Category Archives: Business

The Consumer Protection Act and your rights

A3The South African Consumer Protection Act, No. 68 of 2008 was signed on 24 April 2009 and the purpose of the Act is to protect the interests of all consumers, ensure accessible, transparent and efficient redress for consumers who are subjected to abuse or exploitation in the marketplace and also to give effect to internationally recognised consumer rights. The Consumer Protection Act define a consumer as any person to whom goods and services are marketed, who is a user of the supplier’s goods, enters into a transaction with the supplier or service provider of any services and products.

If you have a complaint and the supplier won’t resolve it for you, you can complain to your provincial Consumer Affairs Office or the National Consumer Commission as well as other bodies.

The Consumer Protection Act:

  1. ensures that you are treated as an equal and protects you against discrimination in economic transactions.
  2. protects your privacy and ensures fair practice when goods or services are marketed to you.
  3. means you have the right to choose the agreements you enter into and continue with.
  4. gives you the right to the disclosure of information so that you can make informed choices.
  5. protects you against fraud and other dishonest practices.
  6. makes sure that you don’t have to agree to unfair conditions in the small print.
  7. allows you to return things which don’t work properly.
  8. protects you against goods and services that can harm you.
  9. makes suppliers compensate you if they have caused you a loss.
  10. ensures that you are educated on consumer issues and the results of your choices.
  11. makes it possible for you to form groups to promote your interests.

The Consumer Protection Act can help consumers in dealings which involve advertising, marketing, promoting, selling, supplying and delivering or repairing of goods and services in South Africa.

You are a consumer if you have made a deal with a supplier, for example, when you pay for goods or services, or if goods or services are marketed to you.

Goods include things, but also information and data and the licence to use it. Services include receiving advice or training you pay for, transport of people or goods, transactions at restaurants and hotels, entertainment and access to electronic communication. Employment relationships, credit agreements, deals between two private consumers and goods or services supplied to government do not fall under the Consumer Protection Act.

References:

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)

New requirements to re-instate a company or close corporation

B4A company or close corporation may be deregistered upon request from the company or close corporation or any other third party. A company or close corporation may also be re-instated. However, since the withdrawal of Practice Note 6 of 2008, and its replacement with Notice 08 of 2017, there are new requirements for the re-instatement.

The Practice Note is issued in terms of Regulation 4(2)(b) of the Companies Regulations, 2011, and is applicable to the re-instatement of companies and close corporations in terms of Companies Regulation 40(6) and (7).

What are the new requirements?

Since December 2016, to re-instate a company or close corporation, the re-instatement application on a form CoR40.5 must comply with the following requirements regardless of the cause or date of deregistration:

  • Certified identity copy of the applicant;
  • Certified identity copy of the owner of the customer code;
  • Multiple deed search (deed search of each of the 10 regional deeds offices);
  • Letter from the Department of Public Works, only if the multiple deed search reflects immovable property;
  • Sufficient documentary proof indicating that the company or close corporation was in business or that it had any outstanding assets or liabilities, at the time of deregistration;
  • Mandate from the applicant confirming that the customer may submit on his/her behalf.

When can a company or close corporation be re-instated?

CIPC will only consider re-instating a company or close corporation if it can provide proof that it was conducting business at the time of deregistration, or has any other economic value. Furthermore, upon the successful processing of the re-instatement application, all outstanding annual returns must be filed in order to complete the process, within 30 business days from date of the re-instatement.

Reference:

  • Companies and Intellectual Property Commission | CIPC. Practice Note 08 of 2017, Requirements for re-instatement in terms of Regulations 4(2)(b).

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). 

The Competition Commission:
Play fair or else

B1There has been a lot of activity in the commercial sector regarding unfair behaviour according to the Competition Commission. Claims arose that retail giants blocked rivals by means of exclusive mall leases, which essentially impedes competition by preventing smaller operators from entering the market. A complaint also arose that Ster-Kinekor and Nu Metro engaged in market allocation with regards to lease agreements at the V&A Waterfront.

Fortunately, there is a Competition Commission that specifically deals with such cases.

What is the Competition Commission?

The Competition Commission is a statutory body constituted in terms of the Competition Act, No. 89 of 1998. Its purpose is to investigate, control and evaluate restrictive business practices, abuse of dominant positions and mergers in order to achieve equity and efficiency in the South African economy.

