Dying without a Will, especially whilst owning Immovable Property, is a Recipe for a Family Feud:

By Sisteen Geyser – Director, Estates and Trust Department

It is a common but unfounded belief that the State will take over your assets if you die without a Will.

The Intestate Succession Act, no. 81 of 1987, sets out the rules of how the estate of a person who died without a Will should be divided between his/her family members.  It specifically makes provision for a surviving spouse, by ensuring that the spouse will inherit the first
R250 000 or a child’s share of the Estate, whichever is more.  A child’s share is calculated by dividing the value of the intestate estate by the number of children of the deceased (both surviving the deceased and deceased children who passed away leaving descendants), plus the number of spouses who have survived the deceased.

Problems arise where the deceased held immovable property, as the above rules would have the effect of the surviving spouse and all the children (or grandchildren representing a predeceased child) inheriting immovable property jointly.

Where the deceased is survived by children only, and they in turn have minor children, matters become even more complicated.  There may be problems about who will pay the costs of the administration of the estate and the costs of transferring the immovable property to the heirs, and co-ownership of the property by a number of family members may be impractical and give rise to disputes.

Prevention is better than cure in these circumstances.  To ensure that a surviving spouse or one child inherit the immovable property as sole owner, to avoid complicated and possibly contentious sharing, you should draw up your Will accordingly.

Should you wish to draw up a Will or simply revise your existing Will, please contact our Estate and Trust Department.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Classes of shares: Something to consider

By Richard Stevens – Director, Commercial Department

The Companies Act 71 of 2008 (“the Act”) provides that a company’s memorandum of incorporation (MoI) must set out the classes of shares and the number of shares in each class.  The Act further provides that the preferences, rights, limitations of each class have to be set out in each class as well.

Should a company only have one class of shares, those shares carry one voting right per share.  If a company, however, has more than one class of shares, the MoI may provide that different rights, including voting rights, would attach to each class.  It is also possible to exclude the voting rights of certain classes in certain matters.  The only condition is that there should always be one class that must be able to vote on a matter.  If an amendment of existing class rights is proposed, the shareholders of that class have to be able to vote on that matter.

The question therefore is whether there is any benefit to create different classes of shares.  Often employers want to provide shares in the employer company to loyal and successful employees but are fearful for losing control over the management of the company, or, in the case of a family business, a parent may wish to provide shares to children but again may be concerned about relinquishing control over the management of the business.  These situations could be ideal to consider the establishment of different classes of shares due to the fact that different rights could be attached to the different classes.  It would therefore be possible to grant the same rights to share in company distributions to all classes but provide for different voting rights.  Should the controlling shareholder wish that certain classes may only share in certain distributions, this would also be possible.  The disadvantage of having different classes, especially in bigger companies with numerous shareholders, is the administrative burden of having to keep record of the different rights of each shareholder.

Any change to the share structure of a company would require an amendment to the MoI which requires a special resolution by the shareholders of the company.  Should you wish to obtain advice on any of the issues raised in this article, you may contact any of the following people:

Richard Stevens – richards@cluvermarkotter.law
Max Loubser – maxl@cluvermarkotter.law
Luzanne Brink – luzanneb@cluvermarkotter.law
Anton Melck – amelck@cluvermarkotter.law
Marieke Wild – mariekew@cluvermarkotter.law

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

What is the Role of the Independent Trustee after 1 March 2017?

By Sisteen Geyser – Director, Estates and Trust Department

The Master recently published Guidelines setting out requirements for the appointment of an Independent Trustee, “where the trust is registered for the first time with the Master and it emerges from the Trust Deed that the trust is a “family business trust”.

A “family business trust” is a trust where the trustees have the power to contract with independent third parties, thereby creating trust creditors, where all the trustees are beneficiaries and all the trustees are related to one another.

Such an independent trustee need not be a professional person, but must be an independent outsider (with no family relation to any of the existing or proposed trustees, beneficiaries or founder of the trust) who understands the responsibilities of trusteeship, and will ensure that the trust functions properly and that the provisions of the trust deed are observed.

More importantly, such a trustee “must be competent to scrutinise and check the conduct of the other appointed trustees who lack a sufficiently independent interest in the observance of substantive and procedural requirements arising from the trust instrument. Has no reason for concluding or approving transactions that may prove to be invalid, because he or she would be knowledgeable about the law of trusts.”

The Master may, in certain circumstances, dispense with the appointment of an independent trustee.

