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Covenants and the Management thereof

Covenants and the Management thereof With more specialised financial products these days and with more competition between financiers, we tend to see that financiers are more focused on mechanisms and early warning systems to ensure repayment of facilities through the introduction of covenants in addition to security than to finance against security only. The days of security lending only on sizable loans are over, financiers want to have certainty regarding cash flow. Continue reading “Covenants and the Management thereof” »

Display Prices and the Consumer Protection Act

The Consumer Protection Act 68 of 2008 (“the Act”) focuses on display prices in order to protect consumers from suppliers who tend to mislead the consumers through incorrectly marketed pricing. The Act defines “price” as follows – “price, when used in relation to— Continue reading “Display Prices and the Consumer Protection Act” »

An Extract From The Guidance Note 05 On Section 28 Of The Financial Intellegence Centre Act, Act 38 0f 2001

“The obligation to report in terms of section 28 of the FIC Act   2.1 The obligation to report in terms of section 28 of the FICA Act arises when transaction is concluded with a client by means of which cash in excess of the prescribed amount: • is paid by the accountable or reporting institution to the client, or to a person acting on behalf of the client, or to a person on whose behalf the client is acting; or • is received by the accountable or reporting institution from the client, or from a person acting on behalf of the client, or from a person on whose behalf the client is acting. 2.2 The obligation therefore extends to cash in excess of the prescribed amount being paid or received by the accountable or reporting institution. 2.3 Payment or receipt of cash includes paying or receiving cash in person as well as paying or receiving it via a third party. Continue reading “An Extract From The Guidance Note 05 On Section 28 Of The Financial Intellegence Centre Act, Act 38 0f 2001” »

Financial Institutions Re-Price Credit Agreements Of Existing Clients

Financial Institutions act within the scope of the law when they proceed to re-price certain facilities in terms of the relevant clauses of the credit agreements/products entered into. In terms of the judgement in NBS [...]

Section 38 Of The Companies Act No 61 of 1973

Section 38 of the Companies Act prohibits a company from providing financial assitance to acquire shares in that company, subject to certain exceptions.  The position in terms of the Corporate Law Amendments Act No 24 of 2006 (the “Act”) Section 38(1) states that a company may not give any financial assistance fot eh purpose of, or in connection with, a purchase or subscription made or to be made by any person for any shares of the company, or where the company is a subsidiary company of its holding company. Continue reading “Section 38 Of The Companies Act No 61 of 1973” »

Covenants

A debt covenant or more specifically, a financial or banking covenant is a solemn agreement between a lender and a borrower; whereby the borrower is required to either engage or refrain from a specific action. The factors which play a large role in determining the scope of a covenant are (i) the degree of the risk undertaken by the lender; (ii) the nature of the borrower; and (iii) whether the loan is a secured or an unsecured loan. The main purpose of a covenant, for an unsecured loan, is to provide more security to the lender; and although this might appear as if the covenants are obstacles creating a burden and a restriction on the borrower during its term, it is of extreme necessity in order to monitor the condition of the borrower and the terms of the loan. Continue reading “Covenants” »

A brief overview of a “Section 21” Company in terms of the 2008 Companies Act

With the commencement of the New Companies Act a Section 21 Company will be referred to as a non-profit company (“NPC”) which is very similar in nature. In terms of the New Companies Act the financial statements of a public companies must be audited. In the case of any other company such statements must only be audited if required by regulation or unless the company voluntarily requests that its financial statements be audited. If a the financial statements of a company are not audited they must be independently reviewed.  Continue reading “A brief overview of a “Section 21” Company in terms of the 2008 Companies Act” »

A brief overview of a Section 21 Company in terms of the 1973 Companies Act

 A Section 21 Company is a company limited by guarantee and requires at least 7 (seven) persons associated for a lawful purpose; –          must have at least 2 (two) directors; –          members are not owners / shareholders as no-one owns a Section 21 Company, it is controlled by the members and managed by the directors; –          does not have a share capital but the liability of its members is limited by the memorandum to the amount which the members undertake to contribute in the event that the company being wound up; –          must comply with the following: Continue reading “A brief overview of a Section 21 Company in terms of the 1973 Companies Act” »

Special Resolutions and The New Companies Act

The Companies Act No.69 of 1973 (“the current Act”) is the current Act used to regulate special resolutions and requirements thereto. The new Companies Act 71 of 2008 (“the new Act”) once introduced will result in a number of changes and new concepts. The objective of this article will be to shed light on all changes regarding resolutions and specifically special resolutions from the current Act in terms of the new Act.  Continue reading “Special Resolutions and The New Companies Act” »