Think twice before ignoring that court order


When you are on the receiving end of a court order, it would be wise to obey the terms set out in it. Disobedience in terms of a court may cause a court to hold you in contempt of court. The consequences of the latter might be more severe than you expected – resulting in a criminal record perhaps or worse.

A person can be held in contempt of court in both criminal and civil proceedings. For the purposes of this article, we will focus on civil court orders.

There is a common law distinction between two types of court orders:

  1. Orders for monetary payments (ad pecuniam solvendam); and
  2. Orders for performance (ad factum praestandum), where an order is made to act, or to refrain from acting, in a certain manner.

When a court makes an order where a person (judgment debtor) is obliged to make monetary payments, the judgment debtor will not be held in contempt if he is unable or fails to make payment. The person who stands in favour of the order (judgment creditor), must rely on the alternative remedies at their disposal. Examples of such remedies include, among others, warrants of execution, section 65A(1) court procedures to determine the financial position of the judgment debtor, emoluments attachments orders, and garnishee orders..

However, if there is a contravention of an existing maintenance order, a person can be held in contempt of court according to section 31 of the Maintenance Act 99 of 1998. Section 31(1) states that any person who fails to make any particular payment in accordance with a maintenance order shall be guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding three years, or to such imprisonment without the option of a fine.

The lack of means to adhere to the maintenance order will in itself not be a sufficient defence for acquittal if it is proved that failure to pay is due to unwillingness to work or misconduct.

On the other hand, failure to comply with an order for performance, whether it refers to a positive act or refraining from acting in certain manner, could amount to contempt of court.

Contempt of court is a criminal offence. Therefore, it must be proven beyond reasonable doubt that a person is in contempt of court.

The requirements the court considers when establishing contempt of court are:

  1. The existence of a court order;
  2. Service and notice of the court order;
  3. Non-compliance with the terms of the court order; and
  4. Wilfulness and mala fides beyond reasonable doubt.

There are two procedures to follow in pursuit of a finding of contempt of court.

Firstly, the Applicant can bring an application to the High Court, with a founding affidavit setting out the allegations that the Respondent is in contempt of court. Said allegations will be in terms of the aforementioned requisites.

The Respondent can, in turn, oppose the application with an opposing affidavit disputing the allegations. The Respondent has a duty to adduce evidence to rebut the inference that his conduct was wilful and mala fide. 

The alternative procedure is laying a criminal charge at the South African Police Service (SAPS), where the matter will be subject to prosecution by the National Prosecuting Authority (NPA). The person allegedly in contempt of court will be an accused in the matter and the NPA will have to prove the offence beyond reasonable doubt.

To be held in contempt of court can result in serious consequences and persons can be liable to a fine or worse, imprisonment, upon conviction.

 Reference List:

  • Maintenance Act 99 of 1998
  • Matjhabeng Local Municipality v Eskom Holdings Limited and Others; Mkhonto and Others v Compensation Solutions (Pty) Limited 2018 (1) SA 1 (CC)

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Business-to-business agreements: The questions you need to ask


Your business success relies on your interaction with clients/customers and other businesses. Your profit is directly proportional to the behaviour of these external role-players. Dealing with individual clients/customers does come with some risk – especially if you offer a line of credit. However, your agreements with other businesses, in which greater risk and sums are applicable, you cannot afford to take a wrong step and jeopardise your own position and growth.

For this reason, the way you approach your agreements with other businesses should be done with much forethought and consideration. These are some of the things to consider in your business-to-business agreements:

When does the agreement start and end?

It may sound obvious, but having a clear understanding of when a contract starts and ends is extremely important. The world changes and the economy goes through volatility, and as a result, your scope might change. There are too many variables in the world of business to have a contract that goes on indefinitely. Also, make sure that if there are certain conditions that may trigger the commencement of the contract, that it is clearly stipulated. Should you want to leave the door open to continue the agreement in the future, be sure to include a renewal clause in the contract along with the process to be followed.

How can the contract be terminated?

You may enter into an agreement and discover at a later stage that it no longer suits you or your business’s needs. So be sure to include terms that explain the process and/or penalties applicable when one or both parties are intent on terminating the contract.

