The Companies and Intellectual Property Commission (CIPC) recently issued a notice regarding the requirements for the lodging of an application for the removal of a director of a company by the shareholders.

The relevant sections of the Companies Act of 2008 (“the Act”) do not specifically set out the grounds for the removal of a director by the shareholders, leading some to conclude that the shareholders have a right to remove a director and need not provide any reason for doing so.  The procedure for such a removal entails the passing of a resolution by the shareholders at a shareholders meeting. However, in terms of the Act, the director concerned must be given notice of the meeting and the resolution and afforded a reasonable opportunity to make a presentation to the meeting before the resolution is put to a vote.

A recent Western Cape High Court decision confirmed a director’s right to be afforded “a reasonable opportunity to make presentation”, and found that shareholders are required to provide the affected director with reasons for the resolution in advance. The absence of these reasons would render any notice of the meeting and resolution invalid.

The implication of the above decision is that anyone wishing to lodge an application with CIPC for the removal of a director of a company (COR39 application), must ensure that their notice lists the reasons for removal.

Should you require further information on commercial matters and CIPC applications, please contact us.

For more information contact:

Henning Pieterse | Partner

E: h.pieterse@bissets.com

Areas of Expertise: Corporate & Commercial Law

Tenants often don’t read carefully through the terms and conditions contained in their lease agreement and this can cause problems down the road. A properly drafted lease agreement will ensure that both parties’ rights are protected. Both parties must ensure that all the necessary information is included in the lease agreement, along with any additional arrangements discussed.

Enquire about costs and duration

The monthly rental cost and duration of the lease (including specific dates) must clearly be stated in the lease agreement to avoid any confusion regarding this matter. The lease agreement should also clearly indicate how and when any increases in rent will take place.

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

Some rental properties include utilities within the monthly rental cost, while others don’t. Before you sign the lease to a property, ask your landlord what is included in the rental rate.

Get information regarding changes to the property

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

Both the landlord and the tenant are responsible for the maintenance of the property, depending on the type of maintenance. The responsibilities of both parties should be clearly set out in the lease agreement. The lease agreement should also indicate how the tenant must report any problems that require repair and how long the landlord has to take appropriate action.

Make sure which alterations can be made to the property and whether it can be removed upon termination of the agreement, where applicable. Rather know the rules and stick to them, than making an alteration and then finding out afterwards that your landlord is unhappy with it or will retain ownership of it after your departure. Remember that in most instances you will not be allowed to paint walls or damage them in any way (including inserting screws or nails to hang pictures) or will be required to repair the walls (repaint to original colour and/or fix any damage cause by you).

Conclusion

Tenants must understand all the clauses, terms and conditions contained in the lease agreement to avoid any surprises later. A rental agreement is a legally binding document and tenants must understand and agree with everything contained therein before they sign it.

For more information regarding lease agreements, please contact:

Lisa Visagie | Partner

E: l.visagie@bissets.com

Areas of Expertise: Property Law | Conveyancing

One of the biggest dreams that most people have, is to one day own their own home. However, that is easier said than done. Dreams of owning big houses with backyards turned into renting small apartments. The choice between renting a property and buying a property is often a difficult decision to make. Renting a property comes with its advantages and disadvantages, but so does owning a property.

The idea of renting a property is often frowned upon because most people believe that renting is just as good as throwing money in the bin. This is because the money goes straight to the landlord and the tenant is not getting much in return.

When faced with the decision of renting a property, keep in mind that there are both pros and cons.

The pros include:

1. More flexibility

Renting a home allows for more flexibility. Renting is ideal for those who move around often, whether it be for work or other reasons. If you don’t intend on staying in one specific place for a long time, renting is the perfect option for you, and it requires no long-term commitment from you as a tenant.

2. Affordability

You might not be able to buy a home in your favourite area; however, you could possibly afford to rent a home in your favourite area.

3. Moving out

When it comes to moving out, it is easier to do for a tenant than a homeowner. A tenant can easily give a month’s notice or find someone else to take over their lease, and vacate the premises. A homeowner, however, needs to find a buyer to purchase his/her home before they can even think about moving out.

4. Homeowner’s insurance

Most of the maintenance work and repairs that need to be done on the property is the owner’s responsibility. Homeowner’s insurance is also paid for by the homeowner. The tenant only needs to insure his/her own personal belongings.

