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Author: MHI Law

WHAT HAPPENS WHEN ANNUAL RETURNS ARE NOT FILED?

WHAT HAPPENS WHEN ANNUAL RETURNS ARE NOT FILED?

In terms of Section 33 of the Companies Act 71 of 2008 (“the Act”), read with Regulations 28, 29, 30 and 33 of the Companies Regulations of 2011 (“Regulations”), companies and close corporations must submit Annual Financial Statements or a Financial Accountability Supplement (“FAS”) together with their Annual Return with the Companies and Intellectual Property Commission (“CIPC”) annually.

All companies (including external companies) and close corporations are required by law to file their annual returns with the CIPC on an annual basis, within a prescribed time period. The purpose of filing such annual returns is to confirm whether a company or close corporation is still in business/trading, or if it will be in business in the near future.

Therefore, if annual returns are not filed within the prescribed time period, the assumption is that the company or close corporation is inactive, and as such CIPC will start the deregistration process to remove the company or close corporation from its active records. The legal effect of the deregistration process is that the juristic personality is withdrawn, and the company or close corporation ceases to exist.

Companies and close corporations are required to file annual returns once a year within a given time period. Companies must file within 30 (thirty) business days after the anniversary date of its incorporation date while close corporations must file within the anniversary month of its incorporation up until the month thereafter.

A clear distinction must be made between an annual return and a tax return. An annual return is a sort of ‘renewal’ and has the purpose of confirming whether CIPC is in possession of the most up to date information of a company or a close corporation and that the company or close corporation is still conducting business. A tax return focuses on the taxable income of a company or close corporation in order to determine the tax liability of the company or close corporation to the State and is filed with SARS. Compliance with one does not mean that there is automatic compliance with the other.

In determining the appropriate fee for the filing of an annual return, a distinction must be made between a company and close corporation filing, and the date on which the annual return became due, since different fee structures are used for companies and close corporations. If the annual return became due on 1 May 2011 or thereafter, the fee structure under the Act must be used. If it became due before 1 May 2011 the Companies Act, 1973 fee structure must be used. (Please refer to the CIPC website at www.cipc.co.za for the various filing fees applicable based on the company or close corporation’s turnover for a particular filing year.)

During February 2016, CIPC launched a programme to implement eXtensible Business Reporting Language (“XBRL”) as a digital financial reporting standard for qualifying entities in South Africa by mandating submission of annual financial statements to the CIPC together with its Annual Return submission from July 2018.

Regulation 30 of the Act stipulates that a company that is required by the Act or Regulation 28 to have its annual financial statements audited must file a copy of its audited statements:

  1. on the date that it files its annual return, if the company’s board has approved the statements by that date; or
  2. within 20 business days after the board approved the statements, if they had not been approved by the date on which the company filed its annual return.

A company that is not required to have its statements audited, in terms of the Act or Regulations, may, at its option:

  1. file a copy of its audited or reviewed statements together with its annual return; or
  2. undertake to file a copy of its audited or reviewed statements within the time provided.

A company that is not required to file annual financial statements in terms of the regulations, or a company that does not elect to file, or undertake to file, a copy of its audited or reviewed annual financial statements in terms of the regulation, must file an FAS to its annual return in Form CoR 30.2.

Should a company be required to file its annual financial statements in terms of the Regulations with its Annual Return with CIPC, these Annual financial statements need to be submitted in XBRL format. The idea behind XBRL is that instead of treating financial information as a block of text – as in a standard internet page, spreadsheet or printed document – it provides an identifying tag for each individual item of data. For example, company net profit or net current assets have their own unique tags that are understandable to computers. These tags contain information about the item, including its description, e.g. ‘accounts receivable’, its value and currency and whether the amount is a debit or credit.

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)

WHAT ARE THE BENEFITS OF CO-WORKING SPACES?

WHAT ARE THE BENEFITS OF CO-WORKING SPACES?

