BUYING PROPERTY FOR A COMPANY-TO-BE-FORMED: WATCH YOUR WORDING!
You have found the perfect property, at the right price - now can you buy it in the name of a company that has not yet been incorporated?
Indeed you can - a "pre-incorporation contract" is intended to bind the company as and when it is formed. But don't - in the excitement of the moment - sign anything until you have taken proper advice. It is essential to word the agreement
so that the statuses of both the signatory and of the proposed company are clear. Otherwise, as happened in a recent
High Court case, you risk having to pay your legal team to argue over complex legal issues with intimidating names like "stipulatio alteri". In that case, a property sale agreement was held to be invalid for want of strict compliance with the requirements of the Companies Act.
The old Companies Act applied there, but it is equally important to comply with the requirements of the new Act - if you don't, you could lose the property altogether.
A risk of another kind is that the new Act specifically provides that, if a company isn't formed or if, once formed, it rejects any part of the pre-incorporation contract, any liability created by the contract becomes the personal liability of the person entering into the contract for the company. It isn't just the signatory at risk here - the Act puts at risk "any other person" - presumably referring to anyone acting for the proposed company in relation to the sale.
Another important new provision is that the contract will be "deemed" to have been ratified if the board of directors has neither ratified nor rejected it within 3 months of incorporation. Nevertheless, best avoid any doubt by formally minuting ratification by the board within the 3 month period.
The bottom line - don't sign anything for a company still to be formed unless: -
1. You are certain that the contract is correctly worded
2. You are confident that the company will indeed be formed
3. You are confident that the company will ratify the contract (or at least not reject or change it).
Note: Whether you should buy a property in the name of an individual, company or trust is a complex issue - take advice on which is best in your particular circumstances. If the advice is to use a trust, note that none of the above applies to trusts - no "pre-incorporation" contracts can be ratified, and stringent requirements apply as to registration of trust deeds and formal authorisation of trustees to act.
If use of a company is recommended, consider whether you should form a new company or acquire a shelf company (in the latter event the above rules do not apply because the company is already in existence).
JOGGING ON A DARK AND STORMY NIGHT - PAVEMENT PITFALLS, AND YOUR REMEDY
Jogging along a pavement on a "dark, rainy and windy night", the Plaintiff in a recent High Court case fell into an uncovered valve chamber, breaking his leg.
Holding the municipality liable for the jogger's damages, the Court found that as a public authority it had a "positive legal duty" to ensure that such uncovered chambers did not constitute a danger to the public. Its duty to protect the public from harm was all the greater because of an "endemic massive scale theft" of these covers in the area.
Budgetary constraints (a familiar theme in our cities and towns) had led the authority to adopt a "selective policy of not replacing missing inspection covers which did not immediately pose a danger to the public" - a policy described by the Court as both "arbitrary" and "irrational".
Nor was the jogger guilty of any contributory negligence - he could not be expected to have foreseen or suspected that the pavement had in it an uncovered valve chamber which "was not visible, was not demarcated, or barricaded, and did not have reflective signage warning the public of its presence".
If you suffer any loss or harm from a pavement or road hazard (the perennial problem of potholes springs immediately to mind) take advice immediately on whether your remedy may be a claim against the local authority.
EMPLOYERS: DON'T MISS YOUR EMP501 DEADLINE!
Don't leave your interim EMP501 Employer Reconciliation Declaration to the last minute. You must lodge by 31 October or face penalties, and you need to get to grips with new submission systems first: -
* If you use the online "e@syFile" system you must have the latest version of the software. Submissions using the old version won't be accepted.
* If you still use manual submission, blank reconciliation forms can be requested from the SARS Contact Centre or a
SARS branch (the forms are no longer available at branches but instead will be posted to you).
REMOVING A LIQUIDATOR: WHEN YOU CAN, AND WHEN YOU CAN'T
Removal of liquidators from office has been a hot topic in the news recently, but little has been said around the principles involved in the process.Broadly speaking, the Master of the High Court has a discretionary power to remove a liquidator from office on the grounds of: -
1. Lack of qualification for nomination or appointment, or
2. Failure "to perform satisfactorily" any duty or "to comply with a lawful demand of the Master………", or
3. Insolvency, or mental or physical incapacity to perform his/her duties as liquidator, or
4. A meeting of creditors voting for removal, or
5. Being, in the opinion of the Master, "no longer suitable to be the liquidator of the company concerned." This might apply for example where a perception arises of bias, partiality or lack of independence on the liquidator's part.
In a case recently before the High Court, two liquidators applied for review of a decision by the Master to remove them from office. The resulting judgment illustrates some of the applicable considerations: -
* The courts will "not lightly interfere" with the exercise of the Master's discretionary power.
* On the other hand, the removal of a liquidator is "an extreme step not lightly taken".
* The evidence must demonstrate that the conduct of the liquidator "has subverted the substantial and real interests
of the liquidation process".
* The interest that ought to be foremost in the Master's mind is that of the "general body of creditors".
In this case, held the Court, the removal applications were a "personal attempt" by the directors "to frustrate the liquidation process for their own personal ends" (they were under active investigation by, and being sued by, the liquidators).