How will disputes be resolved?

As much as we would love to live in a world where everyone does their part and there is no conflict, it is practically impossible to escape the odd bad egg. Inserting a clause that explains how disputes will be resolved can go a long way to avoiding unnecessary legal fees and time spent in court trying to set things right. Most contracts prefer to do so by insisting that the first course of action is arbitration, and not litigation.

How can you protect yourself from risk?

There may be instances where there isn’t just a dispute but rather a blatant breach of contract. If another business causes you damages because of their action (or inaction) in contradiction of your agreement, there must be a way to take appropriate action. Including a breach clause and damages clause in a contract ensures that in such an unwanted event you at least have a clear plan for legal recourse.

How confidential is the agreement?

How you conduct business should be a private matter. Protecting your trade secrets are often vital for the sustainability of your business in a competitive environment. For this reason, there must be a confidentiality clause inserted in your commercial contracts.

How will you protect yourself from the worst-case scenario?

As was made clear by the Coronavirus pandemic, there is always the possibility of an unforeseen event that can derail your ability to satisfy the terms of your agreement with another commercial entity. For this reason, no commercial contract should be drafted in which there is not a force majeure clause that stipulates the large-scale external conditions that could void the contract.

Who will I approach to draft my commercial contracts?

Drafting a commercial contract is not for the faint-hearted. In fact, there are professionals who devote their entire lives to the drafting of watertight commercial agreements that are valued in millions of Rands. It is always advisable to speak to a reputable Commercial Law Attorney who will be able to help you navigate the world of commercial contracts and ensure that your best interests are protected.

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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The practical realities of death: Winding up a deceased estate


Being unprepared for the practical realities of death can make the winding up of a loved one’s estate even more traumatic. The winding-up process can be lengthy, cumbersome, and bureaucratic – worsened recently by delays as a result of the Covid-19 pandemic. Thankfully, all estates follow the same winding-up process which means that there is a large amount of consistency when it comes to estate administration. Generally speaking, the winding-up process follows this pattern:

Report the death to home affairs

In terms of the Births and Registration Act, a person’s death must be reported to the Department of Home Affairs who will then issue a death certificate. In practice, the funeral parlour will report the death on your behalf and then provide you with the death certificate. However, it is important to ensure that you provide the correct details to Home Affairs as any errors on the death certificate can cause unnecessary delays. The executor will not be able to register the estate with the Master’s Office without a correct death certificate.

Find the will

Following your loved one’s death, you will need to locate their will. If you do not know the location of the will, it is advisable to contact your loved one’s bank, attorney, financial advisor or investment house (or auditor/accountant). Besides being an important document in terms of the distribution of your loved one’s assets, it also provides details of who your loved one has nominated as executor to their estate. Once you’ve established who the executor is to the estate, you will need to notify that person of the death.

Register the deceased estate

The executor’s first job is to notify the Master of your loved one’s death by submitting a J94 death notice. It is important to note that all documents required for the winding up of a person’s estate are available online. The death notice needs to be completed by the deceased’s surviving spouse, nearest blood relative, or the person who identified the deceased and should be submitted within 14 days of death. If the deceased was living in South Africa, their estate must be reported to the Master whose jurisdiction the deceased was living 12 months prior to their death. If the deceased was not residing in South Africa at the time of their death but held assets in this country, then their death can be reported to any Master’s Office, provided that it is only reported to one.

Executor to arrange preliminary meeting with family

The next function of the executor is to arrange a preliminary meeting with the deceased’s loved ones, with the primary purpose of this meeting being to check the will, establish who the beneficiaries are, and prepare a rough inventory of the deceased’s assets and liabilities. In preparing for this preliminary meeting, it will help to take copies of the deceased’s bank account details, title deeds, insurance policies, birth and marriage certificates.

Executor to Master for Letters of Executorship

Up until this stage, the executor is still the nominated executor in terms of the will and to have this position formalised they will need to apply to the Master of the High Court to be appointed as executor. To do this, the Master must first ensure that the will is valid and that the executor can be appointed. Where the value of the estate is greater than R250 000 and if the Master is satisfied that the will is valid, they will issue Letters of Executorship to confirm the executor’s mandate. Where the value of the deceased estate is less than R250 000, the Master can dispense with the need for an executor and give directions as to how the estate should be wound up. If the will is found to be invalid, then the deceased’s estate must be wound up in terms of the laws of intestate succession. In such an instance, the Master will appoint an Executor Dative to the deceased estate.