When walking into a co-working space, the first thing you will notice is that the atmosphere feels completely different from a regular office. You will feel a sense of excitement and collaboration in the air with a mixture of occupants who are deep in focus at their very own private desks, as well as other occupants who are engaged in conversation at the larger shared tables.

In essence, co-working spaces are shared work spaces. They are more affordable alternatives for those who want to escape their isolated home offices and noisy coffee shops.   People who make use of co-working spaces are usually freelancers, entrepreneurs, start-up companies and small teams who want to take advantage of flexible space and hours. Co-working spaces offer these occupants office-like amenities, such as hot-desks, boardrooms and kitchens.

When it comes to co-working spaces, the allure lies in the affordability. You can rent out what you need, instead of renting an entire office, which can be very expensive. Co-working spaces can work on membership-based models, and usually, occupants can decide between paying a daily fee or a monthly fee. It’s important to note that these membership fees can vary depending on whether you work at a shared desk or want a single desk to yourself.

Benefits of co-working spaces:

1. Professional environment

Co-working spaces allow entrepreneurs and freelancers the opportunity to work in a professional environment with flexible terms without having to empty their pockets.

2. Networking

Co-working spaces are open to anyone and attract freelancers and entrepreneurs from all walks of life. This means that you are in close proximity to a wide range of professionals which provides you with the perfect opportunity to build connections and network with other professionals, both inside and outside your field.

We have seen a massive rise in the popularity of co-working spaces. This is mainly due to the increasing numbers of contractors and start-up companies who seek office space that is affordable. Co-working spaces are innovative, and it changes the way that people work. In the future, we will likely see even more people ditching coffee shops and home offices to work in co-working spaces. The need for co-working spaces will always be there, therefore, this could be a very profitable investment.

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)

ARE MUSLIM MARRIAGES RECOGNISED IN SOUTH AFRICA?

ARE MUSLIM MARRIAGES RECOGNISED IN SOUTH AFRICA?

All marriages entered in terms of Islamic law, are currently not recognised as valid marriages.

For a valid marriage to be recognised in South Africa one must get married in terms of civil law which is regulated by the Marriage Act 25 of 1961 or two people can enter into a civil union partnership under the Civil Union Act 17 of 2006.

Everyone has the right to freedom of religion, belief and opinion. The Constitution allows for legislation to recognise marriages that are entered under any tradition or religion and there are certain rights and obligations that arise from a civil marriage.

Couples married in terms of Islamic law will not be able to benefit from these rights and therefore this non-recognition and non-regulation violate the rights of women and children when it comes to divorces as well as the law of succession. Leaving them unprotected and in a vulnerable state.

The law has developed to some extent over the years and a surviving spouse as defined in the Law of Intestate Succession includes a spouse in a Muslim marriage, therefore he or she can inherit a portion of the estate of the deceased spouse.

Dissolution of an Islamic marriage which is not registered under civil law would have the same effect as the dissolution of a marriage out of community of property with no accrual or a civil union without a contract. One party would not have any lawful claim to institute against the estate of the other upon divorce as there was no valid marriage and therefore the Divorce Act 70 of 1979 (“Divorce Act”) will not be applicable.

The Women’s League Centre Trust (“WLCT”) brought an application in the Cape High Court to which a full bench heard the case. The WLCT prayed for a Bill to provide for the recognition of Muslim marriages as a valid marriage for all purposes in South Africa and to make an order that the government failed to fulfil their constitutional obligation to protect, promote and fulfil various constitutional rights. The Judgment was handed down and it makes provision for legislation to be enacted within 24 months of the date of Judgment.

The new legislation will recognise marriages solemnised in accordance with Sharia law as valid marriages and to regulate the consequences of such recognition. It was founded in the Judgment that the President, Cabinet and Parliament failed in their constitutional obligation as set out above.