To achieve its purpose, the Commission’s core functions, set out in section 21 of the Act, are to:

Investigate and prosecute restrictive horizontal and vertical practices;

  1. Investigate and prosecute restrictive horizontal and vertical practices;
  2. Investigate and prosecute abuse of dominant positions;
  3. Decide on mergers and acquisitions applications;
  4. Conduct formal inquiries in respect of the general state of competition in a particular market;
  5. Grant or refuse applications for exemption from the application of the Act;
  6. Conduct legislative reviews; and
  7. Develop and communicate advocacy positions on specific competition issues.

How to lodge a complaint with the Commission?

Step 1: Complaining against another party: To begin the procedure officially, you will need to complete and send Form CC1 to the Commission.

Step 2: Joining in a case started by someone else with a similar complaint: After the Commission has received a complaint, it may publish a notice in the Government Gazette and/or other media, inviting any person who believes that the alleged practice has affected, or is affecting, a material interest of that person to file a complaint about the matter.

Step 3: Giving relevant information: The information that needs to be submitted to the Commission must contain the following:

  1. Name of complainant.
  2. Name of the party complained of, the respondent.
  3. A brief description of the conduct giving rise to the complaint.
  4. State whether the conduct is still continuing – if not, the date on which the conduct ceased.
  5. Provide a written submission setting out, in detail, the complainant’s cause for the complaint, how it arose, the parties involved, relevant dates and any other relevant information.
  6. Provide contactable details for the complainant, i.e. postal address, fax number or email address.

Step 4: Protecting information given to the Commission: If the information sent to the Commission contains trade, business or industrial information that belongs to you or a firm, has a particular economic value, and is not generally available to or known by others – and you do not want it revealed to others – you may request that it should be kept confidential by completing.

Step 5: Seeking interim relief: Any person who has lodged a complaint with the Commission concerning a restrictive practice, as explained above, may ask the Competition Tribunal for an interim relief order, whether or not a hearing or investigation has commenced in respect of the alleged prohibited practice.

Step 6: Where the Commission would not act: If the Commission declines to refer a complainant’s case to the Competition Tribunal for prosecution, the complainant may refer, within 10 days after receiving a “Notice of Non-Referral” from the Commission, the matter to the Competition Tribunal at his/her own cost.

Step 7: Withdrawal of a Complaint: In terms of Rule 16 of the Act, at any time during an investigation, a complainant may withdraw a complaint lodged with the Commission.

References:

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)

THE COMPULSORY ROTATION OF AUDITORS

B4Every public and state-owned company has to appoint an auditor and a company secretary. However, in terms of section 92 of the Companies Act, 2008, the same individual is not allowed to serve as the auditor or designated auditor of a company for more than 5 consecutive financial years.

What does this mean for my company?

  1. If an individual has served as the auditor or designated auditor of your company for 2 or more consecutive financial years, and then ceases the position, the individual may not be appointed again as the auditor or designated auditor of the company until after the expiry of at least two further financial years.
  2. If your company has appointed 2 or more persons as joint auditors, you must manage the required rotation in a way that all of the joint auditors do not relinquish office in the same year.

Despite the strict requirements for public and state-owned companies, it is not compulsory for private or personal liability companies to appoint an auditor, unless the company is required to produce audited financial statements.

Is this for the better?

It is understood that the external audit function is an activity of public protection and provides credibility to financial statements and assurance to investors. However, auditor rotation could lead to additional costs to companies, as the new auditor would be required to perform additional procedures on the opening balances of their new client.

In some areas, it could also impact negatively on the availability of auditors, as some towns only have a limited number of registered auditors. Auditors practicing as sole practitioners will also be affected, and could lose long-term clients unless they bring in another registered auditor and expand their practice.

References:

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 TO REGISTER A TRADEMARK IN 2017

B2If you have a business and wish to keep competitors from using, or misusing, your brand, then you should consider registering a trade mark for your company’s name and logo.

A trade mark can only be protected and defended under the Trade Marks Act, 1993, if it is registered. However, unregistered trade marks may be defended in terms of common law. The registration procedure results in a registration certificate which has legal status, allowing the owner of the registered trade mark the exclusive right to use that mark.

 Where do I register a trade mark?

The Companies and Intellectual Property Commission (CIPC) administers the Register of Trade Marks which is the record of all trade marks that have been formally applied for and registered in South Africa.