Open bank account

If the estate has cash of more than R1 000, the executor is required to open a bank account in the name of the deceased and deposit all monies into that account.

Report the estate to Sars

The executor is also required to report the deceased estate to Sars and to ensure that all tax liabilities are brought up-to-date. In doing so, they are required to submit tax returns and pay over any CGT that is owing.

Documents required

In order to wind up the estate, the executor will need a number of documents. Other than the death notice and death certificate, the executor will require the deceased’s ID document, certified copies of the ID documents of all heirs who stand to inherit, the original signed will, marriage certificates, antenuptial contracts, birth certificate, divorce orders, and maintenance agreements. If the deceased has heirs who reside overseas, obtaining certified copies of their ID documents can cause delays in the process.

Advertise the estate

The executor is then required to advertise the deceased estate so that any potential creditors can register their claims. To do this, the executor will need to place a Section 29 advert in the local newspaper and government gazette in the area where the deceased resided prior to their death. Generally speaking, if you contact your local newspaper they will send you the relevant forms to complete, and will forward the advert to be published in the government gazette. Once the advert is published, creditors have 30 days in which to lodge claims against the estate.

Prepare liquidation and distribution account

After the expiration of this 30-day period, the executor must prepare a liquidation and distribution account, also known as the L&D account, which is a complete list of all the assets and liabilities of the deceased estate. It must also include the names of the beneficiaries, what their respective inheritance is in terms of the will, as well as the income and expenditure incurred by the deceased estate. The Master requires that the executor files the L&D account within six months of the date of death although they can request an extension if necessary.

Lodge the L&D account with the Master

Once finalised, the executor must lodge the L&D account with the Master where it must lie for 15 days to allow for queries. The executor is required to respond to any queries that the Master has on the accounts and, once satisfied, the Master will give permission for the L&D account to be advertised.

Advertise L&D account

The executor is then required to place a Section 35 advert in the local newspaper and government gazette announcing that the L&D account will lie open for inspection at the Magistrate’s Court for a period of 21 days. If no objections are received, the Magistrate will issue a certificate of no objection which, once lodged with the Master’s Office, will mean that the executor can distribute the estate.

Release from Sars

Before distributing assets to the beneficiaries, the executor must obtain a release from the receiver of revenue confirming that all outstanding taxes have been paid.

Pay creditors

All liabilities in the estate must be paid before the estate can be distributed amongst its heirs, including any amount owing to Sars in respect of estate duty, and any amounts owing to the estate’s creditors. The executor is entitled to charge a prescribed fee of no more than 3.5% of the gross value of the estate, excluding VAT. The executor is also entitled to a fee of 6% of any income, such as dividends, rent or interest, that they collect on behalf of the deceased estate.

Pay heirs and beneficiaries

Once all liabilities have been settled, the executor can distribute the assets either by transferring them into the name of the heirs or by realising the property and paying out the proceeds in terms of the will. The executor must ensure that fixed property is transferred into the names of the nominated beneficiaries, keeping in mind that no transfer duty is payable on inherited property, although the conveyancing fees will be paid by the estate. Once the heirs have received their inheritance, they are required to sign an acquittance as verification of receipt.

Apply to Master for discharge of duties

At this point, the executor can apply to the Master for a discharge from all responsibilities as the executor and, if satisfied, the Master will issue a filing slip and discharge certificate.

12 April 2021 06:12   /  By  Gareth Collier – Crue Invest (Pty) Ltd

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Working from home: What you can claim from tax


The tax season is about to open and, because you’ve probably spent a big chunk of the last year working from home, there may be potential deductions you could claim when filing your personal return.

“There are a number of factors that determine whether you can claim a tax deduction for working from home. Let us start with the legalities. There are three sections (section 11, section 23(m), and section 23(b)) of the Income Tax Act which deal with deductions of home office expenses, each has its own requirement, but it is important to note that all three sections must be met in order to qualify for a deduction,” says financial planner, Lana Visser from Fiscal Private Client Services.