If legislation is not enacted within 24 months of the date of Judgment, a union validly concluded as a marriage in terms of Sharia law and which is still in force when the order becomes operative, may be dissolved in accordance with the Divorce Act and all the provisions of that Act will be applicable. It will not apply to marriages that were validly terminated in terms of Sharia law prior to the order becoming operative.

It is also ordered that in the case of a husband who is a spouse in more than one Muslim marriage, the court will consider all relevant factors. This includes any contract or agreement and must make any order that it deems just and may order that any person who, in the court’s opinion, has a sufficient interest in the matter, be joined in the proceedings.

This is a major step in family law as women and children will finally have the protection they need.

Reference List:

Women’s Legal Centre Trust v President of the Republic of South Africa and Others, Faro v Bingham N.O. and Others, Esau v Esau and Others (22481/2014, 4466/2013, 13877/2015) [2018] ZAWCHC 109; [2018] 4 All SA 551 (WCC); 2018 (6) SA 598 (WCC) (31 August 2018)

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 PUT TOGETHER AN EXIT STRATEGY

HOW TO PUT TOGETHER AN EXIT STRATEGY

Preparing yourself and your business for your inevitable exit from that business, whether by choice or fate, is one of the most neglected aspects we see in small and medium enterprises.

That being said, we believe an exit strategy is critical not only in ensuring you achieve the best possible sale price on eventual exit, but also ensures that you realise the best possible returns from that business while you’re still around.

But what is an exit strategy? Essentially it is a plan for wrapping up your continued and essential involvement in a business, and can also be called succession planning. Depending on the available capacity in the business or your personal mind space, it is something that could take years to put in place, so best to start with it as soon as possible.

What are the essential aspects of a succession plan?

1. Define your planning window – how soon do you want out?

With a planning window comes urgency and focus. It defines whether you will exit at once or in stages, and also defines how resources should be concentrated in order to formulate the plan and execute on its ideals.

2. Get your accounting and legal frameworks in place

Astute buyers, whether external or internal, will most probably want three years of accounting records in place and will require full disclosure around all business dealings when conducting their due diligence in order to evaluate the commercial potential of the business.

3. Write down how things are done in your business

Standard operating procedures need to be documented, from simple things on how the shop is opened and closed on a daily basis, all the way through to how you can ensure that each and every client has the same service experience when dealing with your business. Templates for repeating tasks and formal job descriptions / detailed role clarifications for employees also form part of this aspect.

4. Remove yourself from the equation

You will realise the best possible sale price on exit from the business if it can thrive without you. If you have staff, give them the training and authority they require and delegate as far as possible.

5. Get a guideline valuation of your business

A professional opinion on the value of your business tends to manage not only your expectation of your eventual proceeds from an exit but also equips you with the requisite knowledge to ensure you can maximise the valuation of the business.

6. Work on your elevator pitch

Present the story of how you became involved in the business, the journey that you had and why you want to exit, as well as the future potential in the business.

Use the numbers as corroborating evidence and incorporate external facts and statistics to support your view on future potential.

The best potential outcome of this succession plan might even be for you to remain involved, but then having a more profitable and efficient business – one where you don’t need to be there every day.

And should you indeed exit, you will be able to realise a better price and increase the chances of your legacy being continued in the form of a successful and sustainable business.

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)

WHAT TO LOOK OUT FOR BEFORE BUYING A PROPERTY

WHAT TO LOOK OUT FOR BEFORE BUYING A PROPERTY

You’ve searched far and wide for the perfect home for you and your family, and you’ve finally found it, or so you thought. Buying a home, especially for the first time, is as overwhelming as it is exciting.

You’ve viewed your dream home, but remember, you receive so much information during your viewing, that you could easily become overwhelmed and miss important details. Especially if you have fallen in love with your potential new home. It is important to remember that there are various “red flags” that you need to look out for before purchasing, as missing these “red flags” could have significant financial repercussions. Before signing, make sure to look out for the following:

1.Foundation and structural faults

What do you think is the most important part of a house? The double garage? The interior? How well-lit the rooms are? No. The most important part of the house, and arguably the costliest to repair, is the foundation of the house. Make sure to look out for large cracks in the walls, as this could be a sign of some serious structural problems with the foundation. Make sure to thoroughly investigate the door frames; if door frames don’t appear to be square or if the doors have difficulty closing, it could be a sign of structural problems.

