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Litigation Update, Cwele back on full pay, but not out of the woods, reported in the Sunday Independent



 

Cwele back on full pay, but not out of the woods

Written by Nathi Olifant

Having reached an out-of-court settlement with her employer the Hibiscus Coast Municipality, convicted drug dealer Sheryl Cwele is back on full pay.

But a top Durban lawyer says Cwele could lose her salary if the municipality can show that she has created problems for it and harmed its good name.

Mike Maeso, a partner at law firm Shepstone & Wylie, said the council had the discretion to institute disciplinary action against her for bringing the municipality into disrepute.

Cwele, who was suspended from her post of director of health at the municipality in May, is appealing her conviction for drug dealing.

"In law the moment you appeal the conviction the sentence then gets suspended or set aside until such time that the process is finalised. This can happen if she is able to argue that criminal charges have less to do with her employment," he said.

Maeso said if the municipality were to take steps against her it would have to prove what the council had suffered. Or it would have to prove that she had created problems for the municipality.

"In that case, the municipality may decide not to continue with the relationship it has with the employee. This may happen if the municipality conducts an inquiry to establish if she has brought the municipality into disrepute.

"It's a very difficult position for the municipality. Here you have a very senior employee found guilty by a court of law and the trick now is to determine what impact that has had on the day-to-day functioning of the council," he said. "It seems illogical to have such a person in the employ," he said.

Maeso said any employer would determine whether the person was guilty in terms of their employment and guilty in a criminal case. Cwele is asserting that the municipality based its charges of misconduct on her conviction in the High Court in May, which she is appealing, saying it would be "improper" to act until the final word from the Supreme Court of Appeal.

Cwele was convicted and sentenced to 12 years' imprisonment with co-accused Frank Nabolisa for recruiting South Coast women to smuggle drugs from South American countries.

Cwele and Nabolisa have been granted leave to appeal. The municipality then suspended Cwele as director of health services and started disciplinary proceedings. Last month the municipality suspended her salary. Cwele filed papers with the Durban Labour Court challenging the suspension of her salary This week she and the municipality settled out of court.

Municipal manager S'bu Mkhize said that after conducting a "cost benefit analysis", the municipality resolved to settle out of court. He said they agreed to pay her salary pending the outcome of the disciplinary proceedings. Cwele will lose her salary if the municipality's disciplinary committee finds her guilty an outcome she has indicated she would appeal.

The municipality is now paying the salaries of two directors of health services after Thembi Khawula, the municipality's erstwhile manager of cultural services, was appointed to act in Cwele's absence.

Mkhize said this week that the first leg of proceedings in Cwele's independent disciplinary hearing was complete and a ruling made. "Both Cwele and the municipality now have to submit papers to the chairman of the disciplinary committee on mitigating or aggravating circumstances, to allow for a final decision.

"Once the chairman makes his decision, it is final," he said referring to Cwele's comments in court papers that she would appeal the outcome of the disciplinary hearing if it rules against her. Should she lose the appeal, Cwele will also lose her house. The National Prosecuting Authority (NPA) told the court in May that it would lodge an application for Cwele's assets to be forfeited if her appeal bid failed.

The NPAs Asset Forfeiture Unit (AFU) would argue that Cwele used the proceeds of crime to purchase her house. However, Cwele's lawyer, Mvuseni Ngubane, hit back on Friday saying he was not aware of any action by the AFU to attach her client's property regardless of whether she loses the appeal.

Michael Maeso, Partner and Head of Employment & Pension Law

Contact: 031 575 7207 and maeso@wylie.co.za

 

 

 

 

Conveyancing & Property Update, Second properties could pay busines rates, reported in the Sunday Tribune



Second properties could pay business rates

Written byNicola Jenvey and Vivian Attwood

PLANS to classify rented buildings as commercial businesses have all sorts of property owners up in arms.

Holiday homes, and investment properties in particular, are expected to be hit by an amendment to the Municipal Property Rates Amendment Bill proposed by the Co-operative Governance and Traditional Affairs department this week. The resulting higher rates will sound the death knell for developers and investors, said Wakefields Real Estate CEO Keith Wakefield.

In eThekwini, the change to commercial rates would mean a rates increase of 226 percent.

"The way the draft proposal is worded, it means you will get rates rebates only on the primary residential property in which you live," said city treasurer Krish Kumar. "We will respond with alternative submissions. "It would be virtually impossible to manage because those who own more than one property would simply put a second or third (property) in the name of a spouse or offspring."

Kumar said the South African Local Government Organisation had indicated it would oppose the draft bill.

South Africans now have only days left for input – public objections must be lodged by Friday.

Acutts property group chairman Pat Acutt said, "This is a disaster. Shame on them. It is typical of the current regime to grab money now without considering the long-term impact." He said the knock-on effect of the "flawed thinking and legislation" reflected bad governance. People did not need to be discouraged from saving, he said; instead South Africa needed tax incentives to boost retirement saving.

Meumann White managing partner Bruce Forrest condemned the amendment mainly because he said investment properties provided an opportunity for people to provide for their retirement.

"If this amendment is enacted, people will be severely disadvantaged. Their investments might be rendered unviable or unaffordable," he said.

Investment property owners already pay capital gains tax because only primary residences – the homes in which people live – are exempt. They also pay income tax on rental income.

