July 2016 - Miltons Matsemela

27 Jul 2016

COMPANIES: HOW PRIVATE ARE SHAREHOLDERS’ DETAILS?

“Privacy, like other rights, is not absolute. As a person moves into communal relations and activities such as business and social interaction, the scope of personal space shrinks”

(Extract from judgment below)

All companies – big and small, public and private – must keep registers of their shareholders and directors. And, as the SCA (Supreme Court of Appeal) made clear recently, even “private” companies’ registers aren’t private at all.

An investigative journalist digs for detail

A financial journalist, investigating a controversial investment scheme, was tasked with investigating the shareholding structures of three companies.

The companies refused him access to their securities registers and he approached the High Court for assistance.

The companies asked the Court to exercise a discretion to refuse such access, and in hearing an appeal around this issue, the SCA has clarified the public’s rights as follows:-

The public at large (including the media) have an unqualified right to inspect or copy those registers on payment of a statutory fee.
The motive of the person seeking access is totally irrelevant; nor does he/she have to show that the request is “reasonable”.
It is not necessary to comply with the requirements of PAIA (the Promotion of Access to Information Act) although of course PAIA can be a useful tool to force access to company documents other than these registers.
It is a criminal offence for a company to refuse such access or to “otherwise impede, interfere with, or attempt to frustrate, the reasonable exercise by any person” of these rights.

So what shareholder information is public and what is confidential?

A shareholder is only required to provide –

His/her name,
His/her business, residential or postal address, and
“An identifying number that is unique to that person”.

The shareholder can also voluntarily provide an e-mail address.

Confidentiality can be claimed – by either the company or the shareholder – for the e-mail address (if supplied) and for the identity number. Names and addresses are public, full stop.

27 Jul 2016

METER WARS: A CONSUMER STRIKES BACK

“You can’t fight city hall”

(old idiom decrying the futility of trying to fight a bureaucracy)

You challenge the accuracy of a services account from your local municipality, thus: “Your meter must be wrong, no way was my consumption that high”. The reply: “We’ve tested the meter and it works fine. Pay up or face disconnection”.

Off to court you go. Can you “fight city hall” and who has to prove what?

There’s good news here for consumers in a recent High Court decision dealing with just such a situation.

The R4.5m water claim and the disconnection

A municipality installed a new water meter at commercial premises
When read for the first time 18 months later, it showed a spike of 13 times the historic average consumption measured by the old meter
Alarmed, the consumer requested that the meter be tested. The municipality duly removed it, tested it, reported that it functioned correctly, and then (for an undisclosed reason) disposed of it.
A third meter was installed. Although the consumer’s business had by then grown substantially, water consumption was shown at three times less than the quantities measured by the previous meter.
The consumer had paid the water account according to its own calculations. Nevertheless disconnection of supply followed, and then the municipality refused to issue a clearance certificate when the property was sold. In all the consumer was forced to make two payments totalling R16.5m, which it did under protest and with reservation of rights
Sued by the municipality for just under R4,5m, the consumer defended the action and counterclaimed for R9.5m (the amount it claimed to have overpaid).

Who must prove what?

Finding in favour of the consumer, the Court held that, once the consumer had raised a bona fide (“in good faith”) dispute, the onus was clearly on the municipality to prove that the meter had measured the water supply correctly and accurately.

That, held the Court, it had failed to do – its expert evidence concerning the testing was found to be unsatisfactory and insufficient.

The end result is that the municipality has to repay the consumer R8m – a substantial victory.

Consumers – a critical factor

Note that a critical factor here was that when the consumer made the two disputed payments to the municipality it did so under protest, without waiver or abandonment of any rights and without admission of liability that the amount was due. Without those provisions, the onus would probably have been on the other foot, i.e. on the consumer to prove that the readings were not accurate. That’s often going to be a near-impossibility when only the municipality has the legal right to test its meters and when it has control of all consumption data. So pay nothing on a contested account without legal advice.

Municipalities – what you must prove

Make sure you can prove that meter tests comply fully with all prescribed requirements. And (this of course should go without saying) don’t dispose of any contentious meters until litigation has been well and truly put to bed!