A trade mark is only registrable if it serves the purpose of distinguishing the goods/services of one trader from those of another trader. Other points to remember include:

  1. It must not have become customary in your field of trade.
  2. It does not represent protected emblems such as the national flag or a depiction of a national monument such as Table Mountain.
  3. It is not offensive or contrary to the law or good morals or deceptive by nature or way of use.
  4. There are no earlier conflicting rights.

 How to register a trade mark?

  1. Register as a customer on CIPC: Go to the CIPC website (www.cipc.co.za). If you are already registered as a customer, and know your customer code and password, then continue with the next step.
  2. Deposit funds: Deposit the application fee of R590 regarding every class and every trade mark applied for into the CIPC bank account using your customer code as reference.
  3. Conduct a search: In order to conduct a search, you can request a special search from CIPC, or you can conduct a cursory e-search yourself.

A registered trade mark can be protected forever, provided it is renewed every ten (10) years upon payment of the prescribed renewal fee.

To make the process easier and more successful, then contact your legal adviser, who can lodge a trade mark application on your behalf and ensure all your documentation is correct.

References:

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 TO REGISTER A TRADEMARK IN 2017

B3If you have a business and wish to keep competitors from using, or misusing, your brand, then you should consider registering a trade mark for your company’s name and logo.

A trade mark can only be protected and defended under the Trade Marks Act, 1993, if it is registered. However, unregistered trade marks may be defended in terms of common law. The registration procedure results in a registration certificate which has legal status, allowing the owner of the registered trade mark the exclusive right to use that mark.

Where do I register a trade mark?

The Companies and Intellectual Property Commission (CIPC) administers the Register of Trade Marks which is the record of all trade marks that have been formally applied for and registered in South Africa.

A trade mark is only registrable if it serves the purpose of distinguishing the goods/services of one trader from those of another trader. Other points to remember include:

  1. It must not have become customary in your field of trade.
  2. It does not represent protected emblems such as the national flag or a depiction of a national monument such as Table Mountain.
  3. It is not offensive or contrary to the law or good morals or deceptive by nature or way of use.
  4. There are no earlier conflicting rights.

How to register a trade mark?

  1. Register as a customer on CIPC: Go to the CIPC website (www.cipc.co.za). If you are already registered as a customer, and know your customer code and password, then continue with the next step.
  2. Deposit funds: Deposit the application fee of R590 regarding every class and every trade mark applied for into the CIPC bank account using your customer code as reference.
  3. Conduct a search: In order to conduct a search, you can request a special search from CIPC, or you can conduct a cursory e-search yourself.

A registered trade mark can be protected forever, provided it is renewed every ten (10) years upon payment of the prescribed renewal fee.

To make the process easier and more successful, then contact your legal adviser, who can lodge a trade mark application on your behalf and ensure all your documentation is correct.

References:

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 TO REGISTER A NEW COMPANY

a3_bThe basic steps to register a company under the Companies Act of 2008 at the Companies and Intellectual Property Commission (CIPC) involves certain forms and supporting documentation that must be lodged and the accompanied fees paid.

The steps

The first step in registering a new company is optional. A CoR9.1 form must be completed and lodged with the CIPC in order to reserve a name for the company to be registered. However, the Act does make provision for a company to be registered without a name. The company registration number will then be the name of the company until such time as the company properly registers a name. A certified copy of the identity document of the applicant must be submitted as supporting documentation with this form and a filing fee is payable.

The next step is to complete and lodge the CoR14.1 Notice of Incorporation form together with the CoR15.1 Memorandum of Incorporation.

The Notice of Incorporation specifically contains information regarding the type of company to be registered, the incorporation date, financial year end, registered address, number of directors and the company name if applicable. A certified copy of the identity document of the applicant must be submitted as supporting documentation and a filing fee is payable. A CoR14.1A form contains specific information about the directors of the company who will be appointed at registration, and this form must be lodged together with the Cor14.1. Certified copies of the identity documents of all directors to be appointed must be submitted as supporting documentation. An optional form CoR14.1D may be lodged together with the CoR14.1, which indicates any company appointments to be registered with the CIPC, such as a company secretary or auditor.

The Memorandum of Incorporation is probably the most important document when registering a company, since the provisions contained herein will govern the company. It can be short and simple, or long and extremely technical, depending on what type of company is being registered. In this regard, it is best to seek professional advice. The supporting documentation and filing fees applicable will depend on what type of Memorandum of Incorporation is being registered.

