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Author: MHI Law

FIRST-TIME HOME BUYER?

FIRST-TIME HOME BUYER?

Buying a property is a rather big deal, which is why you should be sure that you are able to afford it before you end up running into debt. Owning your own home is a very rewarding experience, but there are usually some obstacles along the way. Follow the steps the below to be sure that your new home is your dream home.

  1. Make sure you have a healthy credit score

Your credit score lets banks know how well (or badly) you manage your debt. A good credit score improves your chances of getting a home loan.

In order to build up your credit score, make sure you pay all your bills on time, every time. Clear as much of your debt before applying for a home loan. If you don’t have a credit card, you should apply for one to aid your score. Check your status by getting a credit report from a credit bureau.

  1. Save up for a deposit

Having a deposit saved makes you more attractive to sellers, agents and banks, which means, if you have a deposit ready, you have a higher chance of getting your loan approved. A deposit also means that your loan repayments will be lower; you’re in a better position to negotiate an interest rate if you have a deposit since there is a lower risk for the bank.

  1. Look out for any additional costs

There are a number of additional costs that are incurred when buying and taking ownership of a house, and these may come as a shock to a first-time buyer.

Make sure to account for additional buying costs such as the loan initiation fee, transfer duty, loan registration costs and conveyancing fees. Also ensure that you take additional homeownership costs into consideration, e.g. loan repayments, homeowner’s insurance, municipal rates and taxes, water and electricity, maintenance, and security.

  1. Ensure the price is worth it

You should make sure that there are no damages to the property. Be sure to check for any leaks, as it might become a costly and annoying long-term problem.

If you’re planning to make this your forever home, you might want to consider what facilities are available nearby in case mobility becomes a problem. Is there a doctor close by? Are the transport links good?

Conclusion

From this it should be clear that buying a house is a rather complex activity that necessitates a lot of thought, calculating, and logical reasoning. It is advised to obtain the help of a professional to be absolutely sure that the money you end up paying is worth all the possible obstacles that you may encounter.

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 CANNABIS JUDGMENT: IS IT LEGAL NOW?

THE CANNABIS JUDGMENT: IS IT LEGAL NOW?

Cannabis has historically been criminalised in South Africa. It has, until recently, been a criminal offence to possess, cultivate or use cannabis. However, this position has been drastically altered by a ground-breaking unanimous judgment by the Constitutional Court in the case of Minister of Justice and Constitutional Development and Others v Prince.

This case came before the Constitutional Court as part of confirmatory proceedings in terms of section 167(5) of the Constitution after the Western Cape High Court declared certain sections of the Drugs and Drug Trafficking Act and the Medicines and Related Substances Control Act inconsistent with the right to privacy as enshrined in section 14 of the Constitution. The Court furthermore ordered Parliament to cure this constitutional defect within 24 months.

The right to privacy can be defined as the right to live and enjoy one’s life with a minimum of interference. Deputy Chief Justice Raymond Zondo who penned the Constitutional Court’s judgment agreed with this definition when he stated that, “It can legitimately be said that the right to privacy is a right to be left alone.” This case thus essentially raised the question of whether or not the State can interfere with what you do in private if such private act does not adversely affect others. The Court found the privacy argument convincing and accordingly found that the prohibition of the mere possession, use or cultivation of cannabis by an adult in private for his or her personal consumption is inconsistent with the right to privacy provided for in section 14 of the Constitution.

It is important to note that the Court did not legalise cannabis as a substance. It was merely decriminalised to the extent that adults may now grow their own cannabis and use it in a private space. The Court, with reference to the cultivation thereof, stated:

“An example of cultivation of cannabis in a private place is the garden of one’s residence. It may or may not be that it can also be grown inside an enclosure or a room under certain circumstances. It may also be that one may cultivate it in a place other than in one’s garden if that place can be said to be a private place.”

The Court did not, however, state what would constitute a private space for purposes of using or cultivating cannabis. It is thus unclear whether or not a private space is limited to one’s dwelling or whether it can include spaces such as motor vehicles or other privately-owned spaces such as restaurants or festival grounds. This is thus something that Parliament will most probably clear up when enacting the legislation as discussed above.

