by Vicky | 30, 08, 19 | Uncategorized
When do Directors need to get a Shareholders’ Resolution?
Under the Companies Act 71 of 2008 (“the Act”) directors have substantial powers regarding the management and control of a company on a day-to-day basis. This is useful to allow the directors to get on with the business of the company without having to constantly refer back to the shareholders for approval. There are however some instances where a shareholders’ resolution is required, and other instances where it is prudent to obtain one even if not technically required.
When considering a shareholders’ resolution it is important to take note of the company’s Memorandum of Incorporation (“MOI”) and the Shareholders’ Agreement (if the company has one). These set out the various requirements for when a resolution is required and the voting percentage required to approve certain decisions.
When must we obtain a shareholders’ resolution?
There are certain circumstances in terms of the Act in which directors have to obtain shareholders’ resolutions, such as to:
- Amend the company’s MOI;
- Amend the authorisation, classification, preference, rights and limitations of the shares of the company;
- Approve the disposal of all or greater part of the company’s assets; or
- Approve any matter not listed above but required in terms of the MOI.
What are the risks of not obtaining a shareholders’ resolution?
If directors act beyond the authority provided to them by the company, they are considered to be acting in their personal capacities and run the risk of being held personally liable for any damages incurred as a result of their actions.
Our tips:
1. It is prudent to have a shareholders’ resolution signed in circumstances that:
• are out of the ordinary course of the business of the company; and/or
• have a large financial impact financially on the company
even if it is not required in terms of the Act or the MOI.
2. As a director, you should be familiar with the scope of your capacity to act for the company in terms of the Act and your MOI, and more specifically any limitations on such capacity.
For template resolutions, bespoke resolutions or professional advice as to whether a shareholders’ resolution is required please email Stuart Fourie or Vicky Stott.
by Vicky | 15, 08, 19 | Uncategorized
What are Backup Offers?
A backup offer occurs when a seller concludes a sale agreement with a buyer (primary offer) which is subject to one or more suspensive conditions, and then the same seller signs a later sale agreement with a second buyer (the backup offer).
Dealing properly with backup offers is important for all parties involved in these transactions.
Some of the considerations for the different parties involved are set out below.
The Seller:
As a seller, a backup offer is comforting because it may mean that you will have a replacement sale ready and waiting to proceed should the primary sale agreement fall through. You also don’t have to wait for the primary offer sale agreement to fall through before concluding a sale agreement with a second buyer.
It is essential however that the second sale agreement include provisions making that sale agreement subject to and conditional upon the primary sale agreement falling through. We do not recommend that sellers sign more than one sale agreement with different buyers unless they have obtained advice from their conveyancers in respect of the necessary provisions to be included in the subsequent sale agreements.
The first buyer/primary sale:
As the first buyer, you will be under pressure to comply with the suspensive conditions in your sale agreement by dates stipulated in that sale agreement. Should you not be able to comply timeously, your sale agreement will lapse and the backup offer will become the primary sale agreement.
We recommend that you ensure that your sale agreement provides a reasonable time period to meet the suspensive conditions, alternatively have an automatic extension of the time period for meeting the suspensive conditions as any subsequent or back up offers may restrict the seller’s right to grant you extensions of time to do so.
The second buyer:
As the second buyer, you need to be aware of the due dates in the primary agreement so that you will know when the primary agreement falls through. There should also be an obligation on the seller to advise you immediately if the primary sale agreement becomes conclusive. We recommend that your backup offer stipulates that the seller may not extend any time periods for the meeting of any suspensive conditions in the primary sale agreement. You do not want to have a situation where the seller has concluded a sale agreement with you as the backup buyer but then gives the primary buyer extensions of time for meeting the suspensive conditions.
Estate Agent:
Should there be multiple offers from different buyers in respect of immovable property, you will need to ensure that you understand how to best protect the parties to your sale agreement. We advise that you discuss the transactions and your particular sale agreement with a conveyancer prior to the signature of the sale agreement.
For advice regarding conveyancing, sale agreements and backup offers please contact us.
by Vicky | 24, 07, 19 | Uncategorized
Huur gaat voor koop – what does this mean?
Roughly translated, huur gaat voor koop means: an existing lease trumps a subsequent sale.
What are the legal consequences of this principle?
(a) When a property which is subject to a lease is transferred, the purchaser steps into the shoes of the seller as the landlord in terms of the lease.
(b) The new owner and the tenant are bound by the terms of the lease as if the new owner had signed the lease agreement as the landlord.
(c) This takes effect automatically by operation of law and no new agreement between the parties is required.
(d) The tenant’s right to undisturbed occupation of the property for the duration of the lease, is protected for up to 9 years and 11 months from date of commencement of the lease.
(e) On termination of the lease, the new owner will be liable to refund any deposits made by the tenant, regardless of whether the deposit was paid to the new or previous owner.