Please note that although the Guidelines are applicable to new trusts, it may be necessary to appoint an Independent Trustee to the trust in terms of the Trust Deed, or to ensure that there will be a proper distinction between control and benefit under the trust.

Should you need assistance with the appointment of an Independent Trustee, you are welcome to contact our Estates and Trust Department.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Directors of companies: Liability, Indemnification and Insurance

In terms of the previous Companies Act directors could generally only act with the consent or approval of shareholders in a number of cases. The Companies Act 71 of 2008 (“the Act”) grants more default powers to directors than the previous Company Act. The increased powers come at a cost to directors: they are more exposed to personal liability should the company suffer harm or loss due to the actions of a director.

One of the most important sections of the Act is Section 77 which sets out the liability of directors for various contraventions of certain sections of the Act. Three of the subsections imposing liability will be briefly highlighted below.

Section 77(2) provides that the director of a company may be held liable in accordance with the principles of the common law relating to breach of a fiduciary duty for any loss, damages or costs sustained by the company as a consequence of any breach by the director of the duty as envisaged in the Act.

A director can furthermore be held liable in terms of Section 77(2)(b) in accordance with the principles of a common law relating to delict for any loss, damages or costs sustained by the company as a consequence of any breach by the director of a duty of care, skill and diligence.

Section 77(3) also provides that a director of a company is liable for any loss, damages or costs sustained by the company as a direct or indirect consequence of a director having amongst others acquiesced in the carrying on of the company’s business, despite knowing that it was being conducted in a manner which could be reckless, grossly negligent or fraudulent. In the context of reckless trading it is important to bear in mind that the question is very relevant when the company incurs debts at a stage when it is insolvent.

To guard against the possibility of liability, a director may wish to be indemnified by the company for any damages caused by the director, or, alternatively, to be covered by insurance, paid for by the company, to hold the directors harmless against any claim by the company for damages caused by the director. The Act regulates the circumstances under which such indemnity and the purchase of insurance are possible.

Should you wish to obtain advice on any of the issues raised in this article, you may contact any of the following people:

Richard Stevens – richards@cluvermarkotter.law
Max Loubser – maxl@cluvermarkotter.law
Luzanne Brink – luzanneb@cluvermarkotter.law
Anton Melck – amelck@cluvermarkotter.law
Marieke Wild – mariekew@cluvermarkotter.law

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Changes in Trust administration at the Master’s Office Part two: Amendment and Deregistration of Trusts

Recently we published an article about the changes in the way the Master’s Office deals with Trust Administration in terms of a Circular issued in March 2017.  Some of the other important implications of the amended procedures are:

Amendment of Trusts:

  • The Master will in future ensure that amendments comply with the prescribed provisions regarding amendments, and will not amend any protected provisions of a Trust Deed.
  • Inter Vivos Trusts can be amended without the consent of the Beneficiaries with vested rights, if the Trust Deed expressly permits the amendment thereof by the Trustees, and as long as the amendment falls within the conditions for amendment as set out in the Trust deed. If the amendment clause does not refer to Beneficiaries, the consent of all the Beneficiaries with vested rights should still be obtained.
  • Testamentary Trusts cannot be amended by the Trustees and Beneficiaries of the Trust, although Beneficiaries may renounce their rights.

Deregistration of Trusts:

Reasons for the termination, as well as proof that the Trust has no further assets or liabilities to be submitted to the Master.

Special Trusts:

The administration of Special Trusts and Trusts created for the receipt of Road Accident Fund Compensation, are contained in the Master’s Circular.

Should you wish to discuss what the impact of the changes would be in respect of a specific Trust Deed, or need assistance with any Trust related administration, you are most welcome to contact our Trust Administration Department today.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Changes in trust administration at the Master’s Office Part one: Trustees

The Master of the High Court recently published a Circular which changes the way in which Trust Administration is handled by the Master’s Office.  Some of the most important implications of the changed procedures are:

Independent Trustees:

  • Updated requirements and amended forms to be completed by Independent Trustees
  • The Master must, when a Trust is registered for the first time, and is a “family business unit”, consider appointing an Independent Trustee

Appointment of Trustees:

  • Identity of Trustees are to be confirmed with certified copies of Identity Documents
  • New rules prescribed for the way in which a corporate Trustee is replaced
  • Confirmation that the Master may refuse the appointment of a Trustee only under certain circumstances
  • In case of a change in Trustees, the Letters of Authority are to be returned to the Master
  • Before dealing with Trust Assets, Trustees need to be authorized to act as Trustees in terms of a Letter of Authority issued by the Master

Resignation of Trustees:

  • If the Trust Deed makes provision for the resignation of a Trustee, those procedures are to be followed
  • If no provision is made for resignation, notice should be given to the Master and Beneficiaries with vested rights in terms of Sec 21 of the Trust Property Control Act, 1988.