It is of utmost importance to note that the commercialisation of cannabis has not been legalised. It is thus still a criminal offence to cultivate cannabis for commercial purposes or to trade with cannabis. The Court stated in this regard that, “[D]ealing in cannabis is a serious problem in this country and the prohibition of dealing in cannabis is a justifiable limitation of the right to privacy.” The right to privacy as it relates to the use of cannabis is furthermore limited in that the use thereof in the presence of children or non-consenting adults are also still prohibited and thus a criminal offence.

The judgment is very vague as to how much cannabis a person may possess. However, it is advisable in this regard not to cultivate or possess large quantities of it since the Court stated that:

“In determining whether or not a person is in possession of cannabis for a purpose other than for personal consumption, an important factor to be taken into account will be the amount of cannabis found in his or her possession. The greater the amount of cannabis of which a person is in possession of, the greater the possibility that it is possessed for a purpose other than for personal consumption.”

It is clear from the above that there is still a lot of legal uncertainty regarding the legality of cannabis use. Vishnu Naidoo, a national police spokesperson, said that the relevant authorities are currently busy formulating a directive to its members as to what they should do when encountering someone who has cannabis in his or her possession. This will give us some certainty, but complete legal certainty will only be attained once Parliament has done its job.

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)

WHY IS IT IMPORTANT TO DEAL WITH COLLATION IN YOUR WILL?

WHY IS IT IMPORTANT TO DEAL WITH COLLATION IN YOUR WILL?

The South Africa common law presumption of collation (collatio bonorum) is alive and well.

This presumption is rooted in the belief that a testator intended that there should be equality in the distribution of his estate among his descendants (“children”). Collation is the process by which the inheritance of certain descendants (heirs) of the deceased is adjusted to consider any substantial benefits received from the testator during his lifetime.

Collation is achieved by adding to the inheritance the amount due by each heir. The new total shall then be divided between all the heirs. An heir cannot, if he refuses to collate, enforce legal remedies to claim his share of the inheritance.

Collation further takes place by operation of law and therefore applies automatically to your will, or if you have failed to execute a will it applies to your intestate heirs.

If you, therefore, intend to release any of your descendants (heirs) from this obligation to collate it should be clearly expressed in your will, by adding the following paragraph: –

“I direct that my children need not collate any of the gifts or sums of money they received from me during my lifetime and I remit collation so far as they are concerned.”

Or if you specifically intend for one of your descendants (heirs) to collate it should be clearly expressed in your will, by adding the following paragraph: –

“I record that during my lifetime I advanced to my son, Piet Louw sums totalling in all R300 000 (three hundred thousand rand) to enable him to qualify as an attorney and I direct that he collates that sum with my estate before he is paid his inheritance in terms of this will.

An heir who is obliged to collate has the choice of restoring the property he has received or permitting a deduction equal to the value he received at the time of the gift.

Considering the above it is imperative to have your true intentions reflected in your will and to enlist the services of an estate specialist to assist you with your estate planning and the drafting of your will.

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)

BEFORE SIGNING A LEASE

BEFORE SIGNING A LEASE

Tenants often take the signing of a lease agreement lightly and don’t read carefully through the terms and conditions. A proper lease agreement will ensure that both parties’ rights are protected. Landlords must ensure that they include all the necessary information in a lease agreement, while tenants must make sure that all the points discussed with the landlord are included in the lease, instead of just assuming that they are.

Enquire about costs and duration

The monthly rental cost and duration of the lease (including specific dates) must clearly be stated in the lease agreement to avoid any confusion regarding this matter. The lease agreement should also clearly indicate how and when any increases in rent will take place. If the landlord doesn’t provide you with this information, ask him/her to give it to you in writing so you can keep it on record.

The lease should also clearly explain any deposits (e.g. the rental deposit) that have to be paid, as well as the terms and conditions regarding the refund of deposits. All other variable usage expenses (like water or electricity) that the tenant will have to pay should also be clearly stated.