The cons include:

1. Lack of freedom

A tenant is required to follow the rules set out in the lease agreement. This could have an impact on the use or renovation of the property. You cannot make any changes to the property without getting the owner’s/landlord’s consent.

2. Third party involvement

In most cases, you will have to deal with a rental agent when renting a property. This rental agent will act as the middleman between you (the tenant) and the owner. The downside of this is that issues could take even longer to be resolved.

3. No return on investment

When renting a property, there is absolutely no wealth creation or return on investment, as the home will never belong to the tenant. The tenant is basically just paying towards the homeowner’s home loan.

4. Rental fluctuations

You as a tenant, have no control over annual rental fluctuations, which are affected by inflation. If you can no longer afford to pay your rent, you will have to find an affordable home, and the homeowner will find a new tenant that can afford the increase in rent.

5. No guarantees

Once the lease expires, there are no guarantees that the lease will be renewed, which means that the tenant will have to vacate the premises and find new accommodation.

Maintenance orders and variation

Maintenance is that part of the divorce order which is not a final determination of the rights of the parties. However, as long as a court order exists for maintenance for a certain amount, the person against whom a maintenance order was granted must abide by that order. In cases where the aforementioned party does not pay the maintenance or fails to pay the entire amount, arrears will accumulate.

The person who is entitled to the maintenance may approach the Maintenance Court for an application in terms of Section 26 of the Maintenance Act, 1998 (“the Act”). The party failing to pay maintenance will be in contempt of court and would thus be guilty of a criminal offence.

However, the Maintenance Officer is aware that it is possible for someone’s financial position to have changed since the maintenance order was originally made. A person may have become unemployed, resulting in him or her not being able to pay the same amount of maintenance. Another factor to consider is the possibility that the needs of the person who is entitled to maintenance may have changed.

The party against whom an order to pay maintenance was made can bring an application for Substitution or Discharge of Existing Maintenance Order in terms of the Act, if good cause exists (such as unemployment). He or she will have to submit a complete statement of income and expenditure, as well as a statement explaining the reasons for the application.

The matter will then come before the Maintenance Officer. The meeting with the Maintenance Officer is of a less rigid nature than appearing in Court in front of a magistrate and is of a more inquisitorial nature.

The Maintenance Officer acts as a neutral party during maintenance applications. At the hearing, the parties, or their legal representatives, will go through the expenses of each party and find expenses on which the paying party can save money and vice versa in order to make payment easier and to make sure that the other party’s luxurious lifestyle isn’t being maintained whilst the paying party hardly makes ends meet.

The Maintenance Officer will take certain factors into account when making an order. These factors may include the standard of living of the parties, the financial position of both parties and the age of the parties. The Maintenance Officer will make an order which the parties will have to abide by.

If the biological parent who is supposed to pay maintenance for a child cannot make the payment him- or herself, his or her parents (the grandparents of the child) may be ordered to pay the maintenance of the grandchild as they also have a duty to support a minor child.

For more information regarding maintenance issues, please contact:

Kobus Pieterse | Partner

E: k.pieterse@bissets.com

Areas of Expertise: Litigation | Family Law | Curatorship Applications

The adoption process is regulated in South Africa by the Children’s Act 38 of 2005 (“the Act”). Adoption is one of the ways to help give abandoned minors a permanent or stable family life, which they would otherwise not have had. The Act provides that a child is adopted if the child has been placed in the permanent care of a person in terms of a court order.

Who can adopt?

A child may be adopted jointly by a husband and wife, partners in a permanent domestic life-partnership, or other persons sharing a common household and forming a permanent family unit. The Act goes further to say that a child may be adopted by a widower, widow, divorced or unmarried person, by a married person whose spouse is the parent of the child or by a person whose permanent domestic life-partner is the parent of the child, by the biological father of a child born out of wedlock, or by the foster parent of the child.

In terms of the Act, a prospective adoptive parent must be a fit person to be entrusted with full parental responsibilities and rights in respect of the child, willing and able to undertake, exercise and maintain those responsibilities and rights, over the age of 18 years old, and properly assessed by an adoption social worker.

What does the process entail?