Do I qualify?

If you are a full-time salaried employee and have been working from home for more than six months of the tax year (1 March 2020 to 28 February 2021), you may qualify. Employees who mainly earn commission, or work as an independent contractor may also qualify to claim home office expenses. “Note that ‘mainly’ refers to more than 50% of your overall income from employment,” she says.

What qualifies as a home office?

There are specific requirements according to the South African Revenue Service (Sars).

  • It needs to be a dedicated space in your home specifically used for work purposes only. It cannot be your dining room table where every evening you pack up your laptop for your family to have dinner. It needs to be a space set up in your home and dedicated to work purposes only and nothing else.
  • It needs to be equipped specifically for work.
  • Your work is primarily carried out in that space – so if you have meetings for most of your day and you meet these clients in your lounge or at a coffee shop, then that office space does not qualify.

Visser adds that the onus of proof lies with the taxpayer. “You will be required to prove to SARS that your home office meets all of the requirements, and that the expenses being claimed are in fact allowable deductions”.

What expenses can I claim?

SARS states that expenses related to the production of income, provided it is not of a capital nature, can be claimed. “So, if you build on an additional room which will be used as an office, this capital expense will not qualify. However, there is a list of home office expenses that do qualify as deductible,” she says.

  • Rent
  • Levies
  • Electricity
  • Rates and taxes
  • Interest on bond repayments
  • Cleaning expenses
  • Wear and tear on assets

“When it comes to rent, levies, rates and taxes or interest on bond repayments, you will need to determine the size of your office floor space as a portion of your entire home. This will provide the portion of your expense which is related to the production of income or trade,” says Visser. As an example, if your home office is 12m2 and your entire home is 200m2, then 6% (12/200) of the above expenses relating to your home will be allowed as deductible expenses.

In addition to the abovementioned home office expenses additional costs incurred to earn income are available to commission earners and sole proprietors. Examples of such costs are stationary, internet, telecommunication, and travel costs.

Capital gains tax

When you own your home and use a dedicated space for work purposes, this will impact the capital gains tax when selling your home. The portion used as an office space will be considered separately and the primary residence exclusion will not be applicable to that portion. “What this means is that this could have massive implications on your tax situation when you do sell. Using the above example, when you sell your home, the capital gain will need to be split into the business portion (6%) and the private use portion (94%). The primary residence exclusion can therefore only be applied to 94% of the capital gain (selling price less base cost) and the remaining 6% will be fully subject to capital gains tax. If you do decide to sell your home, it is important to consult a tax advisor in this regard.

“It stands to reason that many employees still find themselves working from home and will be paying for higher costs for internet and electricity, etc. However, it is clear that there are many factors contributing to what you can and cannot claim.,” she says

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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The audit expectation gap explained


In its publication, Closing the Expectation Gap in Audit, the Association of Chartered Certified Accountants (ACCA) describes the audit expectation gap as “the difference between what users expect from the auditor and the financial statement audit, and the reality of what an audit is”.

The ACCA continues to identify three components to the audit expectation gap as follows:

  • The knowledge gap described as the difference between what the public thinks auditors do and what auditors do. This recognises that the public may misunderstand the role of auditors and the requirements of the auditing standards.
  • The performance gap, where auditors do not do what auditing standards or regulations require due to the complexity of certain auditing standards (unclear requirements) or differences in interpretation of auditing standards or regulatory requirements between practitioners and regulators, and
  • The evolution gap, where there is a need for evolution in areas of the audit where, taking into consideration the general public’s demand, technological advances, and how the overall audit process could be enhanced to add more value.

Narrowing the expectation gap

In understanding the three components of the audit expectation gap, namely the knowledge gap, the performance gap and the evolution gap, it is evident that various parties involved in the financial reporting ecosystem have a part to play in achieving an effective financial reporting ecosystem that ultimately results in the reporting of high-quality financial information.