Some rental properties include utilities within the monthly rental cost, while others don’t. Some properties might offer on-site gym memberships, for example, which could save you money. Before you sign the lease to a property, ask your landlord what is included in the rental rate.

Get information regarding changes to the property

Once the landlord has agreed to rent out his property to you, make sure that you document any pre-existing damages to the property and its amenities before you sign the lease. Ask whether these damages can be fixed at the landlord’s expense.

Both the landlord and the tenant are responsible for the maintenance of the property. The responsibilities of both parties should be clearly stated in the lease agreement. The lease agreement should also indicate how the tenant must report any problems that require repair.

Make sure which amendments can be made to the property. Rather know the rules and stick to them, instead of making an alteration and then finding out afterwards that your landlord is unhappy with it. Just imagine your landlord’s disgust after finding out that you’ve repainted his freshly white-painted walls red!

Conclusion

Tenants should be sure to understand the contents contained in the lease agreement and that they understand all the clauses, terms and conditions to avoid any surprises later. While renting a property isn’t as much of a financial commitment as buying a home is, tenants should remember that a lease is nevertheless a legally binding document, meaning that they should make sure that they agree with everything contained therein before they sign it.

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)

AGA (SA) – Relevance, enhanced recognition and status for accountants

AGA (SA) – Relevance, enhanced recognition and status for accountants

The journey to reach the Chartered Accountant South Africa CA(SA) designation has been described as one of the most difficult career paths in South Africa. With the professional accounting body, South African Institute of Chartered Accountants (SAICA), being established as one of the best in the world, and providing the highest of standards and excess of opportunities once reached, it is understandably so.

To become a CA(SA), a 3-year degree and honours degree is required, as well as a 3-year training contract, in layman’s terms referred to as “articles” (this might differ depending on studying while performing articles or the level of studies when starting). A trend has been occurring amongst hopefuls on this path, where studies and articles are started, but for various reasons, the honours part of the qualification is not completed. This results in a qualified accountant without a professional title or association to a professional body.

SAICA has recognised the need for qualified accountants to belong to a professional body, and therefore the establishment of the Associate General Accountant South Africa AGA(SA) designation.

With the establishment of the AGA(SA) designation, it allows a significant number of exceptionally-qualified South African accountants to gain access to professional recognition and career development through association with a highly-regarded professional body.

AGA(SA) provides many similarities to that of the CA(SA) designation. As AGA’s are recognised members of SAICA, they must apply to the same code of conduct. Thereby reassuring the public of the integrity of AGAs and suggesting a certain quality of work that can be expected.

Requirements:

  • A SAICA-accredited B.Com degree

  • A SAICA-accredited training contract

AGAs can:

  • Compile financial statements

  • Perform and sign off of independent reviews for companies with a public interest score below 100

  • Register as tax practitioners and assist with tax compilation and planning

  • Design and operate internal accounting systems

  • Provide management with information that enables them to plan, monitor and control their business

  • Communicate information effectively

  • Act as a commissioner of oaths

AGA(SA) benefits:

  • Access to SAICA products and services

  • A subscription to the ASA Magazine

  • Access to CPD

  • Invitations to SAICA seminars and events

  • Access to SAICA Member Services

  • Receive SAICA Newsletters

The relaunch of the AGA designation is a great asset to the public and a very useful alternative for those individuals who don’t necessarily become chartered accountants, giving recognition where it is due. The designation continues to grow in potential, membership and career recognition.

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)

RACISM IN THE WORKPLACE – IT’S NOT ALWAYS BLACK OR WHITE

RACISM IN THE WORKPLACE – IT’S NOT ALWAYS BLACK OR WHITE

Introduction

This article discusses two recent Constitutional Court judgments, which deal with racism, or perceived racism, in the workplace. Although each judgment and respective outcome should be understood in the context of the specific facts, certain parallels are worth noting. Both judgments had to decide whether the language used in the context was racist. In both cases, the employees concerned were dismissed by the employer and the employer’s decision was challenged by way of arbitration proceedings. In both cases, the arbitrator directed that the employees be reinstated. The Constitutional Court, in both cases, applied its well-known Sidumo test to decide whether or not the awards should be upheld. The test determines whether the decision made by the arbitrator is one which a reasonable decision-maker could not reach. The test ensures the constitutional rights to fair labour practices and administrative action which is lawful, reasonable and procedurally fair. The two judgments are now discussed.