(f) A mortgage bond supersedes the lease only if the bond was registered before the lease agreement was concluded. If not, the rights of the tenant will prevail over the rights of the bondholder.
What are the limitations of this principle?
Huur gaat voor koop only protects rights that are material to the landlord-tenant relationship and does not include inter alia the following examples:
(a) An option in favour of the tenant to purchase the property (unless the tenant can show that the purchaser was made aware of the option prior to purchasing the property).
(b) Any claim the tenant may have regarding improvements to of the property as the purchaser is not the party who benefited from these improvements (unless the tenant can show that the purchase price was reduced in anticipation of a claim by the tenant for these improvements).
What are the exceptions to this principle?
(a) Sale in execution: whilst the sheriff will try to sell the property subject to the existing lease/s, if insufficient offers are received the property can be sold “without leases”. This is at the sheriff’s discretion.
(b) If the owner is declared insolvent the individual appointed as administrator of the insolvent estate may elect whether to cancel the lease or not.
(c) The huur gaat voor koop principle does not apply to long term leases (over 10 years in duration). The rights of tenants of long term leases can only be protected by registration of the lease agreement against the title deed of the property in the Deeds Office.
Our tips for dealing with huur gaat voor koop
(a) If you are purchasing a property subject to a lease agreement:
- make arrangements for any deposit/s paid by the tenant/s to be transferred to you prior to registration of the transfer; and
- obtain a copy of the lease agreement/s and familiarise yourself with its terms and conditions.
(b) If you are a tenant and are uncertain as to whether your lease agreement is still valid, obtain legal advice.
(c) If you are a prospective tenant, seek legal advice to ensure all terms material to you are recorded properly to protect your interests.
by Vicky | 12, 07, 19 | Uncategorized
When to consider termination of a trust
If you have a family trust that is inactive or not being utilised it may be prudent to have it terminated in order to save costs and avoid potential issues in the future.
Some factors when deciding whether to consider termination of a trust are the following:
- Trust assets and liabilities;
- Ongoing administrative costs including any remuneration payable to trustees;
- Tax Considerations;
- Risks of retaining a dormant entity alive in an increasingly fraudulent society;
- How the costs associated with the deregistration of the trust will be paid.
In terms of the common law, a trust can be terminated in the following circumstances:
- Statute prescribed termination;
- Fulfillment of the object of the trust;
- The Trust not having beneficiaries that can be determined;
- Renunciation or repudiation by the beneficiary/ies;
- Destruction of the trust property; or
- The trust deed may set out the circumstances in which a particular trust is or can be terminated.
The Trust Property Control Act, 1988
This Act does not set out the procedure for the termination/deregistration of trusts. In order to fill this gap, the Chief Master provided guidance on the procedure to be followed in 2017.
In order to deregister the trust, the Master must be satisfied that the trust has no remaining assets, the beneficiaries have received what is due to them and that the trust’s bank account has been closed. The Master will then confirm that the trust file is closed and instruct the trustees to abide by Section 17 of the Trust Property Control Act, which states the following:
Section 17: Custody of Documents
“A trustee shall not without the written consent of the Master destroy any document which serves as proof of the investment, safe custody, control, administration, alienation or distribution of trust property before the expiry of a period of five years from the termination of a trust.”
Once the Master has confirmed that the trust has been terminated, the Master’s letter must be provided to SARS together with further supporting documents in order to have the trust deregistered as a taxpayer with SARS.
If you would like advice or assistance with regards to the termination of a trust please contact Stuart Fourie, Vicky Stott or Kerry-Lee van Heerden.
by Vicky | 05, 07, 19 | Uncategorized
Is the deposit clause in your Property Sale Agreement up to date?
When a purchaser is obliged to pay a deposit to conveyancers pursuant to a sale of property agreement, the sale agreement should provide for the deposit to be invested on behalf of the purchaser pending registration of transfer.
The conveyancers can only invest the monies on behalf of the purchaser to earn interest if they have received the purchaser’s FICA documentation and a signed mandate by the purchaser to do so. Often the mandate is included in the body of the sale agreement.
From 1 February 2019 sale agreements should refer to these investments being made in terms of Section 86(4) of the Legal Practice Act 28 of 2014 (the Act) and not in terms of section 78(2A) of the Attorneys Act 53 of 1979 (the latter has been repealed).
Although most of the interest will accrue for the benefit of the purchaser while the monies are invested on the purchaser’s behalf, certain deductions may be made from the interest. 5% of the accrued interest will be paid monthly to the Legal Practitioners Fidelity Fund (“LPFF”) and a small administration fee to the attorneys arranging the investment (which fee differs for each firm).
If you have any queries relating to a property sale agreement please contact our conveyancing team for assistance.
