Browsed by
Month: June 2018

THE DREADED “F” WORD – READ ABOUT THE LATEST AMENDMENTS TO THE FICA PROCEDURE

THE DREADED “F” WORD – READ ABOUT THE LATEST AMENDMENTS TO THE FICA PROCEDURE

The main purpose for the enactment of FICA and FICAA is to identity any proceeds that originates from crime and other illegal activities, as well as to prevent fraud and the financing of terrorism.

Since the bombing of the World Trade Centre on 11 September 1993, a world-wide tendency was created in terms of which more and more pressure was put on financial institutions to ascertain the source of funds utilized by their clients to conclude business transactions. This obligation was also placed on attorney firms, which are defined as accountable institutions (“AI’s”) in terms of FICA.

The above legislation have a profound impact on the manner in which a property transaction is to be concluded, and it warrants the provision of various documentation by both the Seller and the Purchaser to the transferring attorney attending to the transfer of a property. Under normal circumstances these documentation are required prior to the commencement of a property transaction, and in any event, before any funds can be invested on the trust account of the transferring attorney on behalf of either the Seller or the Purchaser. The Fica procedure also requires more than just the provision of a certified copy of the identity document of the parties involved.

Although FICA was rather prescriptive with the conditions AI’s had to comply with regarding the identification and verification of its clients, FICAA introduced certain new terms, posing different obligations on AI’s. One of the main differences between FICA and FICAA is the fact that FICAA created a “risk based approach” to be implemented by AI’s, leaving it to said institution to establish on their own what risk each different client poses to the object that the legislation wish to prevent, and to establish their own internal mechanisms of identifying said risks.

To identify any relevant risks, FICAA requires an institution to institute certain customer due diligence measures. These measure requires the AI to know and understand the core business of its clients, to identity the beneficial owners (being the natural persons behind the legal entity) to prevent abuse of legal entities for fraud or other purposes, as well as to ensure that enhanced customer due diligence procedures are followed when the institution is dealing with foreign prominent public officials and domestic prominent influential persons. FICAA contains examples of which persons qualify as being prominent persons as defined in the Act.

After the risk assessment is done, the AI is responsible to act on the outcome of the risk assessment in accordance with its risk management and compliance programme. In terms of FICAA all AI’s are obliged to have their own risk management and compliance programme, specifically drafted to identify the risks posed to the main business of the accountable institution itself, and which programme are also required to set out the institutions plans to manage these risks in light of its core business, whilst simultaneously ensuring compliance with FICA and FICAA.

The outcome of the risk assessment might require the AI to prevent the risk all together by terminating the client’s mandate, or to report the risk to state entities in terms of the procedure prescribed in FICA and FICAA. The AI might also consider to implement increased customer due diligence measures by for example, to require the provision of additional documentation by the client to ensure the authenticity of the information provided to the AI by the client.

Currently there are no clear guidelines as to exactly how the risk based approach have to be implemented for specific industries, or what and how the risks will be managed. It appears as if each AI within an industry will have to apply their minds and draft a workable document addressing all relevant and expected risk scenario’s within the industry. This in itself seems to be a daunting task, and currently the various industries are hoping to receive valuable and practical feedback from the Financial Intelligence Centre in order to assist them with the drafting of such a programme.

This article was written from the point of view of a conveyancer, wishing to provide an overview of the requirements imposed by the new legislation, and to highlight the type of information required by the specific firm of attorneys according to their own internal guidelines for FICA purposes.

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 RIGHTS OF A DOMESTIC PARTNERSHIP

THE RIGHTS OF A DOMESTIC PARTNERSHIP

Domestic partnerships, also known as cohabitation relationships, are becoming more common in our modern day society, and it therefore becomes ever more important for parties to understand the different legal implications of being married and merely cohabiting. Parties to a domestic partnership do not enjoy the same legal protection as married couples upon termination of the partnership with regards to maintenance claims, property division or succession.

In the South African legal system, there are three forms of fully legally recognised unions, namely marriages, civil unions and customary marriages. However, in our modern society it is becoming more common for couples to live together in domestic partnerships, without ever getting married. It is important for parties to these partnerships to realise that little to no legal protection is provided upon the termination of such a relationship, either by agreement or due to the death of either party.