DA caucus leader for eThekwini, Tex Collins, said, "If the new rates bill is passed, it will kill seaside towns like Umhlanga, Ballito, Plettenberg Bay and Knysna. Most of the properties in these places are either rented out or used as seasonal holiday homes. The increase would make owning or renting them prohibitive." Collins said he let a small flat in Glenwood for about R3 000 a month. "I would have to charge more than R5 000 just to cover my costs. That would put it out of reach for most people who rent because they cannot afford to buy" he said. Theoretically, cash-strapped people who bad let their primary residence to make ends meet would also be affected. Wakefield said the amendment would halt residential development because buy-to-let investors made up half the buyers of new units. Without developers and investors, there would be no rental properties, he said.

Seeff Westville principal Tony Hickman said the amendment would see higher costs passed on to tenants, and the market slump, as many people would have to offload their investment properties. The already ailing holiday home market would also be hit as higher rates would apply if the owners let them. "Increased rentals at the bottom end could even see many tenants end up homeless with some resorting to squatter camps," said Hickman.

Shepstone & Wylie partner Sifiso Msomi said fewer investors would mean a loss of treasury income from transfer duties and capital gains taxes. Department media liaison officer Vuyelwa Qinga Vila responded, "The amendments were decided on in response to problems experienced by end-users. "They are the work of a team in our legal services department. They go through many approval processes with all the relevant stakeholders."

Deputy Minister Yunus Carrim said,"It must be stressed that municipalities are empowered to decide on their own rates and tariffs. The rates bill does not stipulate how many cents in a rand they should charge property owners. Municipalities may choose to increase rates, or decline to do so, at their own discretion."

Sifiso Msomi, Partner

Contact: 031 575 7105 and msomi@wylie.co.za

 

Litigation Update, Judge must weigh up the facts before ordering a sale in execution, reported in Personal Finance in Weekend Argus



Judge must weigh up the facts before ordering a sale in execution

In April, the Constitutional Court ruled in the case of Elsie Gundwana versus Nedcor and Steko Development. Gundwana had asked the court to rule on whether a registrar of the High Court may, in the course of granting a default judgment against a borrower, grant an order for the sale in execution of a mortgaged property.

In 1995, Gunciwana bought a plot of land in George for R52 000. She paid R25 000, with the balance in the form of a mortgage bond from Nedcor. Gundwana fell behind with her monthly repayments during 2003.

In November 2003, the registrar of the Western Cape High Court granted Nedcor a default judgment against Gundwana for the amount of R33 543, together with a further order that declared that the property be sold in execution to recover that amount.

However, Nedcor did not act on the sale in execution order for about four years. During this time, Gundwana made irregular payments on her mortgage bond. In August 2007, Gundwana learned that the sale in execution was to take place that month. When Gundwana contacted the bank, she was told that she was in arrears for the amount of R5 268 and that the total outstanding amount was R23 779.

Gundwana told the bank she would pay the arrears as soon as possible. On August 13, 2007, she paid R2 000 to the bank in the belief that she had averted the sale in execution.

On August 15, 2007, the property was sold in execution to Steko Development.

On April 23, 2008, Steko launched an application in the George magistrate's court to have Gundwana evicted. The eviction order was granted on June 3, 2008. According to the Supreme Court Act, a default judgment may be granted in the High Court by the registrar of the court. However, there is no explicit reference in the Supreme Court Act to orders to declare a sale in execution for a mortgaged property specially executable.

The Constitutional Court's ruling says that the registrar of the court can issue a default judgment, but then the case must go to a judge for a sale in execution order to be granted.

WHAT THE RULING MEANS

According to law firm Shepstone & Wylie, the Constitutional Court's ruling in the Gundwana case means that a bank should do the following to obtain a sale-in-execution order:

  • After a summons for a judgment has been served by the creditor and no notice of intention to defend has been entered by the homeowner, the plaintiff (the bank) must set the default judgment before a judge; and
  • The bank must file a supporting affidavit to the default judgment that sets out:

    • The facts of the matter;
    •  The reasons that a sale in execution should be ordered on the mortgaged property;
    • Whether the default judgment can be satisfied in a reasonable manner without involving the drastic consequences of selling the home; and
    • Whether an alternative course should be considered before granting a sale in execution order.

Only where there is no alternative means to satisfy the default judgment, may a sale in execution order be granted.

Shepstone & Wylie Attorneys

Contact: 031 575 7000

 

 

Conveyancing & Property Update, Sales in execution fall as debt-heavy clients get their affairs in order, reported in Personal Finance, Weekend Argus



Sales in execution fall as debt-heavy clients get their affairs in order

Written byNeesa Moodley-Isaacs

More cautious lending practices by the banks and a proactive approach by over-indebted homeowners, who are tackling their financial problems, have resulted in a decrease in the number of sales in execution.

Banks forcibly selling homes (sales in execution) have fallen over the past year, mainly because consumers are managing their finances better and are taking steps to address their debt problems with the banks before their homes are attached, most of the big banks say. According to the National Credit Regulator's consumer credit market report for 2010, there were about 1.8 million mortgage accounts with a total outstanding balance of R760 billion at the end of December last year. For the quarter to March 2010, 87.76 percent of the mortgage accounts were up to date, and this improved to 89.08 percent for the quarter to December 2010.