2.Poor drainage/grading

In most cases, water problems in a house are directly related to poor drainage or grading. However, it is often difficult to detect if a house has poor drainage or grading. An obvious sign of the above-mentioned faults is pools of water or a bouncy bathroom floor which could indicate that there is a leaking shower drain. Make sure to also look out for overflowing gutters, water stains and cracks in the foundation.

3.Patches of fresh paint

A coat of fresh paint is an excellent and quick way to spruce up your home, but if there are random patches of fresh paint around the house, it could be cause for concern. Why? Because it is possible that the seller is trying to hide something beneath the coat of paint.

4.Faulty electrical wiring

If you are looking to buy an older home, make sure that the electrical wiring is not faulty, as house fires caused by faulty wiring is not as uncommon as we would hope. This is especially the case in older homes, as these homes don’t always have an ample supply of power and the number of electrical outlets like newer homes have. Also look out for any exposed wires, as this could cause significant harm to either the home or your family.

5.Neighbourhood condition

When looking for your perfect home, always remember that you are not only investing in the property itself, but also in the neighbourhood. Make sure to ask enough questions about the neighbourhood. For example, if you move into a neighbourhood that is deteriorating or crime-ridden, it could have a significant impact on your return on investment.

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)

EXCLUSIONARY CLAUSES IN HOSPITAL CONTRACTS

EXCLUSIONARY CLAUSES IN HOSPITAL CONTRACTS

The CPA contains certain outright prohibitions on the terms that can appear in contracts, the so-called “blacklist items”. Section 5(1) of the Act provides that a supplier (doctor/hospital) must not make a transaction or agreement subject to any term or condition if it directly or indirectly purports to waive or deprive  a consumer (patient) of a right in terms of the Act or avoid a supplier’s obligation or duty in terms of the Act, that would amount to an attempt to avoid a supplier’s obligation under the Act.

In terms of Section 54(1) of the Act, a hospital is also obliged to provide quality medical services. Upholding an exclusionary clause would shield the hospital from liability in breach of its duty to render quality medical services, which would be contrary to long-standing professional standards of conduct and ethical rules which all care services swear to uphold.

Section 51(3) of the Act also provides that exemption of liability for loss or damage due to gross negligence will no longer be permitted in the South African law of contract and such prohibited terms are void and unenforceable.

The regulations governing the Act also provide a list of contract terms which are presumed not to be fair and reasonable, namely Regulation 44(1) provides that a term in a consumer agreement between a business or professional and a consumer is presumed to be unfair if it has the purpose and effect of “excluding or limiting the liability of the supplier for death or personal injury caused to the consumer through an act or omission of that supplier”.

Sections 54 and 55 of the Act provide for both quality services as well as safe and quality goods for the consumer/patient. Section 56 creates an implied warranty as the supplier (amongst others) warrants that the goods comply with the required quality standards. In addition to the consumer/patient’s common law right to claim damages for breach of contract, the Act also warrants a consumer’s right to quality service “in a manner and quality that persons are generally entitled to expect”.

Only having regards to the above provisions, it is likely that the CPA will entirely abrogate the principles laid down by the SCA in the Afrox case. This will bring South Africa in line with foreign jurisdictions regarding medical liability, specifically in respect of exclusionary clauses in hospital contracts. In short, it can safely be assumed that exclusionary clauses in hospital contracts are no longer valid.

It can therefore be argued that it is likely that any type of exclusionary clause, at least where it appears in a hospital contract, will no longer be valid in light of the CPA, especially when regard is had to comparative case law dealing with what should be regarded as an unfair, unreasonable or unjust term.

