlei. Die bedrae ter sprake het gewissel van minder as R100,000 tot byna R1.4 miljoen.
  • Die bedrog is “toevallig” ontdek, etlike maande nadat hy reeds by die SOOO bedank het. Hy het in die Hof vir Gespesialiseerde Handelsmisdade op 26 aanklagte van bedrog skuldig gepleit, met ‘n totale bedrag van R4,898,158.21 wat verduister is. Hy is tot 20 jaar gevangenisstraf gevonnis.
  • Die minimum vonnis bepalings van die Strafregwysigingswet was hier van toepassing. Hiervolgens moet selfs eerste oortreders gevonnis word tot ‘n minimum van 15 jaar gevangenisstraf vir enige bedrog waar die bedrag meer as R500,000 beloop (R100,000 in die geval waar persone saamgewerk het, en R10,000 vir wetstoepassers) tensy “wesenlike en dwingende omstandighede bestaan wat die oplegging van ’n mindere vonnis regverdig.”
  • Die Hooggeregshof het die bedrieër se aansoek om verlof tot appèl teen die vonnis geweier. Hierna nader hy die Hoogste Hof van Appèl om hulp.
  • Die Hof was nie beïndruk met die bedrieër se bewering dat hy berou getoon het of met sy aanbod om met ‘n terugbetalingsplan vorendag te kom nie. Alhoewel dit sy eerste oortreding was, het die Hof bedrog beskryf as “’n kanker wat ons land van binne af benadeel” (eie vertaling). Die Hof het opgemerk dat “diegene wat ernstig [hierdeur] benadeel is, die ongeveer 200 jongmense uit benadeelde agtergronde was, wat van onderwys- en vakleerlingskap-geleenthede ontneem is, wat hulle in staat sou stel om hulself in die samelewing op te hef. Uiteindelik sou hierdie vakleerlingskappe hulle in staat gestel het om werk te kry, iets wat skaars in ons land is.”
  • Die eindresultaat – die bedrieër moet sy gevangenisstraf van 20 jaar ten volle uitdien.

Ander misdade met “minimum vonnisse”

‘n Hele reeks van ander ernstige oortredings is ook onderhewig aan soortgelyke minimum vonnisse – moord, roof, verkragting, korrupsie, deviesebeheer-misdrywe (beweging van fondse na en van die buiteland), mensehandel vir seksuele doeleindes, dwelmsmokkelary, en dies meer. Dit is ‘n lang lys, en die algemene publiek en spesifiek die slagoffers van misdaad kan hierin bemoediging vind.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Posted in Protection | Tagged , , , , | Comments Off on Dit is die moeite werd om misdaad aan te meld! 20 Jaar gevangenisstraf vir eerste oortreder se bedrog van R4.9m

Your websites of the month: Buying or selling anything? How to use facebook marketplace

Logista_Nov2019-20By all accounts Facebook Marketplace is giving Gumtree, OLX and other online classifieds a real run for their money in both the personal and business markets. It is now used every month by 800 million people in 70 different countries.

Have a look at Facebook’s “How Marketplace Works” guide here for a step-by-step guide on buying and selling anything, sorting by distance or new listings, notifications, following, safety and trust issues and so on.

For more ideas, and for 5 ways to use Facebook Marketplace for your business, read “Facebook Marketplace: The Marketer’s Guide” here.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Posted in Business, Communication | Tagged , , , | Comments Off on Your websites of the month: Buying or selling anything? How to use facebook marketplace

Tax Clearance Certificate being terminated

Logista_Sep-03The issuing of the printed Tax Clearance Certificate (TCC) will be terminated after 25 October 2019, as we are fully implementing a more secure and electronic Tax Compliance Status (TCS) system.

Since the implementation of the TCS system in 2015, we advised taxpayers that our goal was to terminate the use of the printed TCC, and would stop issuing TCCs at a future date.

We have now reached a point where the ability to print a TCC will be terminated, and the TCS PIN will have to be used by taxpayers to share their tax compliance status electronically with third parties. In addition to terminating the ability to obtain and/or print a TCC, all active TCCs that are currently in circulation will be cancelled. You will therefore no longer be able to verify or print it.

You are encouraged to familiarise yourself with the electronic TCS system and the use of the TCS PIN, so as to be prepared when we entirely terminate the TCC concept.

The secure and convenient electronic TCS PIN provides you with a way to authorise any third party (an organisation or government department) to view your tax compliance status online via eFiling by providing them with the PIN. It will present them with your overall tax compliance status as at the date and time they view it, instead of your tax compliance status as it was at the date when the TCS PIN was issued to you. To protect the confidentiality of taxpayer information, no other information will be accessible to a third party through this process.