A child may be adopted only if consent for adoption has been given by each parent of the child, regardless of whether they are married or not, or by the guardian of the child, or the child  (if the child is 10 years or older, or if the child is under the age of 10 years old but at an age to understand the implications of such consent).

If the parent of a child wishes the child to be adopted by a particular person, the parent must state the name of that person in the consent. Before consent for the adoption of the child is granted, the adoption social worker facilitating the adoption of the child must counsel the parents of the child and, where applicable, the child, on the decision to make the child available for adoption. The eligibility of the prospective adoptive parent must be determined by the Children’s Court.

The consent to adopt must be signed by the person consenting in the presence of a presiding officer of the Children’s Court, and signed by the child in the presence of the presiding officer (if consent of the child is required). The consent to adopt must then be verified by the presiding officer and filed by the clerk of the Children’s Court pending an application for the adoption of the child.

In certain circumstances, consent of the parent or guardian of the child to the adoption is not required, for example, where the parent or guardian is incompetent to give consent due to a mental illness, has abandoned the child, or if the whereabouts of the parents cannot be established, or if the identity of the parents are unknown, if the parents abused or neglected the child, failed to fulfil his or her parental responsibilities towards the child during the last 12 months, has been divested by an order of Court of the right to consent to the adoption of the child, and/or has failed to respond to a notice of the proposed adoption within 30 days of service of the notice. The Act lists further exceptions where consent is not required.

In terms of the Act, notice must be given by the presiding officer to each person whose consent to the adoption is required. If such person fails to comply with the request contained in the notice within 30 days, the person will be regarded as having consented to the adoption.

Please note that the parent of a child who has given consent to the adoption of the child has the right to withdraw such consent for up to 60 days after the consent has been given. The Children’s Court will not make any order of adoption final before the period of 60 days has expired.

The application

An application for the adoption of a child must be made to the Children’s Court, and accompanied by a report by the social worker. The report must contain information on whether the child is adoptable, whether the adoption is in the best interest of the child, and medical information in relation to the child. The application must also be accompanied by an assessment referred to in Section 231 of the Act and a letter by the provincial head of social development recommending the adoption of the child.

A Court considering the adoption of a child must be satisfied that all the requirements, as set out above, have been met and that the adoption of the child is in the best interest of the child.

For more information regarding adoptions, please contact:

Kobus Pieterse | Partner

E: k.pieterse@bissets.com

Areas of Expertise: Litigation | Family Law | Curatorship Applications

by Sophie Robertson

The Western Cape High Court on 31 August 2018 handed down its judgment in the case of Women’s Legal Centre Trust v President of South Africa and Others, ordering the South African government to enact legislation which will give legal recognition to Muslim marriages. This is a significant and welcomed development in our law which will finally afford rights to women and children affected by the previous non-formal recognition of Muslim marriages.

Historically speaking under apartheid, marriages such as traditional African customary unions and Hindu and Muslim marriages were not formally recognised. The lack of formal recognition of such marriages has drastic negative effects for women married according to Islamic law upon the dissolution of the marriage, as well as children born of the marriage, as rights which would usually be afforded to a wife in a lawfully recognised marriage would not in a Muslim marriage be enforceable, which leaves women and children particularly vulnerable with no legal recourse.

Under the new Constitutional dispensation, The Recognition of Customary Marriages Act was enacted to give legal recognition to marriages previously not recognised. One of the Act’s shortcomings was that it failed to recognise, and thus protect, Muslim marriages. This is due to the wording of the Act which states that only marriages which concern “customs and usages traditionally observed among the indigenous African peoples of South Africa” are to be formally recognised and treated on equal footing as a civil marriage. The courts have, over the years, in a piecemeal and litigious fashion, attempted to provide some kind of equal protection to Muslim marriages in the absence of the necessary legislation.

The findings of the High Court handed down by Judge Desai brought long overdue relief as it has been almost 10 years since a draft bill proposing to legally recognise Muslim marriages was published. The Women’s Legal Centre Trust first brought the matter of enforcing legal recognition of Muslim marriages to court in 2014, three years after the deadline for public comment on the Muslim Marriage Bill had passed. Parliament removed the Bill from their review list in 2012. The Minister of Justice at the time said the reason for the removal was because the Bill was largely opposed by those of the public who submitted comments.