Fully vindicating the liquidators, the Court re-instated them and in the process - unfortunately for the image of our justice system - slated the original decision of the Assistant Master in question to remove them as being "either so incompetent or ……... actuated by bad faith" that the matter should not even be referred back to him for further consideration.
CENSUS 2011: READ ALL ABOUT IT!
Get ready for Census 2011, to run from 10 to 31 October -
* Stats SA says the questionnaire should take about 45 minutes per household. See preview examples on its website -
The "Household" questionnaire at http://tinyurl.com/6xqsqjz
The "Transient and Tourist Hotel" questionnaire at http://tinyurl.com/6yfbozg
* It is illegal (criminal penalties apply) to refuse to participate, or to obstruct the work of an enumerator.
* Statistics SA has been at pains to assure the public that confidentiality is guaranteed by statute.
* Check that the person at your door is a genuine Stats SA fieldworker and not a criminal opportunist! Fieldworkers will carry official I.D.s and will have yellow shirts/bibs, caps and satchels with Census 2011 and Stats SA logos. In any doubt, contact the Census 2011 call centre on 0800 110 248 to verify fieldworkers' credentials.
* Answer only the questions as set out on the official questionnaire. Do not disclose any information to anyone which could lead to identity theft.
See http://tinyurl.com/5rlv65s for a photograph of enumerators in uniform.
REPORT FRAUD! COURT CRACKDOWN CONTINUES
The trend towards a tougher stance on white-collar crime continues.
Fraud is a "serious crime" which is "endemic in our society" held the High Court recently in confirming an effective 5 year prison sentence (with a further 3 years conditionally suspended for 5 years) on a clinical psychologist - a first offender - convicted of five counts of fraud involving R720.000. She had, in order to obtain bridging finance for a property transaction, forged letters purporting to show her entitlement to funds from the sale of an overseas property.
This follows the Supreme Court of Appeal's confirmation earlier this year of an effective 4 year prison sentence (another 2 years suspended) imposed on a motor dealership sales manager convicted of 157 counts of fraud and one of corruption. He was found to have been a "willing participant" in an "elaborate fraudulent scheme" which defrauded SARS of some R1.6m in output VAT.
If you become a victim of fraud, report it!
THE OCTOBER WEBSITE: PERFECT TWEETING
Whether you're new to Twitter or a veteran, a personal user or marketing your business, local entrepreneur Oscar Foulkes shares some thoughts on how to create the perfect tweet at http://www.quora.com/How-do-you-create-the-perfect-tweet.
Have a great October!
Note: Copyright in this publication and its contents vests in LawDotNews(law.news)
You have found the perfect property, at the right price - now can you buy it in the name of a company that has not yet been incorporated?
Indeed you can - a "pre-incorporation contract" is intended to bind the company as and when it is formed. But don't - in the excitement of the moment - sign anything until you have taken proper advice. It is essential to word the agreement
so that the statuses of both the signatory and of the proposed company are clear. Otherwise, as happened in a recent
High Court case, you risk having to pay your legal team to argue over complex legal issues with intimidating names like "stipulatio alteri". In that case, a property sale agreement was held to be invalid for want of strict compliance with the requirements of the Companies Act.
The old Companies Act applied there, but it is equally important to comply with the requirements of the new Act - if you don't, you could lose the property altogether.
A risk of another kind is that the new Act specifically provides that, if a company isn't formed or if, once formed, it rejects any part of the pre-incorporation contract, any liability created by the contract becomes the personal liability of the person entering into the contract for the company. It isn't just the signatory at risk here - the Act puts at risk "any other person" - presumably referring to anyone acting for the proposed company in relation to the sale.
Another important new provision is that the contract will be "deemed" to have been ratified if the board of directors has neither ratified nor rejected it within 3 months of incorporation. Nevertheless, best avoid any doubt by formally minuting ratification by the board within the 3 month period.
The bottom line - don't sign anything for a company still to be formed unless: -
1. You are certain that the contract is correctly worded
2. You are confident that the company will indeed be formed
3. You are confident that the company will ratify the contract (or at least not reject or change it).
Note: Whether you should buy a property in the name of an individual, company or trust is a complex issue - take advice on which is best in your particular circumstances. If the advice is to use a trust, note that none of the above applies to trusts - no "pre-incorporation" contracts can be ratified, and stringent requirements apply as to registration of trust deeds and formal authorisation of trustees to act.
If use of a company is recommended, consider whether you should form a new company or acquire a shelf company (in the latter event the above rules do not apply because the company is already in existence).
JOGGING ON A DARK AND STORMY NIGHT - PAVEMENT PITFALLS, AND YOUR REMEDY
Jogging along a pavement on a "dark, rainy and windy night", the Plaintiff in a recent High Court case fell into an uncovered valve chamber, breaking his leg.
Holding the municipality liable for the jogger's damages, the Court found that as a public authority it had a "positive legal duty" to ensure that such uncovered chambers did not constitute a danger to the public. Its duty to protect the public from harm was all the greater because of an "endemic massive scale theft" of these covers in the area.