Rustenburg Platinum Mine v SAEWA obo Bester and Others

Mr Bester was an employee at Rustenburg Platinum Mine. An incident occurred on 24 April 2013, the details of which were disputed. The Constitutional Court ultimately accepted that Mr Bester interrupted a safety meeting and demanded that a car which was parked next to his own be removed. He pointed his finger at the applicant’s chief safety officer, Mr Sedumedi, and loudly commanded, “Verwyder daardie swart man se voertuig”, in reference to another employee’s 4×4 vehicle, otherwise he would take the matter up with management.

Mr Bester was forthwith suspended pending the outcome of a formal disciplinary enquiry. He was charged with two acts of misconduct, namely: insubordination for disrupting the safety meeting and for making racial remarks, which breached a workplace rule prohibiting abusive and derogatory language. On 28 May 2013, Mr Bester was dismissed by the applicant after being found guilty on both grounds.

Mr Bester referred the dispute to the CCMA for arbitration and the arbitrator’s award was taken on review to the Labour Court, the Labour Appeal Court and ultimately to the Constitutional Court. The arbitrator concluded in his award that the dismissal was both substantively and procedurally unfair and ordered the reinstatement of Mr Bester. However, the arbitrator misdirected himself on the facts and found in favour of Mr Bester that in the context the words “swart man” were used, it was innocuous and for the purpose of identification. This defence had not been raised and was unsupported by evidence. Mr Bester’s defence was to deny making the statement.

In the Constitutional Court, Theron J, in a unanimous judgment, held that to regard the words “swart man” as innocuous in the context, ignores South Africa’s past of institutionally entrenched racism. The objective test had to be applied to the correct facts. On this basis, “swart man” was “racially loaded and derogatorily subordinating”. The arbitrator’s conclusion was one that a reasonable decision-maker could not have reached. The sanction of dismissal was reinstated, due to Mr Bester’s dishonesty in denying making the statement and his lack of remorse.

Duncanmec (Pty) Limited v Gaylard N.O. and Others

In this case, nine employees participated in an unprotected strike and were filmed singing a struggle song which featured lyrics that translate to, “Climb on the rooftop and shout that my mother is rejoicing when we hit the boers”. The employees were found guilty of participating in an unlawful strike action and also for singing a racially offensive song. After being given a final warning for the former offence, they were dismissed on the latter offence. Duncanmec justified its decision by contending that the conduct of the employees irreparably eroded the trust relationship between employer and employees.

Before the Bargaining Council, the arbitrator ordered the reinstatement of the employees, reasoning that the employees showed remorse and that the employment relationship had not broken down irretrievably. In addition, it was necessary to distinguish between singing a song which could cause harm and referring to someone in racist language.

The Constitutional Court, in a unanimous judgment written by Jaftha J, noted that increasing instances of racism in the workplace were becoming worrisome. It held that the use of the word “boer” in isolation was not racist or a racially offensive word, but that in the particular case, its use in the song sung by the employees was inappropriate and racially offensive. The Court, however, in applying the Sidumo test, held that the arbitrator had not acted unreasonably, nor, as contended by Duncanmec, applied her own sense of fairness in determining that the dismissal was substantively unfair. The award was therefore upheld.

Conclusion

In conclusion, in the light of these two recent judgments, it is evident that racism in the workplace is a recurring issue with which courts must deal to hold individuals accountable if their conduct is found to be racially offensive and an infringement of constitutional rights. However, it is unrealistic to expect that courts, or the threat of legal action, can prevent persons in the workplace from persisting with racist behaviour. It is therefore important that employers have adequate rules in place which expressly prohibit racist words and conduct, so that violations can be dealt with expeditiously and effectively. The judgments also indicate that should those found guilty of racism show no remorse, dismissal will be viewed as an appropriate sanction.