In the case, the High Court found that by failing to enact legislation, the government has failed to fulfil their constitutional obligations to respect, protect and fulfil the rights of the Constitution. The court subsequently directed the government to rectify such failure within 24 months by enacting legislation which will “recognise marriages solemnised in accordance with the tenets of Sharia law as valid marriages and to regulate the consequences of such recognition”.  The court held that in the event that the contemplated legislation is referred to the Constitutional Court by the President or members of the National Assembly, the relevant deadline will be suspended pending the final determination of the matter by the Constitutional Court.

The legislation to be passed in the near future will likely prove to be an interesting balancing exercise between protecting the interests of Muslim women on the one hand whilst respecting and maintaining elements of Sharia law on the other.  Once the government passes the said legislation it will be the first time in South Africa’s recent history that Muslim marriages will be legally recognised.

Rifqah Omar | Partner

E: r.omar@bissets.com

Areas of Expertise: Litigation | Professional Discipline Law | Muslim Personal Law | Curatorship applications and administration | Administration of estates

by Sophie Robertson

Weed, dagga, cannabis and dope have been some words buzzing around the legal and public spheres in the last few months. This flows from the highest court in the country making a landmark ruling, confirming the earlier ruling of the Western Cape High Court. On 18 September 2018 the Constitutional Court ordered the decriminalisation of the use of cannabis in a private space. South African adults can now possess, cultivate and use cannabis for personal consumption but may only legally do so in a private place such as one’s home. An adult may also not use it, even in a private space, in the presence of children or non-consenting adults. What exactly constitutes a private space is not clear as there is no legal definition available. It is however important to emphasise that cannabis cannot be used in public spaces.

Provisions of the Drugs and Drug Trafficking Act 40 of 1992 (the Act) were declared to infringe on people’s section 14 constitutional right, namely the right to privacy. An important difference between the ruling of the Western Cape High Court and the Constitutional Court is that the former declared provisions prohibiting the purchasing of cannabis constitutionally invalid however the latter did not confirm this finding. It is clear therefore that it is still illegal to purchase, and by implication sell, cannabis and one would therefore need to grow or ‘cultivate’ your supply solely for personal use.

Just how much one is legally allowed to grow for personal consumption is something which the courts left for Parliament to decide. The uncertainty created in the meantime means that one should exercise caution if growing or possessing cannabis, as the court warned that “the greater the amount of cannabis of which a person is in possession, the greater the possibility is that it is possessed for a purpose other than for personal consumption”.

The declaration of the invalidity of certain provisions of the Act has been suspended by the Constitutional Court for the next two years in order to enable Parliament to rectify the constitutional defects. This is does not mean however that cannabis cannot be used or cultivated in that two year period. In fact, the Court read in certain words and phrases into the Act to make it legal for an adult to cultivate, possess and use cannabis for personal consumption in a private space until Parliament cures the constitutional defects. The decriminalisation of cannabis, and the possible odd waft from your neighbour’s abode, is therefore here to stay.

Should you require further information, please contact:

Albin Wagner | Partner

E: a.wagner@bissets.com

Areas of Expertise: Consulting and representing German-speaking clients in all matters | Civil Litigation including Commercial &amp | Matrimonial Disputes | Representation of parties in property transactions | Disputes relating to deceased &amp insolvent estates, insurance, neighbours, local authorities, building and construction contracts | Contract and Commercial Law | Sports Law &amp | Administration

by Natalie Macdonald-Govender

Starting your own business is an exciting adventure, but nerve-wracking at the same time. It is important to have a well-thought out strategy when setting out to start your business. Protecting your business legally should be considered before you put any plans into action, and not an after-thought!

Sole Proprietorship/ Company? What should I do?

We all know the famous stories of now-wealthy entrepreneurs, who started their business in their garage. Contrary to popular belief, you do not need a company or an office to get going with your business.

A common mistake people make is confusing the term “starting a business”, with “starting a company.” You do not need to start a company in order to create a business!

That being said, you need to carefully establish what you would hope to achieve in your business before deciding on which vehicle you will use to house your business in.