Budgetary constraints (a familiar theme in our cities and towns) had led the authority to adopt a "selective policy of not replacing missing inspection covers which did not immediately pose a danger to the public" - a policy described by the Court as both "arbitrary" and "irrational".
Nor was the jogger guilty of any contributory negligence - he could not be expected to have foreseen or suspected that the pavement had in it an uncovered valve chamber which "was not visible, was not demarcated, or barricaded, and did not have reflective signage warning the public of its presence".
If you suffer any loss or harm from a pavement or road hazard (the perennial problem of potholes springs immediately to mind) take advice immediately on whether your remedy may be a claim against the local authority.
EMPLOYERS: DON'T MISS YOUR EMP501 DEADLINE!
Don't leave your interim EMP501 Employer Reconciliation Declaration to the last minute. You must lodge by 31 October or face penalties, and you need to get to grips with new submission systems first: -
* If you use the online "e@syFile" system you must have the latest version of the software. Submissions using the old version won't be accepted.
* If you still use manual submission, blank reconciliation forms can be requested from the SARS Contact Centre or a
SARS branch (the forms are no longer available at branches but instead will be posted to you).
REMOVING A LIQUIDATOR: WHEN YOU CAN, AND WHEN YOU CAN'T
Removal of liquidators from office has been a hot topic in the news recently, but little has been said around the principles involved in the process.Broadly speaking, the Master of the High Court has a discretionary power to remove a liquidator from office on the grounds of: -
1. Lack of qualification for nomination or appointment, or
2. Failure "to perform satisfactorily" any duty or "to comply with a lawful demand of the Master………", or
3. Insolvency, or mental or physical incapacity to perform his/her duties as liquidator, or
4. A meeting of creditors voting for removal, or
5. Being, in the opinion of the Master, "no longer suitable to be the liquidator of the company concerned." This might apply for example where a perception arises of bias, partiality or lack of independence on the liquidator's part.
In a case recently before the High Court, two liquidators applied for review of a decision by the Master to remove them from office. The resulting judgment illustrates some of the applicable considerations: -
* The courts will "not lightly interfere" with the exercise of the Master's discretionary power.
* On the other hand, the removal of a liquidator is "an extreme step not lightly taken".
* The evidence must demonstrate that the conduct of the liquidator "has subverted the substantial and real interests
of the liquidation process".
* The interest that ought to be foremost in the Master's mind is that of the "general body of creditors".
In this case, held the Court, the removal applications were a "personal attempt" by the directors "to frustrate the liquidation process for their own personal ends" (they were under active investigation by, and being sued by, the liquidators).
Fully vindicating the liquidators, the Court re-instated them and in the process - unfortunately for the image of our justice system - slated the original decision of the Assistant Master in question to remove them as being "either so incompetent or ……... actuated by bad faith" that the matter should not even be referred back to him for further consideration.
CENSUS 2011: READ ALL ABOUT IT!
Get ready for Census 2011, to run from 10 to 31 October -
* Stats SA says the questionnaire should take about 45 minutes per household. See preview examples on its website -
The "Household" questionnaire at http://tinyurl.com/6xqsqjz
The "Transient and Tourist Hotel" questionnaire at http://tinyurl.com/6yfbozg
* It is illegal (criminal penalties apply) to refuse to participate, or to obstruct the work of an enumerator.
* Statistics SA has been at pains to assure the public that confidentiality is guaranteed by statute.
* Check that the person at your door is a genuine Stats SA fieldworker and not a criminal opportunist! Fieldworkers will carry official I.D.s and will have yellow shirts/bibs, caps and satchels with Census 2011 and Stats SA logos. In any doubt, contact the Census 2011 call centre on 0800 110 248 to verify fieldworkers' credentials.
* Answer only the questions as set out on the official questionnaire. Do not disclose any information to anyone which could lead to identity theft.
See http://tinyurl.com/5rlv65s for a photograph of enumerators in uniform.
REPORT FRAUD! COURT CRACKDOWN CONTINUES
The trend towards a tougher stance on white-collar crime continues.
Fraud is a "serious crime" which is "endemic in our society" held the High Court recently in confirming an effective 5 year prison sentence (with a further 3 years conditionally suspended for 5 years) on a clinical psychologist - a first offender - convicted of five counts of fraud involving R720.000. She had, in order to obtain bridging finance for a property transaction, forged letters purporting to show her entitlement to funds from the sale of an overseas property.
This follows the Supreme Court of Appeal's confirmation earlier this year of an effective 4 year prison sentence (another 2 years suspended) imposed on a motor dealership sales manager convicted of 157 counts of fraud and one of corruption. He was found to have been a "willing participant" in an "elaborate fraudulent scheme" which defrauded SARS of some R1.6m in output VAT.
If you become a victim of fraud, report it!
THE OCTOBER WEBSITE: PERFECT TWEETING
Whether you're new to Twitter or a veteran, a personal user or marketing your business, local entrepreneur Oscar Foulkes shares some thoughts on how to create the perfect tweet at http://www.quora.com/How-do-you-create-the-perfect-tweet.
Have a great October!
Note: Copyright in this publication and its contents vests in LawDotNews(law.news)