The proportion of accounts more than 120 days in arrears was five percent, or 90 760, for the quarter to March 2010, and this improved to 4.74 percent, or 85 920, for the quarter to December 2010.

Of the four major banks – Absa, First National Bank (FNB), Nedbank and Standard Bank – only Standard reported that sales in execution increased over the past year. "The financial stress consumers are facing has led to more sales in execution, and we expect this to continue for some time," Funeka Ntombeka, the director of home loans at Standard Bank, says.

But figures from Lightstone, a company that researches the property market, show an overall decrease in sales in execution over the six months to March this year.

Gavin Opperman, the chief executive of Absa retail bank, says while there are still heavily entrenched debtors with poor credit profiles, more consumers are beginning to meet their debt repayments.

According to FNB, sales in execution account for only 0.5 percent of the bank's home loan client base. 'About 92 percent of our home loan accounts are in good standing. While the number of arrear accounts that are scheduled to proceed to sales in execution varies at 20 to 30 per day, this number often falls to zero as non-performing loans are processed and then cleared," Vincent Tadden, the head of collections for FNB Home Loans, says.

More homeowners are settling their home loan accounts before a sale in execution or are making arrangements to pay off their arrears over a reasonable period of time, Tadden says.

John Loos, a strategist for FNB Home Loans, says the FNB Estate Agent Survey provides an idea of the extent of homeowners selling "voluntarily" due to financial stress. 'As at the first quarter of 2011, consumers selling in order to downscale due to financial pressure was estimated at 22 percent of total sales. Although this is lower than in the second quarter of 2009, when the percentage of consumers selling due to financial pressure peaked at 24 percent, it remains a high statistic," he says.

Consumers are finding ways to stay in their homes and are negotiating repayment terms with banks as opposed to selling their homes or facing a sale in execution, Loos says. Debi Misura, the general manager of Nedbank's home loans collections and recoveries department, says the number of sales in execution has dropped significantly as a result of the bank's interventions to help distressed homeowners.

OWN CHANNELS

Rael Levitt, the chief executive of Auction Alliance, says the banks are aggressively using their own channels, instead of sales in execution, to sell the properties of homeowners who can no longer afford their mortgage bond repayments.

Levitt says the banks are more cautious than they were in previous years about granting residential mortgage bonds, particularly at the lower end of the market, because consumers' debt levels are high and lower-income consumers are more likely to default on their loans.

A Constitutional Court ruling earlier this year declared that only a judge can authorise a sale in execution. Levitt says that previously, when a judgment was taken against a defaulting homeowner, the registrar of the High Court could order a sale in execution. "Now the court will have to make an evaluation of the facts of each case before deciding whether or not to order a sale in execution," he says.

However, the improvement in the number of people who are managing to keep up with their home loan repayments could be derailed by changes in the economy.

Inflationary pressures are mounting on the back of rising energy costs and food prices. Employment and consumer confidence fell in the first quarter of this year compared with the fourth quarter of 2010, Jacques du mit, the senior property analyst for Absa, says.

Clarity on what a creditor must do before a court will order a sale in execution

The banks must meet certain requirements before they can sell your property if your home loan repayments are in arrears, and a recent High Court judgment has provided clarity on what is expected when a creditor applies to a court for a sale-in-execution order. The judgment was handed down by the North Gauteng High Court in the case of First Rand Bank versus Folscher Bismarck. The judgment means "there is now an onus on a creditor to provide the court with further information and documentation so that a judge will have all relevant information to make a decision on default judgment and execution",

Andrea Holder, an associate partner at law firm Shepstone & Wylie, says. The judgment does not apply to a sale-in-execution application that involves immovable property owned by a company, close corporation or trust, she says. Holder says that, according to the judgment, if you do not appear in court to defend yourself after you have been served with a summons and your creditor applies for a default judgment, the creditor must file an affidavit that states:

  • The outstanding arrears at the date of the judgment;
  • Whether or not the property was acquired with a state subsidy;
  • Whether the property is used for commercial or residential purposes;
  • Whether or not the property is occupied; and
  • Whether or not the debt was incurred to acquire the property. Any matter in which the amount claimed falls within the jurisdiction of a magistrate's court must be referred to a magistrate's court if the property is to be sold in execution.

Holder says that if the bank or creditor applies to the court for a warrant of execution after judgment is granted, the court must consider:

  • Whether the mortgaged property is your home;
  • How the debt was incurred;
  • The arrears outstanding on the mortgage bond;
  • The arrears on the date when judgment is sought;
  • The total amount due in respect of which execution is sought;
  • The payment history on the mortgage bond;
  • Your financial strength and that of your creditor or bank; and
  • The possibility that your debt may be paid within a reasonable period without your home having to be sold in execution.

When you are issued with a warrant for a sale-in-execution, your attention must specifically be drawn to the fact that you can apply to the courts to have the judgment rescinded, Holder says.

 

Andrea Holder, Partner

Contact: 031 575 7511 and holder@wylie.co.za

 

Customs @ Wylie, Update, Changes in Customs duty, reported in Freight & Trading Weekly



Changes in Customs duty — buyers and sellers are protected

Written by Mark Boucher Customs @Wylie

The Customs Act 91 of 1964 ("the Act") provides a measure of protection to buyers and sellers of imported or excisable goods affected by an amendment in the rate of duty.