The general rule for domestic partnerships was laid down in Butters v Mncora: A domestic partnership does not give rise to any special legal consequences, such as that of a marriage or a civil union.

In 2006, the South African Law Reform Commission acknowledged the need for legal protection to be granted and drafted the “Draft Domestic Partnership Bill.” Parliament has however shown no urgency to pass the Draft Bill, and the legal position in South Africa thus remains unchanged.

Maintenance claims

The Maintenance of Surviving Spouses Act entitles a surviving spouse of a marriage, and a surviving civil partner of a civil union, to institute a claim for maintenance against the estate of the deceased. This provides for a claim of any reasonable maintenance needs that they cannot provide for by their own means, until such time that they remarry or pass away.

Parties of a domestic partnership should note that this protection does not extend to domestic partnerships, and thus no such maintenance claim can be made. Should the Domestic Partnership Bill be enacted in the future, section 28 will offer such an opportunity to claim for maintenance. However, at this stage no such protection is afforded.

Property Division

Parties to a marriage have a choice of two matrimonial property regimes.  Simply put this is to be married either in community of property, or out of community of property. Each property system will have different consequences flowing from it either by law or contractually due to an Antenuptial contract. However, no property regimes exist for domestic partnerships, and thus no joint estate can exist as it would in a marriage.

The Supreme Court of Appeal has recently portrayed an increased willingness to extend contract-based legal protection to parties of a domestic partnerships. Contracts can be concluded by parties in domestic partnerships to govern aspects such as division of property upon termination of the partnership. Although these types of contracts are legally enforceable, they may give rise to potential problems. The contract may be concluded solely for the benefit of one of the parties, or circumstances may occur that the parties had not anticipated when the contract was drawn up. In practice however, it seldom happens that parties to a domestic partnership actually enter into a contract.  This may be due to a mutual decision, or due to the fact that parties did not foresee a need for such contract.

Intestate Succession

In terms of the Intestate Succession Act, a spouse of a marriage will inherit if the deceased spouse dies without making a will. This has been extended to include partners of a civil union and customary marriage. Provision for inheritance by a partner of a permanent same-sex partnership has also been made in terms of this Act. This has however not been extended to the termination of heterosexual domestic partnerships, and thus no claim can be made in terms of the Intestate Succession Act on the estate of a deceased partner of a domestic partnership.

Couples living together in cohabitation relationships do not have similar rights to institute claims against the other party upon termination as they would have in a marriage or civil union. This could leave financially dependent parties in unanticipated vulnerable positions.

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)

References:

  • Butters v Mncora 2012 (4) SA 1 (SCA).
  • Barratt A “Private contract or automatic court discretion? Current trends in legal regulation of permanent life-partnerships” (2015) 26 Stellenbosch Law Review 110-131.
  • Clark B “Families and domestic partnerships” (2002) 119 South African Law Journal 634-648.
  • Intestate Succession Act 81 of 1987.
  • Maintenance of Surviving Spouse Act 27 of 1990.
  • Skeleton A (ed) Family Law in South Africa (2010), Cape Town: Oxford University Press.
  • The Domestic Partnership bill in GG 30663 of 14-01-2008.
TITLE DEEDS WHEN BUYING OR SELLING PROPERTY

TITLE DEEDS WHEN BUYING OR SELLING PROPERTY

If you’re planning to buy a new property, you’ll need to get the title deed transferred into your name to prove that you’re the owner of the property. You’ll need the assistance of a lawyer specialising in property transfers (also known as a conveyancer) to help you transfer the title deed into your name.

You’ll only become the owner of the property when the Registrar of Deeds signs the transfer. After it’s been signed, a copy of the title deed is kept at the Deeds Office closest to you.

How long does it take? 

A search may take 30 to 60 minutes. In some of the larger offices, the copy of a deed is posted or it must be collected after a certain period of time.

To obtain a copy of a deed or document from a deeds registry, you must:

  • Go to any deeds office (deeds registries may not give out information acting on a letter or a telephone call).
  • Go to the information desk, where an official will help you complete a prescribed form and explain the procedure.
  • Request a data typist to do a search on the property, pay the required fee at the cashier’s office and take the receipt back to the official at the information desk.
  • The receipt number will be allocated to your copy of title.

