JURISDICTION OF COURTS IN MATTERS INVOLVING COMPANIES

Traditionally, and under the previous Companies Act, a company could have a principal place of business and a registered office.  A company could, for instance, conduct its business at one office and also have a registered office with its auditors. In terms of the 1973 Companies Act any division of the High Court where a company’s registered office or its principal place of business was located, would have jurisdiction. More than one Court could, as a consequence, have jurisdiction in proceedings where a company was involved.

The new 2008 Companies Act, which repealed to a large extent the 1973 Act, does not have a similar wording that provides for more than one address. In the matter of Sibakhulu Construction (Pty) Ltd vs Wedgewood Village Golf Country Estate (Pty) Ltd (Nedbank Intervening) 2013 (1) SA 191 the Western Cape High Court dealt with the question of which Court would have jurisdiction where a company has a registered address different from its principal place of business.

The matter revolved around business rescue proceedings and winding up proceedings. The Court remarked that Section 128 of the Act makes reference to only “…the High Court…”  This wording denotes that a single Court would have jurisdiction over a company, and not more than one Court as in the previous Act. In dealing with the matter the Court considered the interpretation of the new Act.

Section 23(3) of the new Act specifically states that a company must continually maintain at least one office and register the address of its office or of its principal office if the company has more than one office. This office will, under the new Act, be the company’s registered office.  Section 23 makes it clear that this office must be maintained by the company itself and the following Section deals with documentary records to be kept at the address. The Court remarked that the new Act retained the institution of a registered office with which the outside world could make contact.

Unfortunately the Act does not define “principal office” but the Court remarked that, from a reading of the Act, it is clear that the intention is to denote the place where the administrative business of the company is centred. It follows, the Court suggested, that this office should also be the principal place of business. The Court concluded that the principal place of business and the registered office have to be at the same address under the new Act.

Reference was further made to Section 7 of the new Act where it is stated that the purpose of the Act is to provide a “predictable and effective environment for the efficient regulation of companies”. The Court held the view that to give effect to the purpose of the Act as set out in Section 7 it would follow that, in terms of Section 23, a company can only reside at its registered office, which means that only a single court can have jurisdiction.

Companies should be aware of this judgement and make sure that they register their principal place of business as their registered address.

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.

THE IMPACT OF THE NEW BBBEE CODES OF GOOD PRACTICE ON YOUR BUSINESS

The compilation and verification of a scorecard for an entity in terms of the Broad-Based Black Economic Empowerment (BBBEE) Act is done according to the Codes of Good Practice (the Codes) issued by the Department of Trade and Industry (the dti). The Codes have been amended and the new Codes were gazetted on Friday 11 October 2013. These changes will have a significant effect on the BBBEE strategy of businesses and careful consideration will have to be given to adjustments in this area.

Major changes to the previous Codes include:

  1. The seven elements on the scorecard are reduced to five elements and the weighting of each element has been adjusted as follows:
    • Ownership (25 points weighting)
    • Management Control (15 points weighting)
    • Skills Development (20 points weighting)
    • Enterprise and Supplier Development (40 points weighting)
    • Socio-Economic Development (5 points weighting)
  2. The total score will now amount to 105 instead of the previous 100.
  3. The elements Ownership, Skills Development and Enterprise and Supplier Development are now categorised as priority elements, which means that certain minimum requirements are set for these elements. Large enterprises are required to comply with all the priority elements, whereas Qualifying Small Enterprises (QSEs) have a choice to comply with Ownership and one of the remaining priority elements.
  4. If the minimum requirements set for priority elements are not met, the actual level obtained will be discounted by one level.
  5. The limits for Exempt Micro-Enterprises (EMEs) have been adjusted to enterprises with an annual turnover of between R0 and R10 million (unless a sector charter applies). EMEs will still be deemed to be level four contributors.
  6. QSE limits have been adjusted to enterprises with an annual turnover of between R10 million and R50 million (unless a sector charter applies).
  7. EMEs and QSEs with black ownership of more than 51% will automatically qualify as level two contributors.
  8. EMEs and QSEs with black ownership of 100% will automatically qualify as level one contributors.
  9. Start-up enterprises will still be measured as EMEs during the first year following the formation of the enterprise.

There will be a twelve-month period from 11 October 2013 to 10 October 2014 during which businesses may choose to have their scorecard compiled and verified under either the old Codes or the new Codes. The purpose of this is to give businesses a chance to align and implement their BBBEE strategy to comply with the new Codes. Sector charters also have to align to the new Codes, but it is unclear whether it will be possible or even required to do this during the twelve-month period.

It is crucial to seek expert advice when adjusting any entity’s BBBEE strategy in order to avoid costly mistakes and ensure maximum benefit for the business, while properly complying with the relevant BBBEE legislation. For instance, enterprises that previously relied on an annual Socio-Economic Development grant in order to obtain a required BBBEE level will have to significantly adjust this amount.

Only qualified verification agents accredited under IRBA or SANAS may conduct independent verifications and issue the applicable certificate.

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.

