by Vicky | 06, 06, 19 | Uncategorized
Emigration Considerations
Packing up your entire life, leaving your familiar surroundings and moving to a foreign country is an emotional and stressful life event. If you want to be proactive and avoid some unnecessary costs and nuisances while you are settling into your new home country, we suggest the following emigration considerations:
Immovable Property
If you have not sold your home or if your property has not been transferred to the new owner before you leave South Africa then you should sign a special power of attorney for the sale and transfer of your property before emigration takes place.
If you don’t sign a special power of attorney before you leave, you will have to sign one overseas before a foreign official (such as a Notary Public) and meet further authentication / apostille requirements. You will have the inconvenience of locating the appropriate official and then have to pay in foreign currency for their professional services and courier fees to send the properly executed document to South Africa. You can avoid this burden and expense by signing a properly drafted special power of attorney before you leave.
South African Assets
If you own any assets in South Africa which you are not selling before emigration then we recommend that you:
(a) have an up to date South African will to ensure that your South African estate can be effectively wound up and dealt with separately from your estate in your new home country;
(b) consider signing a general power of attorney authorising a trusted agent in South Africa to attend to any loose ends relating to this property on your behalf and on your instructions.
Trusts / Companies / Close Corporations / Other Organisations
If you are a trustee of a South African trust, director or shareholder of a South African company, member of a South African close corporation or part of any other business or organisation in South Africa then you should consider (and take professional advice concerning) whether it would be prudent in your circumstances to:
(a) resign as trustee / director / member as applicable;
(b) sell your shares / members interest;
(c) make provision for trust / company / close corporation / organisational matters to be attended to by an agent locally or yourself electronically; or
(d) wind up the trust / company / close corporation / organisation before you leave South Africa.
Future money transfers (inheritance, dividends, trust distribution)
If you are the beneficiary of a South African trust, the heir of a South African deceased estate, the shareholder of a South African company or have any other reason to expect monetary payments from South Africa in the future then you should obtain professional advice concerning:
(a) keeping your tax returns up to date;
(b) applying to the South African Revenue Services for an emigration tax clearance; and
(c) applying to the South African Reserve Bank to formally emigrate.
Obtaining advice appropriate to your particular circumstances before you leave South Africa will assist with streamlining the future movement of money from South Africa to you in your new home country.
Should you require advice further, kindly contact us.
by Vicky | 30, 05, 19 | Uncategorized
Family Trusts : Independent Trustees
South African legislation does not specifically require the appointment of independent trustees. There is however, a duty on trustees to act in the best interests of the beneficiaries.
The Supreme Court of Appeal, in Land and Agricultural Bank of South Africa v Parker and others 2005 (2 )SA 77 (SCA) found that ‘…the Master should in carrying out his statutory functions ensure that an adequate separation of control from enjoyment is maintained in every trust. This can be achieved by insisting on the appointment of an independent outsider as trustee to every trust in which (a) the trustees are all beneficiaries and (b) the beneficiaries are all related to one another…”
The Chief Master’s Directive 2 of 2017 was subsequently issued providing direction for the appointment of independent trustees for family business trusts.
What is a Business Family Trust?
A “family business trust” can be identified by the following:
- The trustees are all also beneficiaries of the trust;
- The beneficiaries are all related to each other; and
- The trustees have the power to contract with independent third parties thereby creating trust creditors.
The use of the term “family business trust” may be misleading. If your trust meets the above requirements, regardless of whether it is carrying on business formally or not, it will be considered to be a family business trust.
What is an Independent Trustee?
An independent trustee:
- Must not be related/connected to any of the trustees, beneficiaries or founder of the trust, thus ensuring his/her independence.
- Must not be a beneficiary of the trust. This ensures the independent trustee makes objective decisions and ensures proper procedure is followed in terms of the trust deed.
- Must have knowledge and experience in the trust’s field of business in order to avoid dealing in invalid transactions.
- May be, but does not have to be, a professional accountant, admitted attorney, advocate, trust company board of executors or a fiduciary practitioner (FISA member) or business associate with the necessary business knowledge.
- Must not be disqualified from acting as a trustee by the Trust Property Control Act, 1988.
- Must understand the responsibilities and risk for breach of trust.
If the trust deed itself does not make provision for the appointment of an independent trustee, the Master may appoint one. In this event the Master will consult with the founder, existing trustees and beneficiaries with a vested right. The Master is not bound by their recommendations and may appoint a suitable person other than those nominated (this is only done in exceptional circumstances).