Reference List:

  • Duncanmec (Pty) Limited v Gaylard N.O. and Others [2018] ZACC 29.

  • Rustenburg Platinum Mine v SAEWA obo BESTER and Others [2018] ZACC 13.

  • Sidumo v Rustenburg Platinum Mines Ltd 2008 2 SA 24 (CC).

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)

UNDERSTANDING THE FUNCTIONS OF THE COMMISSION FOR CONCILIATION, MEDIATION AND ARBITRATION

UNDERSTANDING THE FUNCTIONS OF THE COMMISSION FOR CONCILIATION, MEDIATION AND ARBITRATION

I have a dispute which has been referred to the CCMA. How does the process work?

The Commission for Conciliation, Mediation and Arbitration (“CCMA”) is a state-funded institution which acts as the centrepiece of the statutory dispute resolution system in the employment sphere. The CCMA, however, operates independently from the state.

A dispute is referred to the CCMA within 30 days of the date when the dispute arose. When a dispute is referred to the CCMA, the first step in the process is that the Commissioner (the objective party presiding over the matter), who will act as a conciliator, assists the parties to reach a mutually agreed upon outcome. The conciliator cannot make any binding determinations during this process. Therefore, there is no obligation on the parties to accept the suggestions of the conciliator. What is also important to note is that the proceedings are confidential and conducted on a “without prejudice” basis, therefore, whatever is said during the said proceedings cannot be used against either party later in the process. Conciliation is not defined in the Labour Relations Act 66 of 1995 (“LRA”), however, in practice, the Commissioners tend to make use of mediation, conducting a fact-finding exercise, subsequently making a recommendation to the parties, which is regarded as an advisory arbitration award.

After conciliation has failed, the Commissioner will issue a certificate stating that the dispute remains unresolved after conciliation proceedings have been conducted (certificate of outcome). The referring party will then have the option to refer the matter to arbitration by completing an LRA Form 7.13 and serving it on all the relevant parties, including the CCMA, within 90 days after the date on which the certificate of outcome was issued. The director of the CCMA may direct that the parties conduct a pre-arbitration conference. The purpose of the said conference is so that the parties can simplify the matter and clearly define what the dispute is.

Arbitration is essentially a hearing based on the merits of the dispute. The arbitrator will give all the parties an opportunity to prove and argue their case. After the arbitrator has heard the parties’ cases, the arbitrator must make a finding, which any reasonable decision-maker could come to based on the available evidence. Reasons for the arbitrator’s decision may be provided. The arbitrator’s decision is final and binding on the parties, subject to a review application in the Labour Court. The arbitrator may also make an order as to costs in accordance with the CCMA rules.

It should also be noted that in 2002, amendments to the LRA were introduced, which also provide for what is now known as “con-arb”. What this entails is that the Commissioner will have to commence arbitration immediately after conciliation was found to be unsuccessful. However, a party to the proceedings may object to con-arb, whereafter the procedure as discussed above will then follow in the alternative.

When a dispute is referred to the CCMA, the first step in the process is that the Commissioner will attempt to settle the matter by way of conciliation which might include mediation, conducting a fact-finding exercise, subsequently making a recommendation to the parties, which is regarded as an advisory arbitration award. When the dispute remains unresolved, the matter will then be finalised on arbitration.

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)

POPI AND YOUR PAYROLL

POPI AND YOUR PAYROLL

The requirements of the POPI Act stipulates that an entity is required to take reasonable measures of a technical, as well as organisational nature, to ensure the adequate safeguarding of personal information. Personal Information, according to the Protection of Personal Information Act, 2013 includes the following:

  1. Information relating to the following of a person:

  • Race / nationality / ethnic / social origin / colour

  • Gender / sex

  • Pregnancy

  • Marital status

  • Sexual orientation

  • Age

  • Physical or mental health / well-being / disability

  • Religion / conscience / belief

  • Culture/language

  • Birth

  1. Education, medical, criminal, employment or financial history of a person

  2. Identifying number, email address, telephone and physical address, location information, online identifier

  3. Biometric information

  4. Personal opinions, views or preferences

  5. Explicitly or implicitly private or confidential correspondence

  6. Views of others about that person

  7. Name, if it appears together with other personal information about that person or if the name would reveal information about that person

Personal information may only be processed (collected, stored, received, organised etc.) if the following conditions are complied with:

  1. Accountability

All the conditions below must be complied with.

