When does prescription of a debt start?

Debt does not last forever, after a period of time it prescribes and becomes invalid. Prescribed debt can be explained as old debt that has not been acknowledged over a period of three years. This means that a debt prescribes if:

  • You have not acknowledged the debt in the past three consecutive years, either in writing or verbally.
  • You have not been summonsed to make a payment by a creditor for the debt within the past three consecutive years.

Trinity Asset Management (Pty) Limited v Grindstone Investments 132 (Pty) Limited

On 5 September 2017, the Constitutional Court handed down a judgment in an appeal against the judgment and order of the Supreme Court of Appeal (SCA) against Trinity Asset Management (Pty) Ltd (Trinity). The SCA ruled that Trinity’s claim for repayment of a debt of some R4.55 million against Grindstone Investments 132 (Pty) Ltd (Grindstone) was unenforceable because it had prescribed.

The parties entered into a written loan agreement, effective from 1 September 2007, in terms of which Grindstone borrowed a capital amount of R3 050 000 (loan capital) from Trinity. Clause 2.3 of the loan agreement provided that the loan capital was due and repayable to the applicant within 30 days from the date of delivery of Trinity’s written demand.

The majority judgment found that, on a holistic reading of the loan agreement, the parties did not intend to delay when the debt would become due or when prescription would begin to run. The parties’ language in the contract did not signify an intention to delay. The parties simply meant to allow Grindstone 30 days to repay the debt once Trinity had issued demand, not to postpone the due date of the debt to an indeterminate future date. The debt thus became due, and prescription began to run, immediately on conclusion of the contract.

Grindstone therefore raised a valid prescription defence, and the appeal was dismissed.

Conclusion

If you are uncertain about a debt amount or require assistance in this regard, then please contact your financial advisor, who will assist you with taking the next steps.

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)

References:

Trinity Asset Management (Pty) Limited v Grindstone Investments 132 (Pty) Limited (CCCT248/16) [2017] ZACC 32 (5 September 2017)

www.debtbusters.co.za/what-is-prescribed-debt/

Municipal debt invalid, the Constitutional Court has ruled

On 23 May 2017, the Constitutional Court heard an application for confirmation of an order of the High Court of South Africa, that declared section 118(3) of the Local Government: Municipal Systems Act, 2000, constitutionally invalid.

On 29 August, in a ruling majority written by Justice Edwin Cameron, the court found that upon transfer of a property, a new owner is not liable for old municipal debt.

Section 118 of the Municipal Systems Act

Section 118(3) explains that municipal debt on any property is a charge upon that property and enjoys preference over any mortgage bond registered against the property. However, the question was whether this means that, when a new owner buys the property, the property remains with the debts of a previous owner.

What did the court say?

The court ruled that section 118 (3) is “well capable of being interpreted”, so that the historical debt is not transferred to a new owner of the property.

“What is notable about section 118(3) is that the legislature did not require that the charge (historical debt) be either registered or noted on the register of deeds. Textually, there is no indication that the right given to municipalities has a third-party effect (to a new owner)… It (historical debt) stands alone, isolated and unsupported, without foundation or undergirding and with no express words carrying any suggestion that it is transmissible,” the court said in the judgement.

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)

References:

The Constitutional Court of South Africa

“Concourt rules new homeowners not liable for debts of previous owners”, Ray Mahlaka, The Citizen, 29 August 2017. https://citizen.co.za/news/south-africa/1631149/concourt-rules-new-homeowners-not-liable-for-debts-of-previous-owners/

Jordaan and Another v City of Tshwane Metropolitan Municipality and Others; New Ventures Consulting & Services (Pty) Ltd and Others v City of Tshwane Metropolitan Municipality and Another; Livanos and Others v Ekurhuleni Metropolitan Municipality and Another; Oak Plant Rentals (Pty) Ltd and Others v Ekurhuleni Metropolitan Municipality (74195/2013; 13039/2014; 13040/2014; 19552/2015; 23826/2014) [2016] ZAGPPHC 941; [2017] 1 All SA 585 (GP); 2017 (2) SA 295 (GP) (7 November 2016)

When does a General Power of Attorney lapse?

By Sisteen Geyser – Director, Estates and Trust Department

If a person who needs to have a legal act done while being unable to attend to it personally, because of illness or being outside the country, for example, such a person (“the principal”) could execute a power of attorney in favour of a third party (“the agent”).  The law on agency applies to this relationship.

The principal must have the necessary contractual capacity for the power of attorney to be valid, and must understand the nature and consequences of granting a power of attorney.  A validly executed power of attorney automatically lapses as soon as the principal is no longer able to perform the acts in question personally.

An adult who does not have full contractual capacity (for example, because of a stroke or extreme old age) requires assistance to make decisions.  Depending on the person’s circumstances, an application should be made to the Master of the High Court for the appointment of an Administrator, or to the Court for the appointment of a Curator Bonis.

Should the principal’s health deteriorate to the point of not being able to comprehend any acts done on their behalf in terms of the Power of Attorney, the family should consider appointing an Administrator or Curator to manage their affairs.

Should you have queries about the validity of a Power of Attorney or need guidance on whether a person needs assistance to manage their affairs, please contact our Estate and Trust Department.

Should you have queries about the validity of a Power of Attorney or need guidance on whether a person needs assistance to manage their affairs, 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)

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)