A contract may be entered into between two parties based on the duties in place at the time of the signing of the contract. However, as we know, the rate of customs duty or any other duty imposed under any of the schedules to the Act may be amended at any time. This will alter the actual "landed" cost of goods.

Section 59 (1) of the Act gives the seller of goods the right to recover from the buyer, as an addition to the contract price, a sum equal to any amount paid by him/her as a result of any increase in duty, in the absence of agreement to the contrary. Say for example an importer purchases pencils from an exporter in Ireland. He and the exporter enter into a contract of sale, using the DDP Incoterm. When the contract is concluded the rate of duty is set at 15%. However, while the first shipment is on the water, the rate of duty increases to 20%. The exporter is obliged to pay the additional duty to Customs. However, the importer argues that since they signed the contract of sale at a 15% rate of duty that is all he is willing to pay.

In such a scenario, the exporter could rely on Section 59 (1) of the Act to support his claim that the importer is obliged to pay him the additional 5% duty.

Section 59 (2) affords the same level of protection to the buyer in that it makes provision for the buyer to deduct from the price payable an amount equal to the decrease in duty since the time of signing the contract to the date of customs clearance.

Not only does the Act protect buyers and sellers but Section 59 (3) also protects signatories to a contract involving the hiring of goods. This section reads as follows:

"The provisions of this section shall also apply to a contract for the hiring of any goods or the use of any goods in rendering a service at a contract price, and the expressions "seller" and "purchaser" shall correspondingly be construed as including the person by whom and the person to whom the goods are hired or the service rendered."

Section 59 of the Act theoretically provides for easy adjudication in situations where either party stands to lose out as a result of an amendment to one of the schedules to the Act. However, it is an entirely different matter in practice when trying to convince a foreign supplier to conform to our Act.

Mark Boucher, Customs @ Wylie

Contact: 031 575 7312 and boucher@wylie.co.za

 

Litigation Update, Former Chemspec CEO’s trail of debt



 

Former Chemspec CEO's trail of debt

ALL WILL BE EXPLAINED, WOOD SAYS

Written by Tania Broughton tania.broughton@inl.co.za

Strath Wood, the former CEO of JSE-listed Chemspec, who resigned under a cloud last year, stands accused of leaving behind a trail of financial destruction when he moved to America.

Not only has his uMhlanga home been attached by the sheriff, but a leading law firm and a former colleague have both gone to court to attach assets to cover alleged debts.

Wood's resignation – cited as being because of ill health – came just days after a Pietermaritzburg High Court judge said he had lied and fabricated evidence, and ordered him to pay R3 million plus interest and costs to IFA Hotels and Resorts.

The dispute related to an agreement between IFA and Wood, in which he had bought 25 million shares in the Don Hotel Group for IFA. He then sold the shares and put the proceeds into his own account.

IFAs lawyer, Patrick Falconer, said Wood owed his client about R9m. "He has not paid a cent," he added.

While Wood's home in La Palma Terraces had been attached and would be sold at auction, Falconer said the property was bonded and there was not much equity in it.

"We will pursue him for the balance, his being overseas will not stop us. We can certainly consider sequestrating him; he has left a trail of financial destruction," Falconer said.

The law firm which represented Wood in this matter, Shepstone and Wylie, had also launched court proceedings against him to recover its fees.

This application came before the Pietermaritzburg High Court on Friday, and was adjourned until later this month.

On the same day, attorney David Randles, a former director of Chemspec who has returned to the legal profession, launched an urgent application to attach shares in the Strath Wood Family Trust, pending the outcome of a civil dispute in which Randles is claiming 10 million Chemspec shares from Wood.

The shares were worth more than R10m at the time the company listed. Now they are worth about R3.8m. In his affidavit, Randles accused Wood and his wife, Kathleen, of trying to dispose of the shares "to defeat the claims of numerous creditors".

Randles said Wood offered him the shares just prior to the listing of the company as an incentive to join Chemspec. He accused Wood of reneging on this deal and placing the shares in his own trust.

Tired of Wood's "empty promises", he sued him in the high court, with a trial date likely sometime in the second half of next year.

Wood denied owing Randles the shares and is opposing the application. Randles claimed that Wood's attorney told his attorney in December last year: "Strath is never going to pay him (Randles). He can just forget about that… it is simply not going to happen."

A subsequent request for an undertaking that Wood and his trust would not deal with the shares was ignored.

Randles said it then became clear that "Wood's empire was crumbling"- sparked by his resignation after the IFA ruling.

In April, Chemspec chairman Ivan Clark told him that Wood had offered him all his shares, which had also been pledged to FNB for a debt owed by the company.

 In May, he discovered that Wood had sold his car, there was no furniture in his home, the home had been attached by IFA and he had obtained a green card and "apparently emigrated" to America.

He said Wood had already encumbered the shares and it appeared that he would sell them even at a discounted price to frustrate his claim. "He is frantically trying to get rid of his assets and is in the process of cutting his ties with this country.. it appears he uses the trust as his alter ego," Randles alleged.