BE CAREFUL WHAT YOU WRITE OR SAY

Classically, the law of defamation attempts to strike a balance between a plaintiff’s right to reputation, and a defendant’s right to freedom of expression – two rights that are recognised both at common law and in the Constitution. Defamation is a serious consideration in the interaction with letters, e-mails and general discussions. A plaintiff needs to prove firstly that a comment regarding him/her was publicised (to someone else than the plaintiff) and secondly that the comment was prima facie defamatory. Once this has been determined the onus is on the defendant to prove that his conduct was not wrongful (without intent).

Wrongfulness is based on intent as opposed to negligence. Even where it remains that the comment was wrongful, the defendant might still have several defences like:

  1. Truth of the statement;
  2. That the comments are in public interest;
  3. That the comment was just an opinion and not given as a fact;
  4. That the comment was fair under the circumstances;
  5. That the comment was made under circumstances of qualified privilege, where the defendant had a duty and someone else had a duty to receive the comment.

The fact that comment is the truth does not mean that it is not defamatory. The test to determine defamation is whether the reasonable person of normal intelligence would view it as defamatory. The defendant can succeed with his defence of fair comment and public interest if no element of maliciousness is involved. The plaintiff only has to prove that the comment was prima facie defamatory of his character and that it was publicised.

Publication can be to a specific person or within hearing distance of the general public and is material if heard by or publicised by the public in a book, postings on websites, or bulletin boards on the Internet.

The onus is on the defendant to prove his defences on a balance of probabilities. This means that where two versions are before a court it should decide on the most probable version under the circumstances. When the court cannot decide which version is the truth for argument’s sake and the defendant raised it as defence, he then will not succeed with his defence.

In a democracy, forthright criticism, wild accusations and innuendos – often unfair and unfounded – are part and parcel of political activity and right-thinking persons in society generally do not think less of politicians who are subjected to derogatory statements by opposing politicians or political commentators. The context might cause material, that would otherwise have been defamatory, to be no more than mere abuse. Courts allow wide latitude for political debate and politicians should not be over-hasty in complaining. Nonetheless, it is important to note that courts extend latitude, not immunity, and there are limits: any latitude extends only to political information or activity or issues pertaining to the country’s governance, not beyond. A distinction must also be drawn between an unwarranted attack on the dignity and reputation of a politician and an attack on the person’s political views, policies and conduct. Courts have to give effect to the values of openness, transparency and accountability, yet protect dignity and privacy. It seems that the bounds are exceeded where improper motives or dishonourable conduct is imputed.

References:

  • Law of South Africa, Volume 8(1) – Second Edition Volume
  • Delta Motor Corporation (Pty) Ltd, vs Van der Merwe, 2004 (6) SA 185 (SCA)
  • Constitution of the Republic of SA, 1996 ss 10 and 16
  • National Media Ltd vs Bogoshi, 1998 4 All SA 347 (SCA)

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

WHAT HAPPENS TO MY BANK ACCOUNTS WHEN I DIE?

In previous articles we suggested that the best way to ensure that your assets are distributed as you want them to be distributed, is to draw up and maintain a will. Should you die without a valid will, your assets will be distributed in terms of the Intestate Succession Act. This may result in unpractical distribution of assets and may lead to someone inheriting whom you did not want to inherit.

In your will you have the choice to determine what should be done with your assets. You should also appoint an Executor who will distribute your assets and manage the administrative tasks in order to fulfil the stipulations of the will and finalise the administering of your will.

As mentioned in previous articles, the death must first be reported to the Master of the High Court and the original will (or the lack of relevant required documentation) must be sent to him. The Master will then formally appoint the Executor by sending him an Executor’s letter and allocating a unique estate number to the estate. This estate number wil then be used in all future correspondence with and enquiries from the Master’s Office.

What happens to my bank accounts?

The Administration of Estates Act determines that all bank accounts in the name of the deceased should be frozen and closed eventually, therefore it is extremely important that you make provision for your loved ones, so that they will have cash in hand when you pass away. Usually the accounts are frozen immediately after word of the passing has been received, so money can still be deposited, but no withdrawals will be allowed. As soon as the Executor has been appointed he/she should open a new bank account in the name of “Estate Late XYZ” according to the stipulations of the Administration of Estates Act. This is because you leave your assets to what forms your “estate”. A new bank account will be opened by the Executor and all monies of the deceased in any other bank accounts (as well as his/her spouse in the case of a marriage in community of property) will be transferred to the new bank account in the name of the estate. All estate funds will then be administrated in the estate’s bank account by the Executor until the Liquidation account (statement of assets and liabilities) is approved by the Master and has been open for inspection and remained unchallenged. The Executor will then be in a position to proceed with the distribution of estate assets and finalising of the administration of the estate.

Support to the next of kin

It may, however, take anything from 3 weeks to 3 months or longer for the Master of the High Court to formally appoint  the Executor. The fact that the Administration of Estates Act requires that all bank accounts be frozen as soon as possible after date of death may result in the next of kin or other financially dependent parties not being able to access the funds of the deceased while awaiting the appointment of the Executor. In case of a marriage in community of property the bank accounts in the name of the surviving spouse will also be frozen and closed, according to the stipulations of the Administration of Estates Act, which may have dramatic consequences. Once the Executor has been appointed, he/she may start administering the estate assets, and only then will he/she be in a position to consider interim advances against inheritance. We therefore urge you to make provision for the time following your passing, so that your next of kin have money available for their immediate needs.

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.