  1. Processing

Personal information may only be processed if the processing is lawful and in a reasonable manner which does not infringe the privacy of the data subject

  • Consents

  • Necessary to carry out a contract to which the data subject is a party

  • Obligation imposed by law

  • Protects legitimate interest of data subject

  • Necessary for a proper performance by a public body

  • Processing is necessary for pursuing the legitimate interests of the responsible party or of a third party to whom the information is supplied

Information must be collected directly from the data subject unless the information is obtained from a public record, then the data subject consented would not prejudice a legitimate interest of the data subject or if the collection is necessary in terms of a law.

Employers must obtain the employee’s consent for their personal information to be collected and used. They must be aware of the third parties (or other individuals) who might have access to it.

  1. Purpose Specification

Personal information must be collected for a specific, defined and lawful purpose related to a function or activity of the responsible party.

Records of information must not be retained for a longer period than is necessary. If it is kept for research, statistical or historical purposes, then it can be kept for longer if there are adequate safeguards in place from the records being used for other purposes.

The responsible party (the employer) must ensure that safeguards are in place to protect the data from being used for other purposes. Employees obtaining these types of personal information of other employees should have a clause in their employment contracts dealing with confidentiality.

  1. Further Processing Limitation

Further processing of personal information must be in accordance or compatible for the purpose it was collected for (see Section 15). It will not be incompatible if the data subject consents or the information is used for historical, statistical or research purposes and the responsible party ensures that the further processing is carried out solely for such purpose and will not be published in an identifiable form.

The employer must obtain the employee’s consent if further processing takes place and it is not compatible with the reason it was collected for.

  1. Information Quality

A responsible party must take steps to ensure the information is accurate, complete and not misleading.

  1. Openness

The data subject (employee) must be aware of the information being collected, or if information is not collected from the data subject, the source where it is collected from, the purpose for the collection etc. unless the data subject consents to the non-compliance. The responsible party must take reasonable steps to ensure that the data subject is informed.

If personal information of the employee is collected by a third party via the employer, the employee needs to be aware of it unless the employee consents to non-compliance.

  1. Security Safeguards

The responsible party must ensure the integrity and confidentiality of the information in its possession or under its control by taking reasonable and appropriate measures to prevent loss or damage to personal information and unlawful processing of information.

Anyone processing personal information on behalf of a responsible party may not disclose the information.

Data subjects must be notified if personal information has been accessed or acquired by an unauthorised person (or the responsible party has reasonable grounds to believe so).

The employer or third party should ensure that employee data is treated as confidential information. Our suggestion would be to include a confidentiality clause in the employment contracts. Passwords must also be set up on the systems.

  1. Access to personal information

A data subject (employee) has a right to request access to personal information, also to correct or delete it.

***Although financial information is not specifically dealt with in the above mentioned Protection of Personal Information Act, according to the Basic Conditions of Employment Act, it is an offence for any person to disclose information which that person acquired while exercising or performing any power or duty in terms of this Act and which relates to the financial or business affairs of any other person, except if the information is disclosed in compliance with the provisions of any law..***

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)

WAT IS ’N NOULETTENHEIDSONDERSOEK EN WAT IS DIE DOEL DAARVAN?

WAT IS ’N NOULETTENHEIDSONDERSOEK EN WAT IS DIE DOEL DAARVAN?

Dit is algemeen om die term “noulettenheidsondersoek” of due diligence (“DD”) te hoor tydens gesprekke wat gevoer word oor die moontlike koop, verkoop, samesmelting of amalgamasie van besighede, asook in gevalle waar ’n derde party dit oorweeg om in ’n besigheid te investeer. Ten spyte van die feit dat voornemende kopers, verkopers en/of beleggers bekend is met die konsep en prosedures van DD-prosedures, word die noodsaaklikheid daarvoor in baie gevalle misken weens die finansiële implikasies wat dit inhou.