Should you need assistance with any Trust related administration, or would like to discuss what the impact of the changes would be in respect of a specific Trust Deed, please contact our Trust Administration Department today.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Changes in trust administration at the master’s office Part two: amendment and deregistration of trust

Recently we published an article about the changes in the way the Master’s Office deals with Trust Administration in terms of a Circular issued in March 2017.  Some of the other important implications of the amended procedures are:

Amendment of Trusts:

  • The Master will in future ensure that amendments comply with the prescribed provisions regarding amendments, and will not amend any protected provisions of a Trust Deed.
  • Inter Vivos Trusts can be amended without the consent of the Beneficiaries with vested rights, if the Trust Deed expressly permits the amendment thereof by the Trustees, and as long as the amendment falls within the conditions for amendment as set out in the Trust deed. If the amendment clause does not refer to Beneficiaries, the consent of all the Beneficiaries with vested rights should still be obtained.
  • Testamentary Trusts cannot be amended by the Trustees and Beneficiaries of the Trust, although Beneficiaries may renounce their rights.

Deregistration of Trusts:
Reasons for the termination, as well as proof that the Trust has no further assets or liabilities to be submitted to the Master.

Special Trusts:

The administration of Special Trusts and Trusts created for the receipt of Road Accident Fund Compensation, are contained in the Master’s Circular.

Should you wish to discuss what the impact of the changes would be in respect of a specific Trust Deed, or need assistance with any Trust related administration, you are most welcome to contact our Trust Administration Department today.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Antenuptial contracts: With or without the accrual system?

The default matrimonial property law regime in South Africa is a marriage in community of property.  This happens by law if parties sign a marriage register (which is usually signed on the day of the wedding) without having signed an Antenuptial Contract before signing the marriage register.  The parties to such a marriage share one estate, i.e. all debts and assets are jointly owned by both parties.If parties decide to marry out of community of property, they have to enter into an Antenuptial Contract to separate their respective estates.

What is an antenuptial contract?

An Antenuptial Contract is an agreement in terms of which the parties determine that they want their marriage to be out of community of property.  When preparing the Antenuptial Contract, one of the important decisions is whether the accrual system (explained below) will be applicable to their matrimonial property regime or not.  An antenuptial contract is prepared by a Notary Public and signed by both parties and two witnesses in the presence of the Notary Public.  The signed Antenuptial Contract has to be registered in the Deeds Registries Office within 3 months after date of signature.  The date of signing the marriage register and/or the wedding date is not relevant in this context.

What is the accrual system?

The accrual system is a regime that implements a formula whereby the party whose estate shows no accrual during the marriage, or a smaller accrual than the estate of the other, or in the case of the death of the first mentioned party, his or her executor, will have a claim against the other party or his or her estate for an amount equal to one half of the difference between the accruals of the respective estates of the parties.  For purposes of determining the accrual of each party, they will be expected to declare their asset values at the commencement of the marriage, which will be deducted from their asset value at the termination of the marriage, to determine the accrual.

The accrual claim only vests at the dissolution of the marriage and shall not during the subsistence of the marriage be transferable or liable to attachment or form part of the insolvent estate of either party.

Whether or not to include the accrual system in an Antenuptial Contract is a personal choice of the prospective spouses.

It is important that both parties consult with the Notary Public preparing the Antenuptial Contract so that they are both fully appraised of the consequences of the different regimes.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Employers Beware: Dismissal for Poor Performance Could Backfire

It is reasonable to want to dismiss an employee for not performing on the job, or failing to meet a specific target. However, Employers should ensure that the targets they set are actually achievable for the employee. If not, they could be found at fault for dismissing an employee who failed to achieve unreasonable targets.Damelin (Pty) Ltd vs Parkinson

In a recent judgement, delivered in January 2017, tertiary education company Damelin (Pty) Ltd, hired Parkinson as the general manager of the Boksburg campus. Parkinson’s employment contract stated that, ‟continued nonattainment of performance goals may result in the termination of employment.”

When Parkinson took up his position in January 2011, the campus had 352 enrolled students of which 168 were first-year students. His target for 2012, which was the national target, was to enrol 420 first year students by February 2012. Andrew Pienaar, the national sales director, estimated that there were 15 000 grade 12 learners in the catchment area of the Boksburg campus. Parkinson queried the target, saying that his team contacted all the schools in the area and there were only 12 735 grade 12 learners in his area. He claimed that unrealistic numbers give rise to unrealistic targets, and that it was like being set up to fail.