The matter was adjourned for papers to be served on Wood and to give him time to respond. Wood said in an e-mail to The Mercury that it was "inappropriate" to report that he had left behind a trail of destruction. He said he had "legitimate defences" to his dispute with Randles.

"I was involved in litigation with IFA. I understand that my share of a unit owned by me has been attached. My attorneys, Shepstone and Wylie, are due payment in respect of fees outstanding and I intend resolving with them issues regarding those fees." He said he was travelling and would be able "to explain the full position" later this week. 
 

 

 

 

Employment & Pension Law Update, Earning threshold changes could benefit employees



Earning threshold changes could benefit employees

Employees are often unaware that they are entitled to certain rights provided for in the Basic Conditions of Employment Act, 1997 ("BCEA'.') by virtue of how much they earn.

Employees earning below an amount determined by the Minister of Labour are legally entitled to be remunerated for overtime worked, work on public holidays and work on Sundays. Those people that earn in excess of the amount set by the Minister of Labour will not benefit from these provisions and are not entitled to be remunerated.

Currently, the earning threshold is R149 736 per annum but the Minister of Labour has recently increased this threshold. Effective from July 1, the earning threshold will be R172 000 per annum.

This means that from 1 July 2011, employers must ensure that all of their employees earning less than R172 000 per annum are being remunerated in accordance with the BCEA in so far as overtime and work on Sundays and public holidays is concerned.

"Earnings" is defined as an employee's regular annual remuneration before deductions. It excludes contributions made by the employer in respect of the employee. Where an employee receives subsistence and travel allowances, achievement awards and payment for overtime worked, this will not be regarded as remuneration for calculating the threshold.

Employers are well advised to review their contracts of employment and payrolls before July 1 to ensure that those employees that are legally entitled to certain provisions of the BCEA are being remunerated.

Employees that did not previously enjoy certain benefits because they earned in excess of R149 736 per annum may now be entitled to these rights.

Siobhan Viljoen, Associate Partner

011 292 2540 and viljoen@wylie.co.za

 

 

 

 

Conveyancing & Property Update, Buy to suit your pocket, reported in the Sunday Tribune



Buy to suit your pocket

Written by NICOLA JENVEY – PROPERTY EDITOR

The life rights issue is still a vague one for many people considering buying property, particularly when the decision is being made for retirement living.

Life rights schemes differ from sectional title properties mainly in that no actual property purchase or transfer takes place – the development retains ownership of the unit.

The basic concept of life rights is that buyers pay an amount for the right to live in a unit for a determined period. When the owner dies, a spouse may be entitled to stay in the unit until death or resale.

Shepstone & Wyle partner Sifiso Msomi said that the payment is an agreed amount that may be deemed a lifetime of rental paid in advance.

No transfer or registration fees are payable, but Tyson Property Group inland director Lee Ellis, points out buyers must know that the property cannot become an estate asset and be bequeathed.

Garlicke & Bousfield director Simphiwe Maphumulo says life rights properties can be bought with loans, but banks are not keen on the risk. Legally, life rights outrank other rights over the property including those of the bond holder.

"This is a cheaper option to secure a place in a retirement development and enjoy a lifestyle in your golden years that otherwise might not be affordable," said Wakefields Real Estate CEO Keith Wakefield.

The advantage is that life rights fix accommodation costs for the rest of the owners' lives. If the development offers a fixed-for-life levy, the associated levies and costs of frail care will not increase above an agreed level.

Hillcrest-based Le Domaine applies a reversionary rights scheme, recognised as a form of life rights, to the Village Versailles development. In this case, purchasers buy into the lifestyle at a 20 percent discount from the sectional title unit price, but on death or notice the unit reverts to the developer at the price originally paid.

Stanleys Property CEO Mike Stanley said the practice is widespread globally and popular as a retirement model.

The most common US retirement sale is a life plan model, resembling the South African life rights system, while Australia and New Zealand retirement village operators rarely transfer title to occupants, instead applying a licence to occupy scheme.

The UK uses a lifetime lease model, while in Europe the apartments-for-life concept, sold on a life rights basis, is gaining popularity.

Stanley said the 1988 Housing Schemes for Retired Persons Act recognised life rights as an ownership form, offering protection to developers and purchasers.

However, people who buy into life rights schemes should ensure they get security of tenure, physical, health and financial security.

Msomi said when a life rights unit is resold, the outgoing resident or estate gets a percentage of the market-related resale price with the details differing with each development.

However, typically this amount corresponds to the number of years the owner occupied the unit.

Sifiso Msomi, Partner

contact: 031 575 7105 and msomi@wylie.co.za

 

 

 

Litigation Update, Facebook, reported in Northern KwaZulu-Natal Courier



 

Facebook

Should the new Council release the Shepstone and Wylie report on the investigation into the alleged illegal promotions at the Municipality that apparently vilified the Council's subsequent decision to suspend two managers?

Gerhard Potgieter – They should. Can Shepstone and Wylie not make it public?

Simon Manyathi – Ooops!

Ansie Graaff Jonker – Yes…

Imogene Leyland – It is the moral duty of our officials to account for their actions, the moral responsibility of citizens to hold them responsible for their actions. These are the things that make democracy a success. So, yes, it is time for them to account for their actions and called in to question.