’n DD kan in kort beskryf word as ’n behoorlike ondersoek na die werking, strukture en historiese maatskappy sekretariële en korporatiewe rekords van ’n besigheid wat normaalweg in opdrag van ’n voornemende koper en/of belegger gedoen word. Die doel hiervan is om die koper en/of belegger in ’n posisie te plaas om ’n ingeligte besluit te neem voordat die besigheid gekoop word of voordat daar in die besigheid gëinvesteer word.

Dit is egter nie altyd moontlik om ’n standaard DD-prosedure te volg nie aangesien elke transaksie se feite en omstandighede verskil. Die proses wat gevolg moet word en komponente van só ’n ondersoek word bepaal volgens die aard en inhoud van elke transaksie, asook volgens die betrokke partye se behoeftes. Dit is egter ook belangrik om te onthou dat ’n DD ’n tydsame proses kan wees en daarom kan kostes maklik oploop, welke aspek ’n bydraende faktor van die partye kan wees wanneer besluit word wat só proses alles moet insluit.

Onderstaande is egter enkele punte wat in meeste gevalle ’n goeie vertrekpunt is wanneer ’n DD-proses van stapel gestuur word, naamlik –

Besigheidstruktuur en korporatiewe beheer

  • In hierdie geval is dit belangrik om te verseker dat die korporatiewe struktuur, korporatiewe rekords en beheer van ’n besigheid in orde en op datum is. Dit kan vasgestel word deur die nodige korporatiewe dokumente en rekords van ’n besigheid na te gaan en indien nodig, die nuutste asook historiese rekords aan te vra by die Kommissie vir Maatskappye en Intellektuele Eiendom (“CIPC”);
  • ’n Verdere aspek is om te verseker dat die bestaande besigheidstruktuur, soos dit deur die verkoper aan die koper en/of belegger bemark was, behoorlik geïmplementeer is en die nodige bepalings van bestaande wetgewing nagekom was.

Finansiële rekords

  • Historiese finansiële syfers en rekords moet nagegaan word om te verseker dat dit ’n korrekte weerspieëling is van die ware finansiële stand van die besigheid.

Belasting

  • Dit is belangrik om te verseker dat alle historiese inkomstebelasting verpligtinge nagegaan word ten einde te bevestig of daar nie enige uitstaande verpligtinge teenoor die Suid Afrikaanse Inkomste Diens (“SAID”) is nie. Daar moet ook verseker word dat alle opgawes behoorlik en tydig ingedien was om te verhoed dat daar op ’n later stadium rentes en boetes gehef word wat tot die nadeel van ’n voornemende koper/belegger kan wees.

Bates

  • Bates is in baie gevalle materieel tot ’n koop/verkoop en/of samesmelting of amalgamasietransaksie en daarom is dit van kardinale belang om die totale waarde van die besigheid se bates en laste vas te stel.
  • Bates kan insluit enige roerende en onroerend bates, asook voorraad, toerusting, intellektuele eiendom ens.

Ooreenkomste

  • Bestaande ooreenkomste, hetsy met verskaffers, kliënte, huur en verhuur, verspreiders van produkte ens. kan in baie gevalle ’n bydraende faktor wees tot ’n voornemende koper en/of belegger se besluit om betrokke te raak by ’n besigheid. Indien dit wel die geval is, is dit belangrik om te verseker dat ooreenkomste van hierdie aard behoorlik saamgestel, uitgevoer en geïmplementeer was deur persone met die nodige kundigheid om die voortbestaan daarvan te verseker.

Bogenoemde is slegs enkele aspekte waaraan oorweging geskenk kan word tydens ’n DD-proses, verdere oorwegings kan insluit, aangaande litigasie, werknemers en bestuur van ’n besigheid, die Nasionale Kredietwet ens.