If an auditor or company secretary is appointed at registration as contained in the CoR14.1D, a CoR44 form must also be completed and submitted. No filing fee is payable for this form. An original acceptance letter and certified copy of the identity document of the auditor or company secretary must be submitted as supporting documentation.

The CoR21.1 Notice of Registered Address must be completed with the particulars of the registered address of the company. Again a certified copy of the identity document of the applicant must be submitted as supporting documentation, but no filing fee is payable.

Once all the necessary forms and supporting documentation has been submitted and applicable fees paid, the CIPC will issue a Registration Certificate form CoR14.3 if it is satisfied that all provisions in the Act has been satisfied.

Any changes to the information placed on record at the CIPC at the original registration of the company, must be registered without delay and on the proper forms and possible payment of applicable filing fees.

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)

COMMENCEMENT OF BUSINESS RESCUE PROCEEDINGS

A4_bIs your company experiencing financial strain? Are creditors breathing down your neck? Business Rescue proceedings may be a solution to your problems.

Business Rescue is a new approach that is governed by the Companies Act 71 of 2008 (“the new Companies Act”) with the aim of assisting companies which are experiencing financial strain and are unable to pay their creditors in the ordinary course of business. This article will look at what Business Rescue encompasses, as well as how Business Rescue proceedings are commenced.

Section 128(1) (b) of the Companies Act defines Business Rescue proceedings as proceedings to facilitate the rehabilitation of a company that is financially distressed by providing, inter alia, temporary supervision of a company under a Business Rescue practitioner.

The role of the Business Rescue practitioner (who must be appointed within 5 days after the company has been placed under Business Rescue) is to ensure that the company complies fully with the steps to be taken once Business Rescue proceedings have commenced. They must also ensure that everything reasonably possible is being done (including the drafting of a Business Rescue plan) to assist the company in getting out of its current state of financial strain and into a position where it will be able to pay its creditors in the ordinary course of business.

The new Companies Act stipulates that, in order to place a company under Business Rescue, a resolution must be taken by the Board of Directors and an application thereto must be made to the CIPC (Companies and Intellectual Property Commission). The Commissioner must then consider the application and approve or reject it. Alternatively, any interested or affected party may apply to the Court for a court order placing the company under Business Rescue.

A company that is under Business Rescue is protected from creditors in that no legal action or proceedings may be taken against a company that has commenced with Business Rescue proceedings.

It is imperative to note that a lack of full compliance with the requirements in respect of Business Rescue proceedings may render the Business Rescue proceedings null and void. This position was reiterated in the High Court case of Advanced Technologies & Engineering Company (Pty) Ltd v Aeronautique et Technologies Embarquees SAS (unreported CASE NO 72522/20110), and the Court further held that the new Companies Act does not provide for condonation of non-compliance with the requirements.

 References:

  • Companies Act 71 of 2008
  • D Davis, W Geach, T Mongalo, D Butler, A Loubser, L Coetzee, D Burdette, 3rd Edition (2013) Commercial law: Companies and other Business Structures in South Africa.

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)

JURISDICTION OF COURTS IN MATTERS INVOLVING COMPANIES

A4_b_MarTraditionally, and under the previous Companies Act, a company could have a principal place of business and a registered office. A company could, for instance, conduct its business at one office and also have a registered office with its auditors. In terms of the 1973 Companies Act any division of the High Court where a company’s registered office or its principal place of business was located, would have jurisdiction. More than one Court could, as a consequence, have jurisdiction in proceedings where a company was involved.

The new 2008 Companies Act, which repealed to a large extent the 1973 Act, does not have a similar wording that provides for more than one address. In the matter of Sibakhulu Construction (Pty) Ltd vs Wedgewood Village Golf Country Estate (Pty) Ltd (Nedbank Intervening) 2013 (1) SA 191 the Western Cape High Court dealt with the question of which Court would have jurisdiction where a company has a registered address different from its principal place of business.

The matter revolved around business rescue proceedings and winding up proceedings. The Court remarked that Section 128 of the Act makes reference to only “…the High Court…” This wording denotes that a single Court would have jurisdiction over a company, and not more than one Court as in the previous Act. In dealing with the matter the Court considered the interpretation of the new Act.

Section 23(3) of the new Act specifically states that a company must continually maintain at least one office and register the address of its office or of its principal office if the company has more than one office. This office will, under the new Act, be the company’s registered office. Section 23 makes it clear that this office must be maintained by the company itself and the following Section deals with documentary records to be kept at the address. The Court remarked that the new Act retained the institution of a registered office with which the outside world could make contact.