It is important to remember that your tax compliance status is not static, but changes according to your continued compliance with tax obligations.

For more information on how to use the TCS PIN, please refer to the “Guide to the Tax Compliance Status Functionality on eFiling”.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Posted in Accounting | Tagged , , | Comments Off on Tax Clearance Certificate being terminated

Your shareholder agreement versus your Memorandum of Incorporation – There is only one winner

Logista_Sep-03Shareholder agreements usually form the backbone of shareholder relationships as they govern, for example, how shareholders sell their shares, how shareholder disputes are settled and the type of authority required for certain transactions.

The Companies Act makes it clear that:

  • If there is any conflict between the MOI (Memorandum of Incorporation – the statutory document which per the Companies Act “sets out the rights, duties and responsibilities of shareholders, directors and others within and in relation to a company”) and the shareholders’ agreement, the MOI will prevail.
  • Similarly, if there are any differences between the Companies Act and the shareholders’ agreement, then the Companies Act will take precedence.

The case that tested a shareholder agreement v the MOI

A company issued a new MOI in 2012. This MOI conflicted with the shareholders’ agreement and some shareholders approached the Court to have an order granted that the shareholders’ agreement governs the relationship amongst shareholders and thus supersedes the MOI. The shareholders’ agreement contained a non-variation clause which stated that no changes to the agreement could be made unless all shareholders agreed in writing.

The Court refused to grant the order and said that the issuing of the new MOI was done lawfully and in line with the requirements of the Companies Act. The shareholders’ agreement so materially conflicted with the MOI that it was now effectively null and void.

As a shareholders’ agreement is fundamental to the workings of shareholders, it is important to carefully consider how the MOI will relate to the shareholders’ agreement. Thus, any potential conflicts should be ironed out when drafting either a new MOI and/or a shareholders’ agreement.

Take your accountant’s advice when doing this to avoid extra cost, aggravation and time taken to resolve any differences which may surface when you need to enforce your shareholders’ agreement.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Posted in Business | Tagged , , , , | Comments Off on Your shareholder agreement versus your Memorandum of Incorporation – There is only one winner

Be ready for SARS employee audits

Logista_Sep-01

“Forewarned is forearmed” (Wise old saying)

SARS is having trouble meeting its revenue targets and this is clearly putting enormous pressure on the South African economy. Further economic deterioration in the economy will probably result in a downgrade to junk status by Moodys. This will mean that all three of the major ratings agencies will have consigned our economy to junk status which means further currency weakness and probably a recession.

Most of the tax paid in South Africa is paid by individuals and it is logical that SARS will focus on maximizing its revenue with this segment of taxpayers. Thus, one can expect more auditing by SARS of employees’ tax returns.

Implications for employees

Any SARS queries will be initially directed at employees who will have to justify what they have claimed. Most employees will go back to their employer and say, for example, ‘there is this query on my car allowance and how should I respond?’

It would make sense for employers to ask all employees to run SARS’ questions through the employer so that SARS receive a consistent answer (employees may have their own tax adviser to help the employee respond to the query, but the adviser may not understand how the employer’s tax administration works).

Implications for employers

If SARS are not satisfied with the responses to their queries, they may start to look at how the employer administers its employee tax obligations.

SARS places a substantial onus on employers to collect tax and to pay it over to the Revenue authorities. This involves a knowledge of taxes like:

  • Remuneration and benefits paid to:
    • expatriate employees
    • local employees
    • executives and directors
  • Retirement benefits for employees, executives and directors
  • Payments to labour brokers and independent contractors
  • Share incentive schemes
  • Cash book payments
  • Gifts, prizes, awards and gift vouchers
  • Loans to employees
  • Company cars
  • Travel allowances and reimbursements
  • The Employment Tax Incentive (ETI).

These taxes are all different and require an understanding of tax legislation and the administrative systems required to process and collect the taxes.

In making their enquiries of the employer, SARS will most likely look to get an understanding of the employer’s systems and if dissatisfied with the response may audit the employer.

An audit can take up to one year to complete and apart from the stress of the audit there will be penalties, interest plus tax due where SARS finds the tax has been incorrectly calculated. SARS can also go back several years when they find errors, and this can become a costly exercise. At the moment, SARS appears to be homing in for the most part on the ETI, labour brokers, company cars and travel allowances – perhaps therefore pay particular attention to these taxes.

