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Legal Update October 2011

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. Continue reading “Legal Update October 2011” »

Legal Update September 2011

PAIA Manuals – Final Deadline Looms!   It’s six years now since we were all bombarded with warnings to comply with the Promotion of Access to Information Act (PAIA), which requires all public and private bodies to prepare, lodge and publish (including on any website you have) a PAIA information manual.   Then, at the last minute (literally), most smaller businesses were let off the hook – their original deadline of 31 August 2005 was extended until 31 December 2011. At the time, hopes were expressed that small businesses might be exempted altogether. Continue reading “Legal Update September 2011” »

Escrow agreements

We have been involved with a series of escrow arrangement the past weeks. An escrow is an arrangement made under contractual provisions between transacting parties, whereby an independent trusted third party receives and disburses money and/or documents for the transacting parties, with the timing of such disbursement by the third party dependent on the fulfilment of contractually-agreed conditions by the transacting parties. The word derives from the Old French word escrow, meaning a scrap of paper or a roll of parchment; this indicated the deed that a third party held until a transaction was completed. In my experience escrow arrangements were usually entered into between two parties and an escrow agent in terms of which the escrow agent is keeping software source code in escrow (in trust) and to make it available to the user -party in the case for instance of liquidation of the provider party. Continue reading “Escrow agreements” »

Public interest score in terms of the Companies Act

The Public Interest Score ("PIS") is to be determined at the end of each financial year by each Company. PIS= a+b+c+d Where:   a  =  average number of employees during the financial year   b  =  one point for every R1m in 3rd party liability at the financial year end   c  =  one point [...]

Legal Update August 2011

  The Restraint of Trade That Sank The Sushi Bar   When you buy a business, think about whether the goodwill you are paying for will be damaged if the seller starts up a new business in competition with you. If so, a “restraint of trade” clause is essential, but beware – it must be properly drawn to be valid. Our courts will not enforce any restraint that is unreasonably wide in nature, geographical area, or duration.   Having said that, as a recent High Court case shows, even a widely-worded restraint clause can still be perfectly valid. The clause in question restricted the seller of an Italian-style restaurant from carrying on any similar business, and in particular provided that she could not compete with the buyer “in any form of Restaurant / Coffee Shop Business” for 3 years.   Continue reading “Legal Update August 2011” »

Why it was necessary for a new Companies Act

Why change? Political changesGlobal changes in how businesses function and operateNeed for higher standards in corporate governanceIncrease in international trade emphasisThe need to modernize company law New features •   MOI •   Director’s liability •   Director to be declared delinquent •   Remedy for oppressive and prejudicial conduct •   Audit requirements •   No Par value Shares •   Regulation •   Business [...]

New Companies Act – Mergers and Aquisitions

 Merger Two or more  profit companies including a holding and subsidiary companies may amalgamate or merge if upon implementation if the amalgamation or merger  will satisfy the liquidity and  solvency test Scheme of arrangement Continue reading “New Companies Act – Mergers and Aquisitions” »

Offences relating to financial statements in terms of the Companies Act

A person is guilty of an offence in terms of the Companies Act if the person: is a party to the falsification of any accounting records of a company;with a fraudulent purpose, knowingly provided false or misleading information inany circumstances in which the Act requires the person to provide information or give notice to another person; was knowingly a party to an act or omission by a company calculated to defraud a creditor or employee of the company, or a holder of the company’s securities, or with another fraudulent purpose; or is a party to the preparation, approval, dissemination or publication of a prospectus or a written statement that contains an “untrue statement”. Continue reading “Offences relating to financial statements in terms of the Companies Act” »

Companies Act: Delinquency of directors

A court must declare a person delinquent if:  he or she has consented to act as director while ineligible or disqualified –has acted as a director in a manner contrary to an order of probation; or has acted as a director in a manner amounting to gross negligence, wilful misconduct or breach of trust. The following may apply to a court for an order declaring a person delinquent or under probation: A company; A shareholder; A director; A company secretary or prescribed officer of a company; Continue reading “Companies Act: Delinquency of directors” »

Solvency and Liquidity test in terms of the new Companies Act

In terms of the new Companies Act the transactions that will require that “the solvency and liquidity test” be satisfied include: –the provision of financial assistance to third parties for the acquisition of the company’s own shares; –loans or other “financial assistance” to related parties; –dividends or other “distributions” to shareholders; –the issuing of capitalisation shares on terms whereby the recipient can choose whether to take the shares or to take cash; Continue reading “Solvency and Liquidity test in terms of the new Companies Act” »

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