Standard-setting activities

The International Auditing and Assurance Standards Board (IAASB), being the international standard-setting body, reacted to the renewed focus on the audit expectation gap by issuing their Discussion Paper on Fraud and Going Concern in an Audit of Financial Statements, which is aimed at exploring the differences between public perceptions about the role of the auditor and the auditor’s responsibilities in a financial statement audit in establishing a view on whether the international standards on auditing remain fit-for-purpose in the current economic environment.

This international outreach is welcomed in reinforcing the important role that the IAASB plays in bringing uniformity to the standard-setting process. Such standard-setting activities contribute positively to the performance gap in addressing the complex nature of the auditing standards or addressing any ambiguity that exists in the auditing standards. Standard-setting activities make a positive contribution to narrowing the evolution gap, by ensuring that standards remain fit-for-purpose in changing economic environments in meeting the needs of the public in relation to the audit process. Standard-setting activities are, however, going to make little or no impact on narrowing the knowledge gap. This is probably the reason why, although the International Standards on Auditing have been revised over the years, the issue of the expectation gap remains unabated.

The importance of educating and having a continuous dialogue with the appropriate stakeholder groups in an effort to close the knowledge gap cannot be emphasised enough; a task that should be undertaken by all parties involved in the wider financial reporting ecosystem. It can be argued that the knowledge gap is the main contributor to the audit expectation gap as this component is beyond the control of the profession. The mere fact that auditors are also called ‘watchdogs’ might be an indication on what the public expects from auditors compared to what auditors are really responsible to do.

Auditor reporting

Deficiencies in the overall control environment and in the design of the internal controls or failure to implement such internal controls are contributing factors to fraudulent activities. At some point, significant internal control deficiencies are usually identified by the auditor, even if it is not during the financial period when fraud occurred.

However, such deficiencies are not reported to the users of financial statements in the auditor’s report when they are initially identified. Perhaps there is room for an enhancement to the reporting requirements in the auditor’s report when it comes to deficiencies in the overall control environment and the internal controls.

Reporting on internal control deficiencies would alert the users of financial statements of areas where the opportunities to perpetrate fraud may exist due to weaknesses in the overall control environment and the internal controls. These additional disclosures in the auditor’s report should, however, not be done in isolation but off the back of enhanced management disclosures around the adequacy and effectiveness of the internal financial control environment.

Combined assurance

The importance of a combined assurance model in achieving the ultimate objective of the reporting of high-quality financial information should also not be underestimated. Combined assurance is explained as a process of combining the activities of various parties, both internal and external to the organisation to add credibility to financial information produced. In the financial reporting ecosystem, two distinct components of the combined assurance model can be identified, namely internal assurance and external assurance. The objective of internal assurance is to prevent internal mistakes from leaking into the external assurance process.

Other parties in the financial reporting ecosystem have a key role to play in ensuring high-quality financial information is reported. These include the preparers of financial statements, including chief executive officers and chief financial officers as well as those charged with governance, such as audit committees. Corporate culture and the quality of the reporting and internal controls at the organisation have a significant impact on whether fraud will be detected even before engaging with an auditor through the external assurance process.

Therefore, explicit reporting could be required from both the preparers and those charged with governance on actions that they have undertaken to ensure that they fulfil their responsibilities in these two areas. This management responsibility needs to be given increased public acknowledgement.

In this regard, the JSE Limited recently amended the JSE Listings Requirements to require the CEO and financial director to make a positive statement attesting that the annual financial statements fairly present the state of affairs of the company and/or group, that internal financial controls are adequate and effective and that where deficiencies and any fraud involving directors have been identified, these have been disclosed to the audit committee and the auditor and the necessary remedial action has been taken.

Time to stand back

The current purpose of an audit is not to detect fraud but rather for the auditor to provide reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error. However, in light of the increased focus on the audit expectation gap, perhaps it is time for all parties involved in the financial reporting ecosystem to stand back and reassess whether the needs of the general public in terms of the reporting and assurance financial information are still being met.

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)


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How SMME’s can be more financially resilient


An emergency or unexpected occurrence can have a negative impact on your business. The Covid-19 pandemic has demonstrated the need for SMMEs to adopt new ways of doing things and has pushed businesses to try and become more financially resilient.

