Email management system? Get it before it gets you

If your company uses emails to communicate with clients, then it’s not enough to just rely on traditional ways of managing email, such as backing up emails periodically. There needs to be a well-equipped email management system in place that will keep your business safe.

The key point that relates to the heavy use of email, is the maintenance of the integrity of the email, and being able to prove that integrity. Unfortunately, you can’t simply do nothing and leave your email system as is and hope for the best. Firstly, it is important to understand the legal requirements. This includes the Electronic Communications and Transaction Act, 2002, or the ECT Act.

The ECT Act provides that information is not without legal force and effect simply because it is in electronic form. These are some of the rules set out by the ECT Act regarding electronic communications.

  1. An electronic document must be captured, retained and retrievable.
  1. Electronic documents must be accessible so as to be useable for subsequent reference, this includes the origin, destination, date and time it was sent or received.
  1. If a signature is required, it must be accompanied by an authentication service.

So what should you do?

All companies who wish to comply with the regulations should implement an effective email management system. The core requirements of a good email management system are as follows:

  1. The ability to monitor and intercept email;
  1. Effective capturing of all email;
  1. Cost effective storage of all email and efficient discarding of email that has lost its business value or is no longer required for legal or regulatory or compliance;
  1. Efficient and cost effective restoration of email;
  1. The ability to maintain the integrity of email and the contents thereof; and
  1. The ability to audit email use in order to be able to prove integrity.

Although it seems like a trivial matter, it is worthwhile to implement an email management system in your company. It will help protect your business in the event that you need a record of communication due to an incident or contract dispute. New regulations introduced by POPI will also make this a necessary part of how your company handles information.

Reference:

  • The Electronic Communications and Transaction Act, 2002

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Owning property without a will

If you die without a will, an administrator will have to be appointed to administer your estate which will be distributed according to the laws of intestate succession. As such, your assets may not be distributed as you would have wished. It also means that the process will be delayed and that there will be additional expense and frustration which most people would not want to inflict on their loved ones during a time of loss.

Marriage and property

When drafting your will, it’s important to consider the nature of your relationship with your ‘significant other’. If you are married in community of property, you only own half of all assets registered in your name and that of your spouse. Your spouse therefore still remains a one half share owner of any fixed property you may want to bequeath to a third party which could potentially present difficulties.

If you are married in terms of the accrual regime, the calculation to determine which spouse has a claim against the other to equalise the growth of the respective estates only occurs at death. Your spouse may therefore have a substantial claim against your estate necessitating the sale of assets you had not intended to be sold.

Alongside your will, you should also prepare the following in relation to any immovable property you may own:

  1. State where your title deeds are kept and record any outstanding bonds and all insurance
  1. File up-to-date rates and taxes receipts
  1. Record details of the leases on any property you have
  1. State who collects your rent
  1. State who compiles your yearly accounts
  1. State where your water, lights and refuse deposit receipts are kept

If you die without a will

According to the according to Intestate Succession Act, 1987, your estate will be distributed as follows:

  1. Only spouse survives: Entire estate goes to spouse.
  1. Only descendants survive: Estate is divided between descendants.
  1. Spouse & descendants survive: The spouse gets R250 000 or a child’s share and the balance is divided equally between the spouse and descendants.
  1. Both parents survive: Total share is divided equally between both parents.
  1. One parent: Total Estate goes to the parent.
  1. One parent & descendants: Half the Estate goes to the parent; balance is divided equally amongst descendants.
  1. No spouse; No descendants; No parents; but descendants through mother & descendants through father: Estate divided into two parts: half to descendants through mother; half to descendants through father.
  1. No spouse; No descendants; No parents; No descendants through mother or father: Full Proceeds of the Estate has to be paid into the Guardians Fund in the event of no descendants whatsoever.

References:

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

The validity of tax invoices: It is your responsibility

The audits of Value-Added Tax (VAT) returns by the South African Revenue Service (SARS), have increased the focus on the validity of tax invoices for the purposes of VAT.