Fortunately, a conveyancer will help you with the process so that you don’t have to worry about all the paperwork yourself. You should contact your legal advisor to find out more.

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)

References:

CAN I OBTAIN FINANCING IF I DON’T OWN IMMOVABLE PROPERTY AS SECURITY?

CAN I OBTAIN FINANCING IF I DON’T OWN IMMOVABLE PROPERTY AS SECURITY?

The article gives a brief overview of what a notarial bond is, the requirements that need to be complied with to register a notarial bond and give tips regarding clauses that will prove to be useful in a notarial bond. It also deals with the situation where a debtor disposes of an asset listed in a notarial bond, contrary to the provisions thereof.

A very useful way of obtaining financing to start a new business, is to register a notarial bond over the movable property belonging to the business. For instance, notarial bonds are regularly utilised in transport companies – a notarial bond is registered over the vehicles forming the core of the business, but the vehicles do not need to be in the physical possession of the creditor, thus the business can fully operate.

What is a notarial bond?

A notarial bond is a general or special bond where the movable assets of a debtor are used as security for a debt. In terms of the notarial bond, the debtor undertakes to pay his debt towards the creditor, failing which the creditor will be entitled to sell these movable assets and to utilise the proceeds thereof to satisfy his claim against the debtor. There are 2 types of notarial bonds: 

  • General notarial bond: all the movable assets on the debtor’s property serves as security for the debtor’s debt.
  • Special notarial bond: specific movable assets identified in the bond will serve as security for the debt.

How does a notarial bond differ from a pledge?

A pledge requires the delivery of the movable asset pledged. A notarial bond does not require the delivery of the movable assets identified in the bond, but in terms of section 1(1) of the Security by Means of Movable Property Act 57 of 1993, the movable property listed in the notarial bond will be deemed to have been pledged to the creditor as effectually as if it had been delivered to the creditor. The fact that the creditor is deemed to be in possession of the property thus places him on equal footing with that of a pledgee. The creditor, upon registration of the notarial bond in the deeds registry, acquires a real right of security in the movable property specified in the bond.

Requirements:

  1. Existence of a principal debt;
  2. Assets which serve as security must be movable, including corporeal and incorporeal assets.

Corporeal assets include furniture, vehicles, the goods of a business, animals and the future offspring of animals and stock in trade.

Incorporeal assets include an unregistered long-term lease of immovable property, a short-term lease of immovable property, a liquor license, a water use license, site permit, shares in a company, goodwill of a business, book debts etc.

What if more than one creditor uses the same asset as security for their debt?

A bond which was registered first enjoys priority over a bond registered thereafter.

Important clause to insert in the bond:

To prevent the debtor from disposing of assets which serve as security in terms of the notarial bond, a clause should be inserted disallowing the debtor to sell, alienate, dispose of, transfer or permit the removal of the asset from the debtor’s place of residence or place where he carries on business, without the prior written consent of the creditor. 

What happens if a debtor disposes of the asset identified in the notarial bond, contrary to the stipulations in the notarial bond?

The creditor will be able to apply for provisional sentence summons against the debtor, provided that the notarial deed meets the requirement of being a liquid document. A liquid document is a document which indicates, without having to consult extrinsic evidence, an acknowledgement of debt, of which the amount is easily determinable. A notarial bond will in general qualify as being a liquid document. 

A creditor will also be able to claim back an asset which has been sold, contrary to the provisions of the notarial bond, to a bona fide third party, from such third party. The reason for that is the fact that a notarial bond, which has been registered in the Deeds Registry, creates a real right, which is a right that attaches to property, rather than a person. 

It is not easy to obtain credit in the economic environment in which our country currently finds itself. However, there are ways to get your business off the ground and registering a notarial bond over the property of your business is a recognised method of securing your business’ debt. If notarial bonds can be utilised more frequently, it can help a lot of new businesses get the financing they need to buy equipment, vehicles and machinery necessary for the operation of the 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)

References:

  • Explanatory Notes Part 1: Course in Notarial Practice, compiled by Gawie Le Roux, Erinda Frantzen and Ilse Pretorius
  • The South African Notary, sixth edition, M J Lowe, M O Dale, A De Kock, S L Froneman, A J G Lang