Speaking during a panel discussion during Money Smart Week South Africa 2021, spokespeople from the Association for Savings and Investment South Africa (ASISA) Foundation defined financial resilience as the ability to cope with income loss, financial setbacks, or unexpected events such as lockdown as a result of the pandemic. It is important for SMMEs to be prepared for financial loss by being cautious about how they spend money when business is going well.

How to be more financially resilient

SMMEs can implement the following steps to ensure that they are more financially resilient:

  • Managing Business and Personal Finances: It is important for SMMEs to remember that business income grows, funds, and protects the business. It is used to pay for business expenses such as rent. Maintaining and distinguishing business income and personal income (such as groceries) ensures that there is always a clear overview of business growth.
  • Planning and Budgeting: SMMEs need to have a financial plan that creates a roadmap of how money is spent. The first step to creating a conclusive financial plan is to outline the budget that covers themes such as the total amount spent on stock and expenses. A good financial plan can help the business reduce costs ahead of a crisis.
  • Diversifying revenue streams: It is crucial for SMMEs to always look for opportunities to increase and maintain revenue during a time of crisis. This means understanding consumer needs and identifying how to use their products to empower the community.
  • Managing Cash Flow: It is important for SMMEs to use less and earn more to ensure that business expenses are kept low and to reduce unnecessary costs in order to save. SMMEs that have a good understanding of their cash flow are at an advantage when managing a crisis.
  • Saving: All SMMEs are advised to save money for a crisis to avoid being at risk and to be able to continue operations. Businesses can expand and remain sustainable depending on their savings.

It is important for businesses to always be prepared to adjust in times of uncertainty. Using the right resources can empower SMMEs to make the right decisions.

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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The difficulty of choosing a guardian


No parent wants to think about giving their child over to someone else. The idea itself is enough to send many into full Liam Neeson Taken mode, refusing even the idea of their child being taken away from them to find a hold in their minds. But what if it’s not your child that is taken away, but you?

Making sure your child is cared for and looked after by someone you know will care for them (almost) as much as you when you’re gone is something that can only be achieved through the appointment of a guardian in a will. The appointment of a guardian should not be taken lightly, though.

While your own personal relationship with the prospective guardian is vital, consideration needs to be given to your child’s opinion of them as well. When you feel you have found the perfect candidate, take the time to talk to your child about it. Even if you don’t, the High Court will. Once a legal guardian has been appointed, the Court takes the child’s opinion into consideration and will conduct the necessary investigations to determine whether the most suitable guardian has been appointed, putting your child in a difficult situation that could have been avoided.

Unfortunately, the appointment of guardianship is not legally binding. Appointed guardians are free to accept or decline their position as legal guardian before any parental rights or responsibilities are given to them. The reason for refusal may include that they have started a family of their own, they moved too far away, they started a new profession, or even that they have simply changed their minds. The grounds for declining guardianship have no bearing on whether or not their decision is accepted or not.

In the case where the appointed guardian refuses guardianship, the High Court will look towards the next of kin of the deceased parents to find a suitable guardian. This search is conducted according to the degree of familial relation, making the aunts, uncles and grandparents of the child the first options, with second cousins twice removed on someone or other’s side barely being given a second thought. In these cases, the next of kin will also have to accept their guardianship, though, just like any other guardian.

When no next of kin can be found, the High Court will place the child into childcare.

But what if you had actually considered that second cousin as a guardian when you set up your will? What if you have a friend that will make an amazing parent (just maybe not as amazing as your first choice of guardian)? When appointing a guardian in your will, it is important to consider the fact that your primary candidate may not be able to fulfil their duties and include the names of substitute guardians for such cases. This will ensure that the child’s future is still in the hands of their parents, and not with a distant aunt that no one even knew of.

Choosing a guardian (or guardians) isn’t a simple task, but it’s one that is essential to ensuring your child will always have someone ready to go full Liam Neeson for them.

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Can losses be distributed out of a trust?


On 18 March 2021, the Supreme Court of Appeal delivered judgment in the case of Massmart Holdings Limited v The Commissioner for the South African Revenue Service. The case dealt with losses which were incurred within the broader Massmart group in respect of the investing of equity instruments as part of an employee share incentive scheme.  The mechanism of the scheme was that shares allocated to the designated employees would be purchased from a share Trust with funding from Massmart Holdings.