A VAT vendor submitting VAT returns is responsible for ensuring that all invoices included in the returns comply with the relevant legislation. If valid tax invoices cannot be provided at the time of a VAT audit, the vendor may lose up to 100% of the input tax being claimed on the invoice, even if an amended valid invoice can be provided subsequent to the audit. Furthermore, serious penalties, interest and other consequences may be imposed on the VAT vendor for errors, intentional omissions and fraud.

The requirements

Section 20 of the Value-Added Tax Act, no 89 of 1991, together with the VAT404 Guide for Vendors as updated in March 2012, sets out the requirements for a valid tax invoice.

A VAT vendor must issue a tax invoice within 21 days of the supply having been made where the consideration for the supply exceeds R50, whether the purchaser has requested this or not. If the consideration for the supply is R50 or less, a tax invoice is not required. However, a document such as a till slip or sales docket indicating the VAT charged by the supplier, will be required to verify the input tax.

The requirements for tax invoices of which the consideration or taxable supply is more than R5 000 are:

  1. the words “tax invoice” should be displayed;
  1. name, physical address and VAT registration number of the supplier name, physical; address and VAT registration number of the recipient;
  1. original serial number of the tax invoice;
  1. the date of issue of the tax invoice;
  1. full and proper description of the goods sold and / or services rendered;
  1. quantity or volume of goods and / or services supplied; and
  1. total amount of the invoice and VAT amount in South African currency (except for certain zero-rated supplies).

The requirements for tax invoices of less than R5 000 are:

  1. the words “tax invoice” should be displayed;
  1. name, physical address and VAT registration number of the supplier;
  1. original serial number of the tax invoice;
  1. the date of issue of the tax invoice;
  1. full and proper description of the goods sold and / or services rendered;
  1. total amount of the invoice and VAT amount in South African currency (except for certain zero-rated supplies).

Second-hand goods

In the case of second-hand goods purchased from a non-vendor, the purchaser has to record the following information:

  1. name, address and identity number of the supplier, confirmed by the person’s identity document or passport. (If the value of the supply is equal to or greater than R1 000, a copy of this document must be retained by the purchaser. If the non-vendor is a juristic person, a letterhead or similar document stating the name and registration number of the juristic person is required);
  1. date of acquisition;
  1. quantity or volume of goods;
  1. description of the goods;
  1. total consideration paid for the supply; and
  1. declaration by the supplier stating that the supply is not a taxable supply.

Conclusion

If a vendor fails to deduct an input tax in respect of a particular tax period, that input tax may be deducted in a later tax period, but limited to a period of five years from the date that the particular supply was made. However, when a vendor becomes aware of an output tax not declared in the relevant period, a corrected VAT return for that specific period should be submitted. It is not acceptable to declare the output tax in the next period and SARS may impose penalties and interest on the output VAT omitted.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Influence on estate planning

The purpose of this communication is to inform clients of certain tax increases and proposals that will have an effect on Estate and Financial Planning. Only those changes and proposals directly affecting Estate Planning will be dealt with.
1. DIVIDEND WITHHOLDING TAX

Dividend income paid to shareholders was taxed at a rate of 15 per cent. The dividend withholding tax rate was increased by 5 percent to 20 percent.

The new rate is applicable to all dividends declared on or after the 22nd of February 2017.

2. CAPITAL GAINS TAX

The inclusion rates, which increased substantially in the 2016 budget, has remained unchanged for the 2017/2018 tax year. However, the increase in the marginal tax rate for individuals and trusts have an effect on the effective rate of Capital Gains Tax.

2.1 Individuals/Special Trusts:

  • Inclusion rate: 40% (remains unchanged)
  • Maximum effective rate: 18% (currently 16.4%)

2.2 Companies:

  • Inclusion rate: 80% (remains unchanged)
  • Effective rate: 22.4% (remains unchanged)

2.3 Trusts:

  • Inclusion rate: 80% (remains unchanged)
  • Effective rate: 36% (previously 32.8%)

2.4 Annual exclusion and exclusion on death:

  • Annual exclusion:R 40 000 (remains unchanged)
  • Exclusion in year of death: 300 000 (remains unchanged)

Effective for years of assessment commencing on or after 1 MARCH 2017.