The effect that the CPA will have on exclusionary clauses and the law of contract in a wider sense will have to be determined by the courts. Except in a few limited respects, the CPA does not apply retrospectively and, as such, contracts entered into prior to 1 April 2011 cannot be attacked on their exclusionary clauses in terms of the CPA. Case law such as the Afrox case will still be a determining factor in the outcome of these matters.

Reference List:

  • The Consumer Protection Act, 68 of 2008
  • Afrox Healthcare Beperk v Strydom 2002 (6) SA 21 (SCA)

 
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)

ESTATE PLANNING AND THE IMPORTANCE OF THE SUBDIVISION OF AGRICULTURAL LAND ACT

ESTATE PLANNING AND THE IMPORTANCE OF THE SUBDIVISION OF AGRICULTURAL LAND ACT

Mr Reyneke owns a farm in South Africa and in terms of his last will and testament he bequeathed the said farm to his two sons in equal shares. Mr Reyneke died in 2019 and the executor of his estate requires clarification concerning the farm and the two sons.

Firstly, the distribution of a person’s estate when he dies is determined by the South Africa law of succession, subject to certain limitations. The South African law of succession is supported by the principle of freedom of testation in terms of which a person is given considerable freedom and discretion as to how his estate should be distributed at death.

One of the limitations to an executor’s freedom of testation is contained in the Subdivision of Agricultural Land Act 70 of 1970.  The Act prohibits the subdivision of agricultural land without the consent of the Minister of Agriculture. Without the consent of the Minister, the wishes contained in the will of Mr Reyneke cannot be carried out.

The following options are available to the testator and heirs:

  1. Redistribution agreement – the heirs can enter into an agreement whereby the land is registered in the name of one heir and the value of the one-half share is paid to the other heir. Both heirs must therefore inherit/benefit equally; or
  2. The land can be sold to a third party; or
  3. The heirs can create a company/trust whereby the heirs become shareholders/trustees and the entire farm is to be transferred to the said company/trust. The heirs can therefore work together as co-shareholders or co-trustees even though they may not own portions of the farm in their individual capacity.

It is therefore important to make use of a fiduciary specialist when drafting your last will and testament.

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)

LANDLORDS & TENANTS: CAN A TENANT CANCEL A LEASE?

LANDLORDS & TENANTS: CAN A TENANT CANCEL A LEASE?

When it comes to cancelling a lease early, both landlords and tenants must be aware of their responsibilities. It’s important to note that the Consumer Protection Act (CPA) has been put in place to protect consumers and it has changed the way that South Africans do business. The CPA also protects tenants in cases where they want to cancel a lease early.

According to the CPA, if a tenant provides the landlord with 20 business days’ notice, the tenant has every right to cancel the lease early. However, this does not mean that a tenant can just pack his/her bags and leave the property without facing some sort of penalty or financial repercussion. These penalties and financial repercussions can include a fair cancellation fee, cost of advertising as the landlord would have to advertise to find a new tenant to take the place of the old tenant, and any other costs deemed reasonable in the case that a landlord cannot secure a tenant in such a short time period.

It’s important to note, although a landlord can expect the abovementioned payments, a landlord cannot, under any circumstances, withhold a tenant’s deposit or expect the tenant to pay rent for the remainder of the lease. A landlord can also not charge a ridiculous and unreasonable cancellation fee. Additionally, a landlord may not withhold the deposit instead of charging a cancellation fee. Landlords tend to think that they can withhold deposits for almost any reason, and this is most certainly not the case.

Unfortunately, there are landlords who ignore the CPA and insist that the tenant pay rent until the lease comes to an end when a tenant cancels the lease early. So, is there anything a tenant can do if the abovementioned is the case? Yes. A tenant can approach the National Consumer Tribunal for assistance or contact the Rental Housing Tribunal.