Helen Stevens – I agree with every word that Imogene says. I could not have put it better myself. (And that's saying something as I am very opinionated!)

Gary Markham – Of course they must. But the old Councillors will probably be left with egg on their faces and because pals of pals rule the roost they will probably be an excuse like 'oh, sorry, what report – I think we lost it' .

Other issues on facebook

Berni Jacobs – To all the political parties… you have our votes, now will you please clean up our town by removing your posters ASAP!

Bobby Abrahamse – I just want to commend Glencoe police on an excellent response. I had five unauthorised persons in my yard this morning and they were on the scene within two minutes and apprehended three of them. WELL DONE!

Lucky 'Lucx Mathambo – Upon reaching the top of the hill, Hagar told the wiseman how he had fought people and critics on his way up to hear the words of the wise man. The wise man spoke:" The same people you fought on your way up, are the same people you will face on your way down."….the moral of the story is: I'd like to think of myself as one of the 'same people…. I also wish to extend best of wishes to the new council.
 

 

 

Corporate & Commercial Update, Legal Review, Constant Change reported in Business Brief



 

CONSTANT CHANGE

All successful economies need a strong legal framework within which to operate. This gives local and international businesses the ability to operate with more certainty. Furthermore, it provides protection to local citizens transacting beyond the country's borders.

The structure in which businesses operate continues to become more complex. The risks and costs relating to ignorance of legal issues can materially hamper any business. The New Companies Act, Consumer Protection Act and Competitions Act are but a few changes that South Africa's active legislature is seeing.

Changing legislation, foreign Investment and an increasing focus on the African continent has meant that legal firms throughout South Africa have had to adapt in order to meet diverse client requirements. With the rising interest in Africa as an investment destination, and the increasing footprint of multi-nationals on the continent, the need for experienced, local and reputable legal services is becoming critical to the success of establishing these businesses.

Chairman of Werksmans Attorneys, Des Williams says, "The current trend appears to be a view of South Africa as a 'gateway' into the rest of Africa. When based in South Africa, you are trading in a mainstream, international economy that has a large capital base and large, highly sophisticated banking, accounting and legal systems. There are several flights a day to the major capitals of Europe, America, and the Far East and Africa, as well as education and health systems of sufficient quality to attract expatriates. Doing business in South Africa, particularly from Johannesburg, has traditionally been and still is easier and more commercially effective than anywhere else in the region."

POTENTIAL IN SOUTH AFRICA

Foreign law firms have also recognised the potential in South Africa, both as a market and as a gateway to other African markets Williams says that the company's major advantage over other local law firms and foreign law firms competing in this market lies in our well established Lex Africa network. "We have recognised the potential far ahead of the trend and are the first South African law firm to explore partnerships across the African continent. In 1993, we pioneered the Lex Africa network, which currently consists of leading law firms in 30 African countries," he says.

 Pieter Steyn, Chairman of Lex Africa and Director at Werksmans Attorneys says, "Africa is a land of great opportunity but it is also associated with diverse challenges and risks. Any new or established business in Africa, whether local or foreign, must be positioned off a strong legal base and be able to deal effectively with legal or commercial issues, particularly if they have cross border business interests in other African countries. This requires an intimate knowledge and understanding of local laws, customs, business practices, cultures and language."

CHANGING LEGISLATION

Closer to home, the implications of changing legislation in South Africa are far-reaching for all businesses and it is imperative for a legal partner to guide clients and avoid potential pitfalls.

Williams adds, "Imminent implementation of new legislation provides us with the opportunity to better serve our clients and the local economy. As such, we have invested significant resources in providing our clients and the broader business community with insights into the most recent legal developments across a diversity of key industry sectors. Currently, the Consumer Protection Act, Companies Act and recent Employment Legislation are top of mind for most clients and will remain a focus for much of 2011."

He says, "It is encouraging to note that – following the recession – business in the legal arena has increased. M&A, banking and finance, litigation and competition work are a few of the areas in which we have noticed increased activity over the past few months. I believe that increasingly complex legislation and regulation, as well as foreign investment and interest in Africa, will continue to drive these areas of the business."

FACING CHANGE

DLA Cliffe Dekker Hofmeyr recently announced the appointment of Chris Ewing as Chairman of the firm. The appointment has been made with the long term sustainability of the firm in mind and underscores the firm's progress towards achieving its growth and transformation strategies developed over the past 10 years under Ewing's watch. "

As Chairman, I will concentrate on developing our growth strategies, which will include our relationship with DLA Piper globally and in Africa. I will be able to spend more time on client relationships and I look forward to returning to the practice of law in a client oriented role. I am looking forward to serving as a mentor and adviser to our younger lawyers," Ewing said.

Ewing adds that the legal services industry is in good shape at present. "All the law firms have recovered from the recession and are now in the process of hiring new staff to handle the abundance of new work," he comments.

Another trend that Ewing is seeing is the globalization of the industry with many law firms partnering with global entities that result in many benefits such as, intellectual property benefits. In 2005, Ewing formalized the firm's association with DLA Piper, marking the first such affiliation of a South African law firm with a global partner. He led the firm through the merger with Hofmeyr Herbstein & Gihwala in 2008, which established Cliffe Dekker Hofmeyr as one of the country's largest business law firms. Ewing was then appointed CEO of Cliffe Dekker Hofmeyr, just ahead of the global economic meltdown.