The Master has the discretion to allow a family business trust to be registered without appointing an independent trustee in the following circumstances:
- The founder makes representations showing good cause not to appoint an independent trustee;
- The Master has requested that security be provided; or
- An annual audit is conducted and the Master is informed of the results.
What happens when your Independent Trustee resigns?
When an independent trustee resigns, another independent trustee must be appointed, either by nomination in terms of the trust deed, or by appointment by the trustees or by the Master consulting with the parties.
Is an Independent Trustee remunerated?
An independent trustee is entitled, as is any other trustee, to be paid a fee as prescribed in the trust deed or by negotiation among the trustees if the trust deed does not prescribe a fee. The Master will determine a reasonable fee for the instances where the trustees are unable to agree on a fee, as provided for in Griesel v Bankkorp Trust Bpk 1990 (2) SA 328 (O).
What are the risks of non-compliance?
As this is a recent requirement there are numerous family business trusts that do not have independent trustees. The possible effect of this is that the trust may be deemed to be an “alter ego” of the founder/trustees and therefore invalid. This could lead to additional taxation and will negatively affect the beneficiaries.
In order to avoid complications and expenses down the line, it is prudent for all family business trusts to check their Trust Deed and Letters of Authority and to ensure that an independent trustee has been appointed.
For professional advice and assistance with your trust please contact Stuart Fourie or Vicky Stott.
by Vicky | 16, 05, 19 | Uncategorized
Legalese: Cession
A common clause in an agreement, is one that stipulates that one party’s rights in terms of the agreement may not be ceded without the prior consent of the other party.
What is a cession?
A cession is the transfer of a personal right from one person to another. A common example of a cession is the transfer of a claim against a debtor for payment from one creditor to another.
What are the legal consequences?
1. As personal rights are intangible, the method of transfer and delivery of this right is by way of a cession agreement.
2. The parties to the cession agreement are:
- The Cedent (the original owner of the rights); and
- The Cessionary (the new owner of the rights).
3. If the underlying agreement which gives rise to the rights being ceded requires the original other contracting party’s prior consent to the cession, then the Cedent will need to obtain this first.
4. The validity of a cession depends not only on the cession agreement but also on the underlying claim being ceded.
Our tips
- If you are the Cedent and want to transfer your rights, make sure that the original contracting party is properly informed of the cession. to ensure that performance of their obligation (usually payment of a debt) is to the correct party.
- If you are the Cessionary wanting to take transfer of the rights, investigate the underlying rights/claim properly to ensure that the personal right being ceded is valid and capable of being ceded.
- If you are the other party to the underlying agreement, make sure you know enough about the Cessionary to determine whether you will be adversely affected by the cession. Take legal advice if in doubt.
For more information on this and other legal matters, please feel free to contact us today.
by Vicky | 02, 05, 19 | Uncategorized
Do you have to secure bond approval before a sale agreement?
Many sale agreements require the purchaser to secure bond approval before the agreement becomes binding. Sometimes it is not clear when this is actually obtained because there are different stages to the bond approval process.
When is your sale agreement secured by a bond?
Sale agreements often use terms such as “Pre-approval”, “Approval in Principle”, “Bond Granted or Approved”. And sometimes a reference to a quotation or offer letter in terms of the National Credit Act.
What does “Pre-approval” mean?
Pre-approval is when the financial institution uses basic information available to it to evaluate the highest value of bond you can qualify for in terms of your income and expenses . Pre-approval is research potential buyers do before making an offer on a home. Not all financial institutions process pre-approval applications as they require a signed sale agreement or accepted offer to purchase. Pre-approval is not sufficient for the purposes of a sale agreement because there is no guarantee the financial institution will proceed with a bond once it does a formal affordability assessment.
What does “Approval in Principle” mean?
Approval in Principle means the financial institution has done a thorough search into your financial circumstances and has approved an amount for a bond based on your personal affordability. A financial institution will only do this type of evaluation after an offer to purchase or a sale agreement for a property has been accepted by the seller. At this stage the bond is still not approved/granted as the financial institution still has a requirement to do a valuation of the property to be bonded and whether the property will provide enough security for the financial institution.
What does “Bond Granted or Approved” mean?
Bond Granted or Approved means the financial institution has done its search into your personal affordability as well as the valuation of the property and found it to be sufficient security for providing financial assistance.
And a “National Credit Act Quotation”?