The actual enrolment of first-year students for the Boksburg campus for 2012 was 117 first year students. In 2011, the figure had been 168. Parkinson had not met the target. A disciplinary inquiry was convened. Parkinson was charged with poor work performance relating to his failure to reach sales targets and was dismissed.

Unhappy with his dismissal, Parkinson and his union went to the CCMA. The commissioner determined that the dismissal was the appropriate sanction. Still dissatisfied, Parkinson then went to court. The court determined that dismissal could only be considered as a fourth step in terms of Damelin’s disciplinary code. The court set aside the award and reinstated Parkinson saying that the informal letters written to Parkinson could not be considered warnings, and that he was not given an appropriate amount of time to reach his targets.

Conclusion

Employers should remember that problems relating to an employee’s performance should, generally speaking, not be dealt with as misconduct but as incapacity which necessitates a different process than misconduct. Setting unrealistic expectations on employees could set them up for failure. In these circumstances, dismissal would not be appropriate. It is therefore important that employers ensure the standards they set for their employees are achievable within a reasonable amount of time. Employers should also first assist their employees where performance is not of the required standard before dismissal can be considered.

Reference: Case no: JA 48/15

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

How and when to use the small claims court

The small claims court (SCC) is for any natural person who wants to institute a minor civil claim against someone else. Juristic persons, for instance a company, cannot institute claims in the SCC, but only file a counterclaim.  You can also claim against companies and associations. However, the claims are limited to amounts that are less than R 15 000. This excludes the State, meaning a person cannot make a claim against a local municipality, for example. Claims made in the SCC are done quickly and cheaply without having to use an attorney and anyone, except juristic persons, are allowed to use them. The SCC is located in every Magistrate’s Court.Read more about the SCC on The Department of Justice and Constitutional Development’s website: justice.gov.za.

Where do I start?

Before running to the court to make a claim, first contact the person you intend to claim from (“the Defendant”) and ask them to fulfil your request. Let them know you are planning on going to the court to make a claim against them if they don’t comply. If your claim can not be settled informally, the next step would be to deliver a written letter of demand to the Defendant.

The clerk of the SCC will help you to draft your letter of demand. The letter should set out the details of the claim, including the amount. Give the Defendant at least 14 days from the day of receiving your letter to settle your claim.  Make sure the Defendant receives an actual physical copy of the letter. This can be posted to the Defendant, or you can simply take it to the Defendant directly.

So, 14 days has passed and the Defendant didn’t respond. Now you can go to the clerk of the SCC with documents to institute your claim. Firstly, you will need proof that you delivered the letter of demand. This can be a post office slip, for example.  You will also need a contract or document that gives a basis for your claim. Your claim can’t just be based on thin air. Lastly, provide the SCC with all the details of the person you’re claiming from, such as name, address and phone number.

The summons

The clerk of the SCC will help you in drawing up the summons.  Once the summons is complete a hearing will also be scheduled. You then have to serve the summons to the Defendant in person and get them to sign it. Don’t be surprised if they are visibly upset. Remember to make copies of all the documents and keep them. Also give copies to the Defendant. The original documents must be handed over to the clerk of the SCC before the day of the hearing. This information will be kept in the court file.

After the Defendant receives the summons, the Defendant may deliver a plea (written statement) to the clerk of the court. The Defendant may also issue a counterclaim. Regardless of whether the Defendant institutes a plea or counterclaim, the Defendant still has to attend the hearing. On the other hand, the Defendant may decide to fulfil your claim before the hearing, you should then issue a written receipt and let the clerk of the SCC know that you won’t be continuing with the case.

Going to the hearing

You and the Defendant must appear in court in person, attorneys or lawyers are not necessary. Remember to bring along all the documents on which your claim is based, there’s no point in showing up empty-handed. If you have witnesses, make sure they also come with you to the hearing. The SCC proceedings are basic and straight-forward. As mentioned, no attorneys are involved. As the proceedings begin, answer any questions that the commissioner of the court asks you. If you want and the commissioner agrees, then you can direct questions to the Defendant.

The final judgment

After the proceedings have been completed, the court will make a judgment, which is final. There may, however, be some grounds for review. If the judgment is against you, then you should settle any order for costs. Since the court judgment is final, you have to abide by it. You can’t change your mind afterwards.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)