05 Jul 2016

Protect your online privacy with Privacy Badger

Every time you surf the Internet, your activities are tracked by a host of commercial operations and governments. The depth of information they accumulate on you is staggering and will at the very least expose you to marketing and advertising targeted to your online behaviour patterns.

If that concerns you, consider installing Privacy Badger, which is currently only available for Chrome and Firefox, from the EFF (no, not that one – the non-profit “Electronic Frontier Foundation”) from their website at https://www.eff.org/privacybadger.

Privacy Badger blocks spying ads and invisible trackers, it learns as it goes along and you can tweak how it handles particular sites.

Note: If one of your apps or extensions stops working or starts behaving strangely, you may need to change the Privacy Badger controls or even temporarily disable it.

05 Jul 2016

STARTING A BUSINESS? THE PARTNERSHIP OPTION

“Alone we can do so little; together we can do so much” (Helen Keller)

In our last article in the series “Choosing the right legal entity for your business” we looked at the sole proprietorship option. Let’s move on to the partnership option, where a group of business owners replaces the sole owner/trader.

Firstly, what exactly is a partnership?

We talk loosely about our “partners” in various contexts, but it is important to understand how the law views the concept in a strictly business situation. In broad terms a partnership is an association of between 2 to 20 people/companies/trusts who agree to pool resources (such as money, property, services, skills etc – whatever is agreed upon) and to operate a jointly-owned business, trade or profession for profit. Partnership assets are jointly owned by the partners and profits are split between them as agreed.

A quick note on the different types of partnership

In this article we talk only about the most common form of partnership – the “ordinary” partnership. In specific circumstances you may also want to consider an “anonymous” partnership (where one or more of the partners are “sleeping partners”) or an en commandite or “limited” partnership. They differ from “ordinary” partnerships in several important respects so take specific legal advice if you are thinking of using them.

We’ll look at the “universal partnership” concept in a future article (it’s normally relevant in cases of cohabitation by unmarried couples).

6 advantages of partnerships…

It’s relatively easy to set up and operate a partnership in the sense that there’s no need for formal registration as there is with a company or trust. Just be sure to have a comprehensive written partnership agreement in place. Although this is not a legal requirement, and although it adds an element of cost and delay, our law reports are full of bitter and costly partnership disputes resulting from the uncertainties that will always attend a verbal or poorly-drafted agreement. Good intentions and a handshake mean nothing when friction arises.
You have no statutory audit requirements and your administrative burden is low compared to, for example, running a company.
You are taxed at personal rates, which can sometimes (not always – see below) be to your advantage.
A partner often gives you access to another source of funding and/or assets for the business.
Most partners also bring new skills to the business.
It’s not nearly as lonely as being a sole trader – you have partners to share both the workload and the stresses and strains of management and decision-making. Just make sure you also share a common vision for the business, or friction is inevitable.

….. and 6 disadvantages

Loss of control – you now have only part control and ownership of the business, and decisions can take longer than if you were on your own.
Any partner can bind the partnership contractually so it is essential that you find partners whom you can trust implicitly to act both honestly and wisely in relation to the partnership and its business.
As a partnership isn’t a separate legal entity, you are personally liable for all the debts and obligations of the partnership business. If the partnership can’t pay its debts, creditors can and will sue you for them. And if the partnership is sequestrated, your personal estate will simultaneously also be sequestrated unless you provide security for all partnership debts. As with sole proprietorship, sleepless nights await you if any important assets (like your house) are in your name.
1. When any partner dies, leaves the partnership or goes insolvent, or when a new partner joins, the partnership automatically ends. Once again you are then personally liable for any shortfalls in the partnership’s ability to pay its debts.
2. If you end up paying more than your pro-rata share of any partnership shortfalls, your claim against the other partners (or their estates) will be worthless unless they have enough net assets to pay you.
3. Tax and estate planning – as with sole proprietorship, being taxed at your personal income tax rate may be a plus in some cases, but in others you will benefit far more from a tax-efficient structure incorporating one or more corporate entities or trusts as well.

What about “Joint Ventures”?

Before you agree on a joint venture (“JV”) with another individual or business, be careful. Although a JV normally applies only to a single transaction, it could well amount to a partnership, no matter what title or description you give it. And as we saw above, partnerships have many pitfalls for the unwary – rather put your JV into a separate entity or have your lawyer draw up a JV agreement giving you some form of liability protection.