3. TRANSFER DUTY

There has been certain adjustments to the Transfer Duty rates. The duty free threshold has been increased from R750 000 to R900 000. On transfers of property valued above R10 000 000 Transfer Duty will amount to R933 000 (previously R937 500) plus 13% of the value above R10 000 000.

The rates between R900 000 and R10 000 000 has been adjusted proportionately.

Effective for property acquired on or after 1 MARCH 2017.

4. ESTATE DUTY

No amendments to the rate or legislation was announced.

5. DONATIONS TAX

No amendments.

6. MEASURES TO PREVENT TAX AVOIDANCE THROUGH TRUSTS

In order to curb the use of interest-free or low-interest loans to finance the acquisition of assets by trusts, Section 7C was enacted as discussed in numerous previous circulars.

Section 7C does not apply to interest-free or interest-free loans to a company, even if the shares are held by a trust. This was discussed with SARS and Treasury during discussions of this section, but no changes in this regard ensued.

This “omission” clearly was too obvious to be overlooked by the legislator. For this reason the following statement contained in the Budget Review is, to say the least, perplexing:

“However, some taxpayers have already attempted to circumvent the anti-avoidance measure by making low-interest or interest-free loans to companies owned by a trust. To counter abuse, it is proposed that the scope of this anti-avoidance measure be extended to cover these avoidance schemes.”

At this point in time we have no indication of what the legislation will entail. Suffice to say that it will not be easy to draft.

7. DAVIS TAX COMMITTEE (DTC)

Mention was made that the report of the DTC on Estate Duty will receive attention in the 2018 budget.

8. COMMENTS

“In duplum” rule

The effect of this rule is that interest ceases to accrue when the amount of interest accrued equals the outstanding principal debt. It is proposed that the rules dealing with low-interest or interest-free loans be amended to explicitly exclude the application of the “in duplum” rule in order to ensure the efficacy of these rules.

Future of trusts

We maintain that trusts still have a place in the Estate Planning environment.

Choose your advisor carefully on the basis of:

  • Expertise in the field;
  • Trustworthiness;
  • Ability to keep abreast of new developments affecting your estate plan.

You will be kept up to date on developments in this regard.

For any enquiries contact our specialists below:

GPJ van den Berg | gert@delberg.co.za | T: +27 (12) 361 5001 | F: +27 (12) 361 6311

WC van der Merwe | callie@delberg.co.za | T: +27 (12) 361 5001 | F: +27 (12) 361 6311

Requirements to restore a deregistered company

There are various circumstances in which a company (or close corporation) can become deregistered at the CIPC.

1. The company itself can apply for deregistration at the CIPC, for any number of reasons.

2. If a company has not submitted and paid its annual returns for more than two successive years, the CIPC will inform such a company of the fact and the intention of the CIPC to deregister said company. If such a company does not take any steps to remedy the situation, the CIPC will proceed to finally deregister it.

3. If the CIPC believes that the company has been inactive for seven or more years.

How can a company be restored?

It is possible to restore such a company or close corporation which has been finally deregistered, but all outstanding information and annual returns (including the fees) will have to be lodged with the CIPC. An additional R200 prescribed re-instatement fee must also be paid.

Recently, the CIPC has set additional requirements to do this, which also impacts on the time, administration and cost to restore such a company. These requirements took effect from 1 November 2012.

The steps and requirements for the re-instatement process are:

  1. The proper application CoR40.5 form Application for Re-instatement of Deregistered Company must be completed and submitted, originally signed by the duly authorised person.
  1. A certified copy of the identity document of the applicant (director / member) must be submitted.
  1. A certified copy of the identity document of the person filing the application must be submitted.
  1. A Deed Search, reflecting the ownership of any immovable property (or not) by the company, must be obtained and submitted together with the application.
  1. If the company does in fact own any immovable property, a letter from National Treasury must be submitted, indicating that the department has no objection to the re-instatement of the company.
  1. Also, if the company does in fact own any immovable property, a letter from the Department of Public Works must be submitted, indicating that the department has no objection to the re-instatement of the company.
  1. An advertisement must be placed in a local newspaper where the business of the company is conducted, giving 21 days’ notice of the proposed application for re-instatement.
  1. If the deregistration was due to non-compliance with regards to annual returns, an affidavit indicating the reasons for the non-filing of annual returns must be submitted.
  1. If the company itself applied for deregistration, an affidavit indicating the reasons for the original request for deregistration must be submitted.
  1. Sufficient documentary proof indicating that the company was in business or that it had any assets or liabilities at the time of deregistration must be submitted.
  1. All outstanding annual returns must be submitted and paid, along with any penalties.

Upon compliance of all of the above requirements, the CIPC will issue a notice to the company that it is restored.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

When must you consult the Family Advocate?

You may consult the Family Advocate if you have a dispute relating to either the best interests of a child and/or parental responsibilities and rights. Other circumstances under which the family advocate may be consulted include:

1. When parties require assistance in drafting parental responsibilities and rights agreements and to register such with the Family Advocate or to amend, and/or terminate the said agreements registered with him or her.

  1. When parties require assistance in drafting parenting plans and to amend or terminate such parenting plans registered with him or her.
  1. An application to define contact.
  1. A custody, access or guardianship dispute arising from the dissolution of a customary or religious marriage.
  1. Domestic Violence and Maintenance cases referred to the Family Advocate in terms of the Judicial Matters Second Amendment Act (Act 55 of 2003).
  1. Fathers of children born out of wedlock may request mediation of their parental rights and responsibilities (in terms of the Children’s Act).
  1. Parental child abduction to and from South Africa.

If there is a dispute regarding the contact, guardianship or care (parental responsibilities and rights) of a minor child, the Office of the Family Advocate would be requested to investigate the welfare and best interest of the minor child involved. Often, they provide a report which is handed to the relevant Court for consideration. The Office of the Family Advocate is not employed by the parties involved. They work for the State ensuring that they are objective in their investigation and only have the child’s best interests at heart.

Steps involved

  1. Contact your nearest Family Advocate to request an enquiry or, mediation of your legal dispute.
  1. Upon receipt of the request, the Family Advocate institutes an inquiry during which he or she interviews you and the parties involved to determine your personal circumstances and the background of the matter. Where mediation is requested the Family Advocate will be the mediator
  1. The Family Counsellor then interviews the children separately, so as to enable such children to exercise their statutory right to be heard and to enable the Family Advocate to convey their views to the Court.
  1. The Family Advocate will communicate whatever decision taken, which significantly affects the welfare of the child, to such child.
  1. Upon completion of the enquiry or mediation process the Family Advocate will file a report for the Court and furnish copies to the parties or their lawyers.

In a typical custody dispute, a Family Advocate and social worker would be appointed to a case and investigate it. The social worker and the Family Advocate would consult with the parents (or parties involved in the dispute), visit their homes if necessary and obtain information from relevant parties etc. The Family Advocate and social worker would also speak to the child and may want to observe the child’s interaction with the parents. If there are other professionals, for example, a social worker or a psychologist who assessed the situation and provided a report, the Office of the Family Advocate would consider those documents as well and even consult with those experts before handing in their report.

References:

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

An Introduction: MOI & Shareholders Agreement

1. Memorandum of Incorporation

The Memorandum of Incorporation (“MOI”) is the founding document of company which, in conjunction with the Companies Act, 2008 (Act No. 71 of 2008) (“Act”), regulates the governance and affairs of a company. It sets out rights, duties and responsibilities of shareholders, directors and others within and in relation to a company, and other matters dealt with in section 15 of the Act.

Section 15 of the Act, amongst others, provides for deviation from the standard provisions set out in the Act and permits the MOI to –

  • deal with a matter that the Act does not address;
  • alter the effect of any alterable provision of the Act (i.e. a provision that may be negated, restricted, limited, qualified, extended or otherwise altered in substance or effect);
  • impose on the company a higher standard, greater restriction, longer period of time or any similarly more onerous requirement, than would otherwise apply to the company in terms of an unalterable provision of the Act (i.e. a provision that may not be negated, restricted, limited, qualified, extended or otherwise altered in substance or effect).