RETENTION

"The movement of partners is happening at a rapid rate of recent. Law firms have to expect that as much as they will gain exceptional talent into their organization, they will also lose it just as fast. It has become vital to offer employees attractive packages and create a flexible culture and environment," remarks Ewing.

It has become imperative to properly engage with employees and give them everything that they would need to perform at their best and deliver exceptional standards of work. The human resources department for lawyers has long ago, moved away from just being about hiring and firing, it now has a more strategic role in an organization, paying careful attention to encouraging, motivating, developing and retaining employees. Ewing says that law firms should have proper recruitment strategies in place that are revised on an annual basis. He believes that it is not just about poaching from fellow law firms, it has become about nurturing, developing and mentoring the future of South Africa, hence he advises law firms to strive harder to empower the youth of this country, the future lawyers.

Cliffe Dekker Hofmeyr recruits 50 aspiring lawyers on an annual basis. Ewing says that it is a stringent process of sifting through over 1000 CVs to the shortlisted candidates. He envisages that more and more companies will afford candidate attorneys the opportunity to learn and grow.

There are many ways to attract and retain the best talent to an organization and this does not only revolve around competitive salaries, it is other financial and non-financial rewards that make the difference. In this tight labour market, the retention of current employees and the attraction of key talent are major challenges. A comprehensive approach to 'total rewards' is a primary lever to assist in achieving a sustainable pipeline of human resources. Salaries are just one way to recognize and reward staff. Other forms of rewards include:

  • Short term incentives
  • Long term incentives
  • Development and growth
  • Recognition and fair rewards
  • Employee well-being
  • Meaningful work and role clarity

 

EDUCATION -The forgotten part of a legal team

Education is the often overlooked, yet vital part of a business's attention to the legal environment. According to June Marks, CEO of June Marks Attorneys, she says that it is unfortunate that South Africa's legal and business environment is riddled with difficulties, such as:

  • Technology advances rapidly
  • New legislation is introduced constantly
  • Corruption is rife.

"Lawyers play a pivotal role in surviving the warzone, as they are the trained professionals who keep up to date with all legislation and developments. Yet, the attorney's profession is an often misunderstood one, and the unfortunate truth is that if a company's staff do not understand the attorney, the results are disastrous. Not only can it lead to financial losses in litigious matters being lost but incorrect advice being given or worse given that your attorney is there to protect you," says Marks.

HOW CAN THIS BE AVOIDED?

It is of vital importance for employees to be educated on the law, on the South African legal system and on the workings of the attorney's profession. Although not widely known, yet often resulting in litigation and criminal cases, in terms of section 332 of the Criminal Procedure Act, a company is held liable for the criminal acts of its employees. This means if your employees do something wrong, your company will be held liable. So, employees must be educated on constant legal developments and how they affect the company and the environment at large.

NEW LAWS

The legal services industry has been inundated with changing legislation and in all honesty, there is no country in Africa or the world that can say that they have been through the changes that South Africa has faced or facing.

The Institute of Directors in Southern Africa (IoDSA) has welcomed the introduction of the business judgment rule into South African company law, which seeks to protect directors from liability to the company and shareholders as a result of poor decision-making.

"What this means is that when the business judgment rule applies, it is taken that a court will largely be prohibited from examining the merits of the directors' decision and that a presumption of due care and good faith will be created regarding that director," says Natasha Bouwman, Legal Specialist, Institute of Directors in Southern Africa.

The Companies Act no 71 of 2008 (new Act) introduced the business judgment rule into South African company law for the first time, after being developed in the US in order to:

  • Deter a risk-averse culture among directors as their liability increases. It is envisioned that the rule could help prevent directors not taking part in risky activities that could be beneficial to the company.
  •  Persuade competent individuals to take up the position of director. There exists a limited pool of competent people who could properly serve as directors in SA.
  • Avoid 'judicial second guessing': The evaluation of business decisions by judges after the event is problematic because judges then have the benefit of hindsight – something the directors did not have when taking decisions.
  • Avoid shareholder management of the company. If certain decisions made by directors are protected by means of the business judgment rule, shareholders will be wary of bringing legal action against directors, owing to the potential of failing in their action and the legal costs involved.

BUSINESS ENTITIES UNDER THE NEW COMPANIES ACT

The new Companies Act seeks to repeal the Companies Act 61 of 1973 in its entirety. Among the stated purposes of the new Companies Act are the aims to simplify the legislation in order to encourage entrepreneurship, enterprise efficiency and to create flexibility in the formation and maintenance of companies. Under the new Companies Act, there will be two categories of companies, namely, profit companies and non-profit companies.

 According to Simla Ramdayal, Senior Associate at Edward Nathan Sonnensburg, no provision is made for the incorporation of close corporations after the new Companies Act comes into effect. Close corporations in existence prior to the effective date of the new Companies Act will continue to remain in existence until deregistration, dissolution or conversion into a company in terms of the new Companies Act. Provision is made in the new Companies Act for close corporations to convert into a private company if an aggregate of 75% of the members' interest in a close corporation consent to the conversion. The Close Corporation Act will be amended by the new Companies Act and will remain in force indefinitely.