NCA Quotation has the same effect as Bond Granted or Approved. It means the financial institution has assessed you and issued a formal quotation in terms of section 93(2) of the National Credit Act. This quotation is binding on the financial institution for 10 days and requires acceptance by the purchaser before the financial institution will instruct its attorneys to proceed with the bond registration process.
Therefore, your sale agreement needs to be specific on when the condition relating to bond approval is actually met. If the agreement refers to “Pre-approval” or “Approval in Principle” there is a risk that the purchaser will be locked into a sale agreement and, if the financial institution subsequently declines the bond, find him/herself unable to come up with the purchase price. If the sale agreement is then cancelled because the purchaser cannot fulfill its obligations, the purchaser may still be liable for estate agent’s commission or other damages the seller may suffer.
Should you be unsure about when the condition relating to bond approval is actually met (or should you have any other queries about your sale agreement), please feel free to contact us before you sign the sale agreement.
by Vicky | 16, 04, 19 | Uncategorized
The Sectional Title Schemes Management Act 8 of 2011 and the Community Schemes Ombud Service Act 9 of 2011 came into operation in 2016. Both Acts introduced various changes to sectional title law in South Africa. One of the notable changes is the establishment of an Ombud service to resolve sectional title disputes.
In terms of the Community Schemes Ombud Service Act (“the Act”) any person may bring an application to the Community Schemes Ombud Service (“the CSOS”) where they are a party to or are materially affected by a dispute falling within the jurisdiction of the CSOS. Some examples of disputes falling with the jurisdiction of the CSOS are sectional title financial and governance issues, meetings and management services.
Where a Body Corporate or owner or affected person has a sectional title dispute, they can now lodge an application with the CSOS.
Where a Body Corporate or owner or affected person has a sectional title dispute, they can now lodge an application with the CSOS. The matter will be allocated to the CSOS personnel and if there is a prospect of settlement the matter will be referred to an informal meeting for conciliation. If conciliation is unsuccessful then the matter will be referred to adjudication and an order handed down. If either party is unhappy with the adjudication order, they can appeal to the High Court within 30 days of the date of delivery of the adjudication order.
As the dispute resolution service by the CSOS is paid for by the CSOS levy now payable by all Body Corporates, this dispute resolution process is a cost effective process. At this stage the CSOS is proving to be a good forum for resolving a wide array of disputes as provided for in the Act.
Legal representation at the CSOS is only allowed in certain circumstances and legal costs are not generally awarded unless in exceptional circumstances. We can however still advise you on whether your dispute falls within the CSOS jurisdiction and assist you with your preparation for conciliation and/or adjudication and appeals to the High Court.
For professional advice concerning sectional title disputes please contact Chris Salmon.
by Vicky | 11, 04, 19 | Uncategorized
Witness: What does this word mean?
A witness in the context of written documents is a natural person who is physically present when a party signs an agreement to confirm that he/she saw that party sign the document. A competent witness is commonly defined as a person of at least 14 years of age and competent to give evidence in a court of law. This means that he/she should be of sound mind and should not have a personal interest in the agreement being witnessed. An example of an incompetent witness would be someone who is intoxicated.
What are the legal consequences?
Most agreements don’t require a witness in order to be valid and enforceable. However, there are certain exceptions, namely:
- If the parties have previously entered into an agreement that requires any amendments to be signed by the parties and witnessed, then the agreement requirements must be met;
- Section 2(1)(a)(ii) of the Wills Act 7 of 1953 requires the testator to sign his/her will in the presence of two or more competent witnesses;
- Section 95 of the Deeds Registries Act 47 of 1937 requires any power of attorney purporting to give authority to deal with a deed capable of registration in the Deeds Registry to be attested by either two competent witnesses or a magistrate, justice of the peace, commissioner of oaths or notary public;
- Section 15 of the Matrimonial Property Act 88 of 1984 requires the consent of a spouse married in community of property to be obtained and for such consent to be attested by two competent witnesses in certain circumstances.
Our tips:
For evidentiary purposes we recommend that agreements be witnessed, even if there is no legal requirement for this.
If the sole purpose of a witness is to provide evidence at a later date that the agreement was signed by the parties, it is imperative that you are able to easily identify and locate such witness. For this reason it is recommended that the witness be someone who is known to at least one of the parties to the agreement or their agent/s. The full name and ID number of the witness be clearly indicated next to his/her signature for ease of reference. If you are needing more information or require assistance in this regard, please don’t hesitate to contact us.