Upon distribution of those shares to the designated employees, the share Trust could either have losses in respect of the distribution, or taxable gains.  Over several years of assessment, the Trust realised losses on the distributions on the vesting of those shares in the designated employees for a cumulative amount of R954 million.

Rather than claiming these capital losses in the Trust from where they arose, the group proceeded to claim those losses in Massmart Holdings. In other words, the group attempted to claim losses on the disposal of assets which never belonged to the claiming party in the first instance.

Massmart’s original objection to SARS’ disallowance of the losses of the Trust was that Massmart Holdings was essentially an extension of the Trust and that it maintained control over the Trust’s activities and should therefore be allowed to claim the losses. After disallowance of the objection, Massmart added a further ground on appeal being that it [Massmart] acquired a right to call on the Trust for delivery of the shares to the identified employees.  It argued that its base cost for that asset was the loss incurred by the Trust on that realisation event (i.e. when the shares vested) and that it obtained no proceeds on that disposal, resulting in a capital loss.

Without entertaining that argument in too much detail, the Supreme Court of Appeal (“SCA”) found that it was not possible for Massmart to claim those losses and that there exists no mechanism in terms of which losses can be distributed out of a Trust into the hands of a beneficiary. While a distribution of gains is well recognised in our common law and law of taxation, it is a firm principle which has now been confirmed by the SCA that Trust losses cannot be distributed from trusts to beneficiaries.

Ironically, Massmart was adequately advised by their respective advisors prior to claiming the losses, but proceeded nevertheless. It appears the battle was lost before it even proceeded to court.

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Why the POPI Act matters


The right to privacy is enshrined in Section 14 of South Africa’s Constitution and we understand it to be a vital human right. It states:

“Everyone has the right to privacy, which includes the right not to have –

(a) their person or home searched;

(b) their property searched;

(c) their possessions seized;

(d) the privacy of their communications infringed.”

It’s the last part of the abovementioned list that is becoming a growing concern. All around the world more and more focus is being placed on protecting private information as countries and governments are setting new laws to ensure the safety of their citizen’s information online.

In an age where information is growing at an exponential rate, no digital exchange of information can be left unprotected. For this reason, the Protection of Personal Information (POPI) Act comes into full effect from the 1st of July 2021.

Non-compliance could carry hefty fines, but as with most regulatory pieces of legislation, compliance is more than just a box to tick. Let’s consider why personal information should be protected:

  1. It builds confidentiality

Protection of data is very much a protection of the information that people hold as important. By capturing, storing, and processing personal information, you are essentially guaranteeing the confidentiality of your transactions with the other party.

Confidentiality is built upon when you can guarantee that none other than you yourself are able to access and process the information you store. Having a secure database stored with good encryption on your servers is a good way to keep to the promise of security you give to your customers/clients.

  1. It ensures the integrity of information

In a similar vein, data protection ensures that data remains accurate and integrous. Your customers/clients need to be sure that all their data is current and accurate, and that no manipulation of the data can take place.

Furthermore, to ensure the integrity of information, the data needs to be frequently backed up while remaining synchronous (i.e. whenever a change is made that change must reflect in the backup in as little time as possible).

Safeguards can also be put in place to ensure that no data is duplicated or stolen.

  1. It leads to trust

With regard to information storage and access, trust is built when your data subjects know that their data will always be available when and where they need it. Readily available data and the ability to request changes to the data with little to no delay are ways to build trust and assure data subjects that you are handling their data ethically.

At the end of the day, how you handle information is a question of ethics. What the POPI Act brings is a sense of relief in a modern age that there will be repercussions for the mismanagement of data and that there is greater regulation of data management.

Soon the everyday consumer will have a lot more protection against unwanted marketing and unethical data practices — practices that have been allowed to go on for too long. For those who are still lagging behind, the time is ticking and failure to become fully POPI Act compliant could hold serious consequences. Make sure to get your matters in order before 1 July 2021.

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Professional accountants’ responsibility to act in the public interest during Covid-19


5 March 2020 was a momentous day in that it marked the day where the first Covid-19 case was reported in South Africa. The year that followed was arguably one of the most difficult in our lifetime, with South Africa and the rest of the world facing numerous challenges across all facets of life, writes Jeanne Viljoen, Saica project director for ethics and practice.