 "Section 21 companies that are in existence prior to the effective date of the new Companies Act will continue to remain in existence. However, every pre-existing section 21 company will be deemed to have amended its "Memorandum of Incorporation" ("MOI") as of the effective date of the new Companies Act to expressly state that it is a non-profit company, and to have changed its name in so far as required to comply with section 11(3) (b) of the new Companies Act (the requirement that the name must end with the expression "NPC")," says Ramdayal.

Under the new Companies Act, one or more persons may incorporate a profit company and three or more persons may incorporate a non-profit company by submission of a Notice of Incorporation and the MOI for registration. Symbols and "any letters" will be permitted to be used in the name of a company (in accordance with the regulations to be promulgated under the new Companies Act). This has been criticized due to the fact that many companies may have to upgrade their systems to read symbols and possibly foreign alphabets.

MOI's and shareholders' agreements under the new Companies Act, shareholders will no longer be able to regulate the management and administration of a company by using a shareholders' agreement to override the provisions of a company's Memorandum or Articles of Association.

Shepstone & Wylie Attorneys  Partner: Commercial, Claire Cowan says that the new Act simplifies the constitutive documents of a company by replacing the Memorandum and Articles of Association with a single document known as the Memorandum of Incorporation (MOI). From the date on which the new Act came into operation, the Memorandum and Articles of Association of a pre-existing company will automatically become the MOI of that company.

"In future, shareholders' agreements have to be consistent with the provisions of a company's MOI. The new Act allows shareholders a period of two years following the effective date to review and amend their shareholders' agreements to accommodate this change. During this two year period any provisions in a shareholders' agreement concluded before the effective date, that conflict with the MOI, will continue to override the provisions of the MOI," adds McGee.

Most of the typical provisions contained in a shareholders agreement relating to the management and administration of a company are now contained in the new Act in the form of "alterable provisions", which are standard rights, duties and powers which will apply to a company unless they are varied in a company's MOI. As a result, many of the provisions of a shareholders' agreement may be comfortably included in the MOI, provided that they are tweaked where necessary to comply with the provisions of the new Act.

McGee says that although the new Act gives each pre-existing company a two year grace period during which the provisions of its MOI will override any inconsistent provisions of the new Act, it is imperative that during this period, every pre-existing company reviews its MOI against the standard provisions in the new Act to determine their effect on the management and administration of the company and to what extent, if any, such standard provisions should be amended in the MOI.

Likewise, shareholders should review their shareholders' agreements against the corresponding alterable provisions of the MOI to make sure that where required, the alterable provisions are amended to accommodate the provisions of their shareholders' agreements.

START-UPS

Small and start-up businesses work predominantly on trust and verbal agreements – because being cautious and doing it formally, costs time and money. It works until something goes wrong!

Advocate Richard van He!den, Managing Director of www. LawUnlocked.co.za says that entrepreneurs are by their nature optimists. It takes commitment and a positive outlook to take on the hardships in building a new business. But many businesses start trading without any proper legal agreements in place, basic agreements like regulating the relationships between partners and shareholders of the business or its relationships with employees, suppliers and customers.

"But the hard lesson that many businesses have learnt is that these agreements become vital once the business is established. You may have been able to wing it on the basis of informal arrangements with your customers or suppliers, especially when the transactions involved were for just a few thousand rands, but the picture is very different and far more risky when your volumes have increased to a point where your business finds itself transacting for hundreds of thousands of rands without protecting itself contractually. Often, habits of informal agreements are so deeply ingrained you don't even realise you're still winging it legally, until you have to go to court," says van Heiden.

CUTTING COSTS

He says that the opportunity for sorting out these legal measures is best taken in the early days of the business. "Understandably, the need for entrepreneurs to wing it comes from the exorbitant costs that lawyers charge on an hourly basis. New business owners simply cannot afford the high costs and try to resume work without proper contracts in place," says van Heiden.

It is possible to benefit from innovative legal drafting solutions that are now available on the web, but only when the drafting is tailored and customised to an individual case, as a real live lawyer would do. There are applications such as www.LawUnlocked.co.za that are based on solid legal principles, combined with clever application of computer science and artificial intelligence. This can give business owners quality, customised contracts at completely affordable rates.

"At the very least, it will save business owners a bundle in fees in only needing a lawyer tweak the more complex or unusual contractual terms to an agreement. At the very best, an 'artificial intelligence' legal document will give business owners substantial protection against the most commonly encountered risks. Entrepreneurs shouldn't delay formalising their legal agreements. You've worked too hard to see it all go up in flames or being worn out in a duel to the death in court, where no-one wins but the lawyers," comments van Heiden.

THE FINAL WORD

One of the best ways to find good legal representation is to rely on the recommendations of trusted family, friends, or business partners. If they have employed the help of law firm before, they can tell you if they were satisfied or displeased and probably even give you advice about what to look for and ask when choosing a representative.

CONTRIBUTORS

June Marks Attorneys, LawUnlocked,Werksmans Attorneys, DLA Cliffe Dekker Hofmeyr, Spoor & Fisher, IoDSA, ENS 

Shepstone & Wylie 031 575 7000

Claire Cowan, Partner

Contact: 031 575 7404 and cowan@wylie.co.za