It is important to note that the MOI is a public document, which is filed with the Companies and Intellectual Property Commission (“CIPC”). Any person can, subject to payment of the prescribed fee, obtain a copy of a company’s MOI from CIPC. Confidential company matters are therefore best dealt with in the Shareholders Agreement (a private document) and not in the MOI.

  1. Shareholders Agreement

In terms of section 15(7) of the Act, the shareholders of a company may enter into any agreement, with one another concerning any matter relating to the company (namely a Shareholders Agreement), provided that such agreement must be consistent with the Act and the company’s MOI.

Any provision of a Shareholders Agreement that is inconsistent with the Act or the company’s MOI is void to the extent of the inconsistency, it is therefore important to carefully align a Shareholders Agreement to ensure its validity and enforceability.

Unlike the MOI, a Shareholders Agreement is not filed with CIPC and is not available to the general public. It is a private document which, among others, regulates the confidential affairs of the company, such as funding, voting, deemed offers, forced sales, come along, tag along, deadlock and other significant issues.

  1. Summary

In order to ensure good governance, transparency and accountability a company should definitely have a properly drafted MOI and Shareholders Agreement. A company’s MOI and Shareholders Agreement must further be aligned with one another and the Act, falling which it could have negative and / or unintended consequences.

It is essential to consult a qualified commercial attorney to assist with the preparation a customized MOI and Shareholders Agreement, to ensure statutory compliance and to limit potential disputes between stakeholders.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

How to register a new company

The basic steps to register a company under the Companies Act of 2008 at the Companies and Intellectual Property Commission (CIPC) involves certain forms and supporting documentation that must be lodged and the accompanied fees paid.

The steps

The first step in registering a new company is optional. A CoR9.1 form must be completed and lodged with the CIPC in order to reserve a name for the company to be registered. However, the Act does make provision for a company to be registered without a name. The company registration number will then be the name of the company until such time as the company properly registers a name. A certified copy of the identity document of the applicant must be submitted as supporting documentation with this form and a filing fee is payable.

The next step is to complete and lodge the CoR14.1 Notice of Incorporation form together with the CoR15.1 Memorandum of Incorporation.

The Notice of Incorporation specifically contains information regarding the type of company to be registered, the incorporation date, financial year end, registered address, number of directors and the company name if applicable. A certified copy of the identity document of the applicant must be submitted as supporting documentation and a filing fee is payable. A CoR14.1A form contains specific information about the directors of the company who will be appointed at registration, and this form must be lodged together with the Cor14.1. Certified copies of the identity documents of all directors to be appointed must be submitted as supporting documentation. An optional form CoR14.1D may be lodged together with the CoR14.1, which indicates any company appointments to be registered with the CIPC, such as a company secretary or auditor.

The Memorandum of Incorporation is probably the most important document when registering a company, since the provisions contained herein will govern the company. It can be short and simple, or long and extremely technical, depending on what type of company is being registered. In this regard, it is best to seek professional advice. The supporting documentation and filing fees applicable will depend on what type of Memorandum of Incorporation is being registered.

If an auditor or company secretary is appointed at registration as contained in the CoR14.1D, a CoR44 form must also be completed and submitted. No filing fee is payable for this form. An original acceptance letter and certified copy of the identity document of the auditor or company secretary must be submitted as supporting documentation.

The CoR21.1 Notice of Registered Address must be completed with the particulars of the registered address of the company. Again a certified copy of the identity document of the applicant must be submitted as supporting documentation, but no filing fee is payable.

Once all the necessary forms and supporting documentation has been submitted and applicable fees paid, the CIPC will issue a Registration Certificate form CoR14.3 if it is satisfied that all provisions in the Act has been satisfied.