Dit is egter belangrik om in ag te neem dat wanneer ’n voornemende koper en/of belegger van ’n besigheid die moontlikheid oorweeg om betrokke te raak by ’n besigheid hy/sy daarop geregtig is om ’n DD-prosedure aan te vra. Die doel hiervan is om soveel as moontlik inligting rakende die besigheid in te samel om ingeligte besluite te kan neem. In meeste gevalle sal gevind word dat die voordele wat só ’n proses inhou die koste-implikasie regverdig en om daardie rede word dit kliënte aangemoedig om hierdie as ’n fundamentele aspek van ‘n suksesvolle besigheidstransaksie beskou.

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)

MEMORANDUM OF UNDERSTANDING: BINDING AND ENFORCEABLE OR NOT?

MEMORANDUM OF UNDERSTANDING: BINDING AND ENFORCEABLE OR NOT?

There is a common misconception that MOUs are always non-binding. MOUs can in fact be binding, non-binding or partly binding and partly non-binding, it all depends on the intention of the parties and the exact wording of the MOU. But uncertainty is rarely a good thing in the context of legal documentation and a poorly drafted MOU containing binding provisions, has the potential to haunt the signatories in Court if the envisaged substantive agreements are never signed. It might also make it difficult for you to raise and negotiate new points which were not included in the MOU.

It will be a question of the law of contract as to whether an MOU is binding or not. Conversely, if the essential terms are not all present, an MOU will be held to be void for vagueness.

The legal binding nature of an MOU was considered in the matter of Southernport Developments (Pty) Ltd v Transnet Limited [2004] JOL 13030 (SCA),  where the Court of First Instance found that there was no agreement between the parties, and the mere fact that there was an obligation to negotiate in good faith did not take the matter any further, replying upon the  decision in Premier, Free State and Others v Firechem Free State (Pty) Ltd which held that:

“An agreement that parties would negotiate to conclude another agreement is not enforceable, because the absolute discretion vested in the parties to agree or disagree.”

Such reasoning can prima facie not be faulted by virtue of the fact that the parties should be allowed to negotiate the terms and provisions of an agreement, and in particular the essential terms of the agreement. Should the parties during the course of their negotiations not be in a position to reach finality on the essential terms of an agreement, then an agreement should not be held to have been concluded. However, where parties have already put their “flag to the mast” and expressed their intention to conclude an agreement in regard to a certain matter, can it be expected that one party can hold the remaining party to such an expressed intention?
The Supreme Court held that the present case had to be distinguished from the Firechem case by virtue of the fact that the parties had created a specific mechanism to ensure that an agreement was concluded. This mechanism was the dispute resolution mechanism of arbitration, and provided that in the event of the parties not being in a position to agree on any of the terms and conditions, such dispute would be referred to an arbitrator.
The latter case sets out the appropriate protective measures to be used by any third party that is a party to an “agreement to agree”. It is imperative that such a letter of intent/memorandum of understanding contains a provision, which provides that in the event of the parties not being in a position to reach agreement on any of the terms of the proposed agreement, that such a dispute be referred to arbitration.

It is important to note that an MOU is never a prerequisite and can often serve to delay the drafting and negotiation of the substantive agreements. Practically speaking, an MOU cannot always be avoided, for example, on particularly complex deals or where a negotiating party treats an MOU as a deal breaker and insists that one be drafted. A well-drafted MOU will be partly binding and partly non-binding and will expressly state at the outset which clauses are binding and which clauses are non-binding.

A well-drafted MOU which clearly sets out which clauses are binding, and which are non-binding can set the tone for the negotiation of the substantive agreements to be drafted at a later stage and makes it difficult (but not impossible) for your counterparty to raise fresh issues. Where an MOU is unavoidable then it should be taken seriously. Almost inevitably it will be a document which creates rights and obligations and you need to be sure that the MOU properly reflects your understanding of the arrangements.

The prudent approach is to consult your attorney before committing to an MOU.

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)

Reference list:

  • The Law of Contract in South Africa (2006) Fifth Edition: RH Christie [LexisNexis Butterwoths]
  • Southernport Developments (Pty) Ltd v Transnet Limited [2004] JOL 13030 (SCA)