Tenants need to ensure that they read the lease agreement very carefully before signing and to also make note of any provisions made in the lease agreement concerning the early cancellation of the lease as per the CPA. It is expected of landlords to be up to date and aware of the provisions laid out for early cancellation of the lease, but some are not, and this can cause immense problems for tenants. If your prospective landlord refuses to recognise the fact that you may cancel your lease early, consider renting another property. Also, consider renting a different property if the landlord insists on harsh repercussions in the case of early cancellation of the lease.

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)

DOES LIVING IN A SECURED ESTATE GIVE A FALSE SENSE OF SECURITY?

DOES LIVING IN A SECURED ESTATE GIVE A FALSE SENSE OF SECURITY?

Choosing to live in a secured residential estate in South Africa is becoming ever more popular with South Africans. Entering your estate whilst security guards watch out for unknown assailants that may enter, living in your home peacefully knowing that the security guards are ensuring that people may only enter with your permission, giving the home owners a sense of security. But is this a true sense of security or is it false, and if the unfortunate happens that you are robbed or assaulted in your home, who is responsible? The Home Owners’ Association? The security company?

A Home Owners’ Association (HOA) is a body/committee comprising of the home owners of a specific estate entrusted with the running of the estate and communal affairs of those that own homes there.

On the 28th of August 2018, Judge J Unterhalter of the Gauteng Local Divison High Court handed down judgment in a matter of Van der Bijl and Another vs Featherbrooke Home Owners’ Association and Another. The Van der Bijls, home owners in a secured estate, brought an action against the (HOA) and the security company for failing to secure their safety, as their property was invaded by robbers.

On the 8th of April 2014, robbers unlawfully gained access into the estate during the night and then proceeded to enter the Van der Bijls’ home. Mr Van der Bijl suffered a gunshot wound to his abdomen and Mrs Van der Bijl sustained injuries from being assaulted. Due to these injuries, the Van der Bijls claimed damages from the HOA and the security company, alleging that the HOA and security company were wrongful in their duty to care and were negligent as they failed to take measures to ensure their safety.

The HOA defended the action and took exception to the Van der Bijls’ cause of action, citing that the HOA did not have a legal duty to take steps to protect the Van der Bijls from the robbery, thus there was no wrongfulness or negligence on their part. The court’s stance is that wrongfulness and negligence are two separate requirements of Aquilian liability. Where wrongfulness concerns the issue as to whether the law imposes liability by recognising a legal duty resting upon the defendant to prevent the harm that the plaintiff suffered, negligence concerns the defendant’s conduct judged against the standard of whether a reasonable person would have foreseen the harm and guarded against it, inter alia, a defendant may be burdened with a legal duty to prevent a harm, but his/her conduct may be blameless because the harm was not reasonably foreseeable. Thus, a defendant may be negligent but not act wrongfully because there was no duty to prevent the harm.

The HOA took exception to the plaintiff’s particulars of claim inter alia, it did not have a legal duty to protect the Van der Bijls from the robbery, citing that the Van der Bijls did not make a case for Aqulian liability as there was no wrongfulness. The plaintiff’s counsel relied heavily on the decision of the Loureiro case, wherein the Constitutional Court held that a private security company, who was employed and remunerated for crime preventing, owed a duty to stop avoidable harm. The Constitutional Court went to express the opinion that there would be wholesome deterrent effect if private security firms were not insulated from their own mistakes. Thus, the plaintiff’s counsel submitted that, as in the Loureiro case, the security company employed by the HOA had a duty to protect the residents of the estate including the Van der Bijls and the HOA bears the same duty. But the two cases do not bear the same facts, inter alia, Loureiro did not decide that Mr Loureiro, by hiring a security firm, was under any duty to secure the house, it was the security company that owed the duty to protect Mr Loureiro and his family. So the fact that the HOA employed the security company to provide security for the estate does not simply follow on that the HOA owed the same duty as that assumed by the security company. Such a duty would have to be shown to exist apart from what the security company had undertaken to do. But yes, following the logic of Loureiro, it is the security company that owed a duty to the HOA and the members it represents.

