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Month: September 2018

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)
JOINT OWNERSHIP: HOW DO I TERMINATE WITHOUT THE CO-OPERATION OF THE OTHER JOINT OWNER?

JOINT OWNERSHIP: HOW DO I TERMINATE WITHOUT THE CO-OPERATION OF THE OTHER JOINT OWNER?

Nature of joint ownership:

Joint owners own undivided shares in the property which they own jointly. Consequently, the joint owners cannot divide the joint property while the joint ownership remains in existence, and a joint owner also cannot alienate the property or a part thereof without the consent of the other joint owner. The rights in respect of the joint property need to be exercised jointly by the owners thereof.

Ways in which joint ownership can arise:

Joint ownership can come into existence by way of an inheritance in which an indivisible property is left to more than one person in indivisible shares; by way of a marriage in community of property, by the mixture of movable property in such a way that it forms a new movable item or by way of an agreement in terms of which the parties agree to jointly buy a property and that both will have equal indivisible shares in the property.

Division of joint property:

Any joint owner can claim the division of the joint property according to that joint owner’s share in the property.[1] It is a requirement for the division of the joint property that the parties need to try to divide the property among themselves first, before approaching the Court for an action to divide the property, which action is called the actio communi dividendo[2].

The underlying principle of the actio communi dividendo is that no co-owner is normally obliged to remain such against his will. If there is a refusal on the part of one of the co-owners to divide, then the other co-owner can go to Court and ask the Court to order the other to partition. The Court has a wide discretion in making a division of the joint property, which is similar to the discretion which a court has in respect of the mode of distribution of partnership assets among partners. 

The Court may award the joint property to one of the owners provided that he/she compensate the other co-owner, or cause the joint property to be put up to auction and the proceeds divided among the co-owners.[3]  Where there is no agreement between the parties as to how the joint assets are to be divided a liquidator is ordinarily appointed, and he can then sell the assets and divide the proceeds, if it is not possible to divide the assets between the parties.[4] If the immediate division of the joint property will be detrimental to the parties, the Court can order in certain cases that the division or the sale of the property be postponed for a period.[5]

It is beneficial that there exist means to divide assets which are jointly owned by parties, who no longer wish to be co-owners, but who cannot reach an agreement on the division of the assets. Without such an action, people might be stuck with a property which they derive no benefit from because it is in the possession of the other co-owner, who refuse to sell the property.

[1] Inleiding tot die sakereg, Van Niekerk & Pienaar, Juta, p 53 – 61.

[2] Robson v Theron 1978 (1) SA 841 (A).

[3] 1978 (1) SA 841 (A).

[4] 1978 (1) SA 841 (A).

[5] Van Niekerk & Pienaar, p 61 – 62.

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)

REVENGE PORN ON THE RISE: LEGAL RECOURSE IN SOUTH AFRICA

REVENGE PORN ON THE RISE: LEGAL RECOURSE IN SOUTH AFRICA

In the digital era we find ourselves in – with the web, social media, smartphones and the ‘screenshot’ – it has become much easier for people to engage in a phenomenon known as ‘revenge porn’. This term is defined by the Merriam-Webster Dictionary as “sexually explicit images of a person posted online without that person’s consent especially as a form of revenge or harassment”. In South Africa, revenge porn is a growing problem with women being the main victims. Studies indicate that this practice disproportionately affects women, with female victims exhibiting a similar range of mental health problems comparable to rape survivors and in extreme cases it can result in suicide. Whether male or female, it is undoubtedly a violation of a victim’s constitutional right to privacy and a strong argument can be made for online abuse being treated as an extension of abuse in the non-digital world.

Current legal remedies in South Africa

When a sexually explicit image or video is posted online, practical considerations initially outweigh legal considerations. The main concern is having the photo or video removed as quickly as possible, before it goes viral. In addition, many people are advised to log off and delete their profiles from social media accounts, but in the long term this does not adequately solve the problem, it merely ignores it.

To date, the complexities of the law in this area lag behind technology and revenge porn is not yet a criminal offence in South Africa, although as discussed below, this position is likely to change soon. Nevertheless, victims have other available legal remedies, some more effective than others. One option for a victim of revenge porn is to sue for civil damages as it constitutes defamation of character. Another option is to sue for crimen injuria, which would involve a case being opened at the police station. Essentially the accused should be criminally prosecuted for violating the victim’s dignity. Alternatively, the Protection from Harassment Act 17 of 2011 offers a comparatively cheap remedy, which allows victims to apply for protection orders against perpetrators. South Africa’s Copyright Act 98 of 1978 in addition specifically provides for interdictory relief, which on an urgent basis could provide for the offending images being removed from online.

However, the above legal remedies are not without fault. Litigation can become a costly and lengthy affair, by which time the victim’s reputation has suffered irreparable harm. Copyright law is only applicable where the victim took their own image or video, such as a selfie.

The Films and Publications Amendment Bill of 2015

The Films and Publications Amendment Bill of 2015 (‘the Bill’) proposes the insertion of section 18F into the Films and Publications Act of 1996 (‘the Act’) which will criminalise revenge porn. Essentially section 18F provides that no person may expose through any medium, including social media and the internet, a private sexual photograph or film, if disclosure is made without consent of the subject, and with the intention of causing that individual harm. The prohibition applies even if the subject consented to the original taking of the photograph or film. Section 24E provides that a person contravening the prohibition in section 18F is guilty of an offence and liable on conviction to a maximum fine of R150 000.00 or to imprisonment not exceeding two years, or both such penalties.

On 6 March 2018, the Bill was passed by the National Assembly and transmitted to the National Council of Provinces for concurrence. This Bill seems closer to promulgation than the proposed Cybercrimes and Cybersecurity Bill of 2017, section 18 of which prohibits and criminalises the distribution of a data message of an intimate image without consent.

Conclusion

Although the proposed section 18F is a positive step, legislation which makes revenge porn a statutory offence should not be viewed as the answer. There is rightly the concern that even when the Bill becomes law, enforcement will remain problematic. The police must be adequately trained to deal with revenge porn, to ensure that the law is properly enforced. There is also a stigma associated with revenge porn so very few victims speak out, with even fewer reporting it to the police. Education about this issue remains vital, teaching people from a young age about consent, the value of privacy, the dangers of the digital era, what constitutes a criminal offence and ultimately that prevention is better than cure.

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:

  • R Essop “Snap of shame: The rough road to stamping out ‘revenge porn’” Mail & Guardian (2018).
  • Sadlier & de Beer Don’t Film Yourself Having Sex (2014).
  • The Films and Publications Amendment Bill 2015.
  • The Films and Publications Act of 1996.
  • The Protection from Harassment Act 17 of 2011.