Sole proprietors

A sole proprietor is usually an individual who decides to start a business by himself, without registering a company but to transact in their own name, or use a trading name, for example: “John Smith trading as John Smith Plumbers Supreme”. Someone may, for example, decide against acting as a sole proprietor due to liability issues. If liability issues are not a major concern for you, due to the low-risk nature of the services/goods you offer, conducting business as a sole proprietor may suit you perfectly as it can offer less red-tape in the areas of governance and lower running costs. When it comes to providing security for obtaining finance, a sole proprietor would usually offer his own personal assets as security for the loan (where required by the lender). A sole proprietor’s assets are not protected if sued and therefore, for example, you may find your home at risk if you are unable to satisfy a judgment debt or go insolvent as a result of the business.

Companies

It was previously possible, when registering a company, to register a private company (Pty Ltd) or a close corporation (a CC). It is no longer possible to register a close corporation in South Africa, but previously registered CC’s may still continue to operate as one. Private companies are now the norm, which can be registered via the Companies and Intellectual Property Commission, or you could purchase a shelf company. It is now relatively quick to register a company or purchase a shelf company. Companies are beneficial in that the company is a separate juristic entity with its own juristic personality. The company is in an event of legal action usually sued, and not the directors (with some exceptions). There is, however, also the need to comply with the provisions of the Companies Act 71 of 2008 when operating as a company and ensure that good-governance principles are upheld.

Funding your small business

It is possible to start a business without much capital funding. That being said, it also depends on your market and the type of business you wish to start. For example, a painter starting a business may only need relatively basic equipment to start out. A restaurant on the other hand will usually have huge start-up expenses, such as up-front lease fees, a lease deposit, staff expenses, furniture and equipment. Most banks will usually need some security before advancing a loan (and not to mention that the borrower should have a good credit record, which if you have never traded before could mean that you have a non-existent record). When approaching lenders for finance, you would usually need to have some kind of security and/or surety for the loan, and at least prepare projected financial statements with a cash flow statement, as well as have a business plan. It is worthwhile to keep on the look-out for small business conferences/ workshops, as it can be a resourceful place to obtain more information on financing arrangements, or find out about companies that are eager to assist grass-root businesses or small businesses with seed funding.

Financial Statements

It is good practice to always have up-to-date financial statements on hand. As a sole proprietor, financial statements are not in most circumstances a statutory requirement. Companies are however, due to recent developments with the Companies and Intellectual Property Commission, now required to submit financial statements when submitting annual returns to the Companies and Intellectual Property Commission. Failure to submit financial statements can result in penalties and fines.

Red Tape

Undertake a risk-assessment on the nature of your work. Is there any legal red-tape? Do you need any specific licensing before commencing with that trade? Think food-license, health license, liquor license, planning approval, municipal by-laws, trade and industry regulations as well as company legislation and be sure to seek legal advice before commencing operations. Claiming ignorance of the law does not work!

Tax Compliance

Companies and sole proprietors alike need to ensure that they are tax compliant. It is essential to file tax returns on time as well as to make payment of any amounts due timeously. Tax compliance includes registering for value-added tax once you expect that your turnover will exceed R1 million in any 12 month period (note- not profit, but turnover!) which can be relatively easy to exceed. It should be noted that the VAT registration requirements also apply to sole proprietors. There are penalties for failing to register when registration should have taken place.

A sole proprietor will not file a separate tax return for the business, but in his/her own name. It is essential to know what expenditure may be deducted in terms of the Income Tax Act 58 of 1962 and what is regarded or deemed to be income or accrued income, to ensure that your tax returns are filed correctly.

With companies, payment for services to a director is usually treated as a salary (remuneration) taxable at the directors relevant tax rates, whilst a payment to a shareholder (aside from repayment of a loan account) is deemed as a dividend (currently taxed at 20%), which dividends tax must be paid to SARS. A company must therefore comply with filing the employee tax returns as well.

There is also a duty to keep records for a period of least five years after the relevant tax period.

Conclusion

Get advice. Plan properly. It’s your dream and your business after all!

Our Corporate & Commercial Department can assist with registration of companies, supply of shelf companies, company administration, drafting of Service Level Agreements, shareholder agreements, sale of business agreements, sale of share agreements, memoranda of incorporation documents, information-use agreements (for POPI purposes), preparation of lease agreements as well as provide advice for starting your business.

Henning Pieterse | Partner

E: h.pieterse@bissets.com

Areas of Expertise: Corporate & Commercial Law

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)