Hence the Van der Bijls may have recourse against the security company and they are one of the defendants. Further, it was noted that the robbers/assailants that caused the harm were not sued and which the plaintiff will have a claim against.

While the Van der Bijls definitely enjoy fundamental rights to security of the person, bodily, physical and psychological integrity, dignity and privacy, and these rights were infringed by being assaulted in their home, the big question is from whom can these rights be claimed. The answer is, you will have a   claim against the assailants, and based on the Loureiro case, the security company, but the Judge failed to see how the HOA, which is an extension of the collective will of the estate home owners, is burdened with the duties to secure these rights. Should the home owners be burdened with these duties, then the question is, does my neighbour have a duty to protect me in my home? He or she may come to your aid and he/she may be described as being valiant to do so but it is not out of duty. Further, there was no contractual obligation, be it in the Memorandum of Agreement or written agreement  between the HOA and the home owners,  holding the HOA liable for protecting the Van der Bijls.

In conclusion, the court found that the plaintiff’s particulars of claim did not set out a cause of action, which follows that the HOA did not have a legal duty to protect the home owners, in particular, the van der Bijls, hence not wrongful.

So, the next time you are thinking of buying a property in an estate, make sure you read the Memorandum of Agreement and understand your rights as a home owner.

Reference List:

  • Van der Bijl and Another v Featherbrooke Estate Home Owners’ Association (NPC) and Another; In Re: Featherbrooke Estate Home Owners’ Association (NPC) v Van der Bijl (12360/2017) [2018] ZAGPJH 544; 2019 (1) SA 642 (GJ) (23 August 2018)

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)

WHAT IS THE BUSINESS JUDGEMENT RULE?

WHAT IS THE BUSINESS JUDGEMENT RULE?

When running a business there are going to be times where the directors in charge will have to make difficult decisions and take risks in order to either save the company or to seal a big deal and gain financially, the notion of “risk for reward”.

As a director, one would be required to make a decision that would be in the best interest of the company, but sometimes these decisions end up being bad for the company, as it suffers financial damage and someone needs to take responsibility for it.

It is important for a director to be able to make decisions without fear, but how would one even take a risk with the “what if it fails” sword hanging over one’s head, knowing that you as a director might have to repay the monies the firm lost out of your own pocket.

This is where the Business Judgement Rule, introduced by the Companies Act 71 of 2008 (“the Act”) comes in, and it serves as protection for directors which allows them to make informed decisions without the fear of liability. However, the Business Judgement Rule can only be used if all the requirements as set out in the Act are complied with.

Section 76(3) of the Act deals with the respective duties of directors, and states that directors perform duties in good faith, in the best interest of the company and with care, skill and diligence that may reasonably be expected of a person carrying out the same functions in relation to the company as those carried out by that director and having the general knowledge, skill and experience of that director. This is subject to Section 4 and Section 5 of the Act in which the circumstances which indicate whether a director has acted responsibly are set out.

These circumstances are as follows:

Whether the director has taken reasonably diligent steps to become informed about the matter. This would require the director to actively do research about the matter in order to be adequately informed and bare the knowledge to act confidently.

Whether the director had no material personal financial interest in the matter of the decision and had no reasonable basis to know that any related person had a financial interest in the matter. The Act defines personal financial interest to mean a direct material interest of that person, of a financial or economic nature to which a monetary value may be attributed and it does not include any interest held by a person in a unit trust, unless that person has a direct control over the investment decision of that fund.

Whether the director complied with the requirements of Section 75 with respect to any interest contemplated in the abovementioned requirement.

Whether the director made a decision, supported a decision of a committee or board, with regard to that matter, and the director had a rational basis for believing, and did believe, that the decision was in the best interest of the company.

All of the above requirements have to be met in order for a director to be able to use the Business Judgement Rule as a defense and be excluded from liability for actions that were taken in good faith.

Reference List:

  • The Companies Act 71 of 2008

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)