Watch out incidentally for “inadvertent” partnerships – as a partnership can be formed verbally or even tacitly (implied from conduct), you could find yourself establishing a partnership by mistake! Another reason to have everything recorded in a full contract.

Remember to take full professional advice on the legal and tax implications of using each type of entity before choosing.

This is the third article in our series “Choosing the right legal entity for your business”. Next time we’ll look in more depth at the private company option.

01 Jul 2016

Guide to Estates / Wills / Trusts

1. Your will
Everyone should have a will. Even if your assets are few in number or low in value it makes things very much easier for those left behind who have to look after your affairs.

2. What is a will?
A will is document in which the person making it (the testator) disposes of his/her assets after his/her death.

3. Who may draw my will?
You may draw your will yourself or you may ask someone to draw it for you. Please remember though that a will is a legal document. Several institutions offer to draw your will at a low charge. Always be aware however that they are not practicing attorneys. In the same you would consult a doctor for medical treatment, so too you should consult an attorney for legal assistance.

4. What is an executor?
An executor is a person appointed by you to administer your estate and dispose of your assets after you have passed away. You may appoint anyone you like. Our advice is that you appoint a close family member such as a wife or son/daughter or your family attorney. The reason for this is that your estate will then be dealt with on a personal basis by persons who are involved and know your views. Institutions tend to deal with matters at head office in an impersonal manner.

5. May I change my will?
You certainly may. In fact we advise you to take a look at your will on a regular basis – say once a year – to make sure it is the way you want it. Circumstances may change within your family or work environment and your will should be adapted accordingly. You may change your will either by drawing a new will or by drawing a codicil, which is an addendum to your existing will.

6. Who may administer my estate?
The executor appointed in your will is required by law to administer your estate in terms of the estate act, which sets out the administration procedure. Your wife/husband or son/daughter will probably not have the necessary knowledge or expertise to carry out these duties. This is
where our estates department will assist you. We have the necessary specialized skills and experience to carry out the administration duties promptly and efficiently. We do this on a personal basis making sure that your executor is consulted and kept posted at each stage of the proceedings.

7. What happens if i die without leaving a will?
There is a common misconception that if you die without leaving a will your assets will go to the state. This is very rarely so. The intestacy act makes provision as to who inherits your assets on intestacy. I.e. Dying without a will. It is usually the surviving spouse and children who inherit under these circumstances. However if there is no will there may be delays in appointing an executor and your cash assets will be frozen pending the appointment.

Also, your assets may then devolve on persons you may not have wanted to inherit. In addition the cash inheritance of any minor child will be paid into the guardians fund at the masters office whereas you may have wished such inheritance to be invested by your executor for the best return.

8. What is estate planning?
Estate planning involves the preparation of a plan during your lifetime to deal with your assets when you are no longer there. The purpose of estate planning is to ensure that the process of administration proceeds without unnecessary problems, and, more importantly, to leave your dependants properly cared for. Everyone therefore should undertake at least some elementary estate planning. Estate planning can be relatively simple involving only taking out life assurance and making a will. However your estate planning may need to be more comprehensive, possibly including the establishment of trusts during your lifetime which will enable you to peg values and thus ensure tax savings.

9. Trusts
As mentioned above one may need to establish a trust during one’s lifetime (an inter vivos trust) and transfer certain assets to it. A trust is a separate legal entity and there are usually three separate role-players in the trust, namely:

The founder – yourself
The trustees – usually yourself and other family members,
The beneficiaries – those who are to benefit from the trust.

A trust may also be created in your will. This is known as a testamentary trust or mortis causa trust. To ensure good planning you may wish to leave certain assets in the hands of trustees to administer for certain purposes and certain periods. This quite commonly occurs where you leave minor children and do not wish their cash inheritance to be paid over to the guardians fund referred to above.

Andrew Murray
Director: Conveyancing/Estates/Notary

Archives:

COMPANIES: HOW PRIVATE ARE SHAREHOLDERS’ DETAILS?

METER WARS: A CONSUMER STRIKES BACK

Protect your online privacy with Privacy Badger

STARTING A BUSINESS? THE PARTNERSHIP OPTION

Guide to Estates / Wills / Trusts