Any changes to the information placed on record at the CIPC at the original registration of the company, must be registered without delay and on the proper forms and possible payment of applicable filing fees.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Important steps for the transfer of property

The transfer process can take up to three months, sometimes longer. There are different steps involved in the transfer of a property, these include:

1. Instruction.

A conveyancer receives the instruction to transfer the property.

  1. Communication.

The conveyancer communicates with the various role-players involved in the transfer process, such as the seller, purchaser, transfer and bond attorneys, municipality, bank, South African Revenue Service (SARS).

  1. Collection.

Certain information and documents are required, such as the agreement of sale, deeds office search, existing deed, bond cancellation figures from the bank and so on. The conveyancer should continuously report to the various role-players about the progress being made.

  1. Drafting and signing.

As soon as all the information and documents have been collected, the conveyancer will draft the transfer documents and request the seller and purchaser to sign them. These transfer documents will include a power of attorney and various affidavits.

  1. Finances.

Financial arrangements include requesting an advance payment for the conveyancer’s interim account for certain expenses, requesting the bank guarantee, collecting the purchase price or deposit and so on.

  1. Transfer duty.

Obtaining a transfer duty receipt from SARS, confirming that the tax relating to the transfer of the property has been paid by the purchaser.

  1. Clearance certificate.

Obtaining a clearance certificate from the municipality, confirming that all amounts in respect of property have been paid for the last two years.

  1. Prep.

The conveyancer prepares for lodgement (submission) of the deed of transfer and other documents necessary for registration at the deeds office.

  1. Registration.

Once the deed of transfer and other documents have been lodged it, takes the deeds office about 7 – 10 working days to examine these documents. If the deeds office is satisfied that the requirement for the transfer of property has been met, the deed of property is registered. The conveyancer will notify the various role-players of the registration.

  1. Accounts.

Once registered, the conveyancer makes the necessary calculations and payments relating to the sale, for example, the estate agent’s commission, purchase price and so on. The conveyancer’s final account is also drawn up and sent to the purchaser and the seller for payment.

Having an experienced and expert conveyancer is extremely important to ensure that the transfer of property takes place quickly and efficiently.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Financial assistance by companies to issue shares

Section 38 of the Companies Act, 61 of 1973 (now repealed) contained a prohibition against companies issuing shares to prospective shareholders on loan account. This was identified as one of the hurdles in the way of BEE empowerment deals specifically (which quite often involves BEE participants requiring funding to be able to subscribe for shares in a company). Consequently, this was addressed in the Companies Act, 71 of 2008, through the introduction of section 44 which now specifically provides for new share issues to be undertaken on loan account, subject thereto that this is not prohibited by the company’s memorandum of incorporation.

The board of directors of a company may now authorise financial assistance to be provided by the company by way of a loan, guarantee or the provision of security to any person for the purpose of subscribing for shares issued in that company. However, and despite any provision of a company’s memorandum of incorporation, the company’s directors may not authorise any financial assistance unless the financial assistance is for either an employee share scheme, or has been authorised through a special resolution by the shareholders of the company. (A special resolution involves a resolution adopted with the support of at least 75% of the voting rights exercised on the resolution, or a different percentage which may potentially be allowed for in the company’s memorandum of incorporation.) In addition, the company’s directors must be satisfied that the terms of the loan (or other form of financial assistance) is fair and reasonable to the company, and that the company would, after providing the financial assistance, still be both solvent and liquid. If the company’s memorandum of incorporation specifically imposes certain further conditions on the company granting financial assistance for the issuing of its shares, these requirements too need to be adhered to.

Any agreement to provide financial assistance which would be contrary to the requirements set out above in terms of either section 44 of the Companies Act, or the memorandum of incorporation of a company, would be void. Directors in breach of this may be held personally liable for damages caused.

The new regime in the ‘new’ Companies Act is enabling for business, but directors should caution against applying this without due consideration to the above requirements. Of specific relevance would be if for example the recoverability of a loan granted to enable the borrower to subscribe for shares is doubtful. If this is the case, the duty of care of the directors towards the company may be called into question by other shareholders prejudiced as a result, potentially leading to delictual claims against the directors in personal capacity for not displaying the statutory required duty of care towards the company.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)