So, it is a prudent idea to frequently test how robust your systems are and how well you understand the tax laws. SARS often tweaks the law and issues interpretation notes on how businesses should levy and pay over tax.

Having an independent viewpoint can be invaluable when testing your systems – make use of your accountant to help you as apart from being at arm’s length he or she has the skill and experience to assist in this important exercise.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Posted in SARS | Tagged , , , | Comments Off on Be ready for SARS employee audits

Communicate with candour – the “Oracle of Omaha” speaks

Logista_Sep-02“The CEO who misleads others in public may eventually mislead himself in private” (Warren Buffett)

Companies that are sustainable in the long term are honest with themselves and with all the businesses’ stakeholders.

The starting point is candour

If you are open and honest in your dealings with people you will gain their trust and once you have this people will follow you. The word “candid” comes from the Latin candeo which means to illuminate – the candid person is not afraid to shine a light on and confront the problems facing the business.

Make this a key aspect of your leadership

Train yourself to show candour in all your dealings. Doing this will mean you will deliver a consistent and increasingly trustworthy message to the company’s stakeholders. You will also find that your staff will follow this example which in turn will result in a tightly focused business. In the long term this will make the company more sustainable and profitable.

It works! The Candour Analytics Survey

In the United States one consultancy has attracted a lot of attention by drawing up and publishing such a survey. It has developed a model that measures the various communications issued by the company along with financial numbers and looks at a company from several angles:

  • Capital Stewardship;
  • Strategy;
  • Accountability;
  • Vision;
  • Leadership;
  • Stakeholder Relationships; and
  • Candour.

This model looks at the clarity of the communication and gives negative marks to what it considers “FOG” (Fact deficient, obfuscating, generalities). What is interesting about the Candour Analytics Survey is that the higher corporations score in this survey, the more they outperform the market – the top 25% Candour-ranked companies outperformed the S&P Index nearly threefold in 2017-2018 (29.7% versus the 11% return of the S&P Index).

As the consultancy says, candour is a proxy for trustworthiness.

Does it have credibility?

One of the biggest fans of this survey is Warren Buffett who has now made candour one of his key principles and as he stated in a communication to his shareholders: “…We will be candid in our reporting to you, emphasizing the pluses and minuses important in appraising business value. Our guideline is to tell you the business facts that we would want to know if our positions were reversed. We owe you no less.”

There is strong empirical evidence that the survey is meaningful and the endorsements it has obtained show it is well worth making Candour one of your key principles.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Posted in Communication | Tagged , , | Comments Off on Communicate with candour – the “Oracle of Omaha” speaks

Spying on employees is becoming a big industry

Logista_Sep-04In a recent UK survey 72% of employees felt that their employers were eavesdropping on them.

Gathering information on employees is now a multibillion dollar industry and is continuing to grow as more sophisticated technology is launched.

Why are employers doing this?

A good example of how keeping tabs on employees can be beneficial is the destruction of the World Trade Centre on 11 September 2001, where many firemen died needlessly searching for people who were not in the buildings. Technology is available that pinpoints who is in an area and how long it will take to get everyone to safety.

It is also possible to determine when people enter sensitive areas or try to access confidential information.

An employer also needs to know if its staff are passing on business secrets or running down the company to friends, fellow employees and the public – damage to a firm’s business reputation is one of the biggest existential risks faced by a company.

Employer versus employee

It is a balancing act as employees have a right to privacy and a right to their personal information being protected whilst as noted above the employer, in order to trade successfully, needs to be aware of potential harmful employee actions.

Maintaining trust

The most important issue is to maintain trust between employer and employee. Once this is undermined the harm to both parties can be lasting and severe.

Management need to be open with their staff if they intend to monitor them. Tell the staff what you plan to track (emails, social media, telephone conversations etc) and that any employee can request the information you have gathered and how you will use it, and destroy it once it is no longer needed. Update staff contracts and conditions of employment with these measures.

An open process with staff will help to clear up uncertainties they have and will keep the trust between you and your employees. It will also enable your business to protect itself against reputational damage from employees leaking negative information about your business.

Protection of Personal Information Act (POPIA)

POPIA awaits the announcement of a commencement date before the one year grace period starts running and among other things will allow staff to compel employers to give their staff access to all the information that the business holds on them.

Technological advances have made it feasible to intercept and analyse your employees’ communications. In view of the arrival of POPIA and more importantly the relationships you have with your staff, think about this carefully, particularly as there will be harsh penalties for any material POPIA lapses.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Posted in Protection | Tagged , , | Comments Off on Spying on employees is becoming a big industry