Unfortunately the Act does not define “principal office” but the Court remarked that, from a reading of the Act, it is clear that the intention is to denote the place where the administrative business of the company is centred. It follows, the Court suggested, that this office should also be the principal place of business. The Court concluded that the principal place of business and the registered office have to be at the same address under the new Act.

Reference was further made to Section 7 of the new Act where it is stated that the purpose of the Act is to provide a “predictable and effective environment for the efficient regulation of companies”. The Court held the view that to give effect to the purpose of the Act as set out in Section 7 it would follow that, in terms of Section 23, a company can only reside at its registered office, which means that only a single court can have jurisdiction.

Companies should be aware of this judgement and make sure that they register their principal place of business as their registered address.

This article is a general information sheet and should not be used or relied on as 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)

 

WHO MAY BE APPOINTED AS DIRECTOR?

A2_b_MarCertain people are not eligible to be appointed as directors of a company. In this article we look at who is disqualified from being a director as well as the effects of the actions of such persons while still acting as director.

A company must not knowingly permit an ineligible or disqualified person to serve or act as a director, according to section 69(3) of the Companies Act 71 of 2008. “Knowingly” includes the situation where the company should reasonably have known that the person is ineligible or disqualified.

Section 69(7) lists the persons on which there are an absolute prohibition, being juristic persons, minors or any persons disqualified in terms of the Memorandum of Incorporation. Section 69(8) lists the persons that are disqualified on a temporary basis, being someone who has been prohibited by the court or whom the court has declared a delinquent, unrehabilitated insolvents, persons who were removed from an office of trust on the grounds of misconduct involving dishonesty, and persons who were found guilty of a criminal offence and imprisoned without the option of a fine, or were ordered to pay a higher fine for being found guilty of any dishonesty crimes.[1]

A question that arises here is what the effect would be of appointing a prohibited director. Section 69(4) says that a person immediately ceases to be a director if they are prohibited from being a director, but section 71(3) states that if a shareholder alleges that a person is disqualified then the person must be removed by a board resolution before they cease to be a director. This means that any act done by such a person, despite his disqualification, will be valid and binding on the company unless the third party who was involved in the act was aware that the person they were dealing with was disqualified.[2]

Section 162(5) (a)-(f) sets out the grounds for an order of delinquency. A court must make an order declaring a person to be a delinquent director if the person:

  1. consented to serve as a director, or acted in the capacity of a director or prescribed officer, while ineligible or disqualified to be a director;
  2. acted as a director in a manner that contravened an order of probation;
  3. grossly abused the position of director while being a director;
  4. took personal advantage of information or an opportunity, or intentionally or by gross negligence inflicted harm upon the company or a subsidiary while being a director;
  5. acted in a manner that amounted to gross negligence, wilful misconduct or breach of trust while being a director; or as contemplated in section 77(3) (a), (b) or (c);
  6. has repeatedly been personally subject to a compliance notice or similar enforcement mechanism;
  7. has been convicted of an offence at least twice, or subjected to an administrative fine or similar penalty; or
  8. was a director of a company or a managing member of a close corporation, or controlled or participated in the control of a juristic person that was convicted of an offence, or subjected to a fine or similar penalty, within a period of five years. [3] & [4]

If a person is declared a delinquent in terms of section 162(5) (a) or (b) it is unconditional and for the lifetime of the person. If a person is declared a delinquent in terms of section 162(5) (c)-(f) this is temporary for a minimum of 7 years.[5]

It is therefore very important, when appointing a director, to make sure that he is qualified in terms of the new Companies Act. One must do proper research about a person accordingly before appointing him as a director of a company because it is possible that if you do not do so, the company in which you are a shareholder may have to bear the consequences of the actions of this disqualified person.

References:

l Companies Act 71 of 2008

l FHI Cassim et al Contemporary Company Law (2012)

[1] Section 69(7) – (8) of the Companies Act 71 of 2008.

[2] Section 69(4) and 71(3) of the Companies Act 71 of 2008.

[3] Section 162(5) (a)-(f) of the Companies Act.

[4] FHI Cassim et al Contemporary Company Law (2012) 435 – 437.

[5] FHI Cassim et al Contemporary Company Law (2012) 438.

This article is a general information sheet and should not be used or relied on as 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)