Covid-19 might be synonymous with a respiratory disease but for the financial world, Covid-19 is marked by unprecedented financial challenges including disruption in the usual control environment, disruption in and even lost production, financial distress and loss of personnel. These challenges result in elevated risk; be it business risk, audit risk or even risk of ethical compliance.

A distinguishing mark of the accounting profession is its acceptance of the responsibility to act in the public interest; a responsibility that is heightened during these challenging times. Being honest, competent and objective are virtues a professional accountant is expected to demonstrate. Saica has prescribed the Code of Professional Conduct (the Saica Code) to guide its members in carrying out their responsibility to act in the public interest in a professional manner.

The Saica Code is founded on a set of fundamental principles, reflecting the profession’s recognition of its public interest responsibility. These principles establish the standard of behaviour expected of a professional accountant. The fundamental principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior and are expanded on below:

  • Integrity, being straightforward and honest in all professional and business relationships.
  • Objectivity, not to compromise professional or business judgements because of bias, conflict, or undue influences.
  • Professional competence and due care, by maintaining professional knowledge and skill at the level to ensure professional service, based on technical and professional standards and relevant legislation.
  • Confidentiality, required because of professional and business relationships; and
  • Professional behavior, by complying with laws and regulations and by avoiding any conduct that might discredit the profession.

Not only does the Saica Code establish the five fundamental principles but it also establishes a conceptual framework to identify, evaluate and address threats to ensure compliance with the fundamental principles. Depending on the role and professional activities of a professional accountant, the global pandemic could have created new threats to compliance with the fundamental principles or impact on previous threats identified. Professional accountants must thus be flexible, alert, sceptical and apply professional judgement to ensure continued compliance with the fundamental principles is achieved.

The Saica Code is aligned to the International Ethics Standards Board for Accountants’ (IESBA) International Code of Ethics for Professional Accountants (including International Independence Standards) (the IESBA Code). To support professional accountants to act in the public interest and navigate the challenging playing field Covid-19 has created, the IESBA and other international professional bodies have issued support guidance papers to assist. This includes the IESBA Staff Questions and Answers – Covid-19: Ethics and Independence Considerations, issued at the start of the global pandemic aimed at guiding professional accountants navigate ethical dilemmas that they encounter during the pandemic.

No doubt, Covid-19 necessitated rapid expansion of government’s financial interventions. These actions involved important choices in pursuit of policies combining public health, economic and social goals. Key guidance addressing ethical and auditing implications arising from government-backed Covid-19 business support schemes was issued jointly by the IESBA, the Financial Reporting Council (FRC) and the International Federation of Accountants (IFAC) in the paper titled Ethical and auditing implications arising from government backed Covid-19 business support schemes.

Covid-19 heightened the risk of fraud and illicit activities, creating opportunities for money laundering, terrorist financing and cybercrimes. In response to this, the Independent Regulatory Board for Auditors (the IRBA), IESBA and the International Auditing and Assurance Standards Board (the IAASB) issued a staff alert titled Navigating the heightened risks of fraud and other illicit activities during the Covid-19 environment, which highlights the heightened risk of fraud arising from the disruptive and uncertain Covid-19 environment. The staff of Chartered Professional Accountants of Canada (CPA Canada) also partnered with the IESBA in jointly releasing a staff alert titled Covid-19 and evolving risks for money laundering, terrorist financing and cybercrime aimed at creating awareness among professional accountants of the changing risks beyond the obvious health and economic challenges of Covid-19.

Other guidance that is available includes Applying the Code’s Conceptual Framework in Covid-19 circumstances: Scenarios in taxation and valuation services and Using specialists in the Covid-19 environment.

What the next 12 months hold is unknown, with uncertainty around if and/or when a ‘third wave’ will hit and the impact that the vaccine will have. The only certainty is that the challenging times will continue in 2021. Professional accountants whether serving as a member of a board, member of an audit committee, organisational leader, preparer of financial information or financial statements or an auditor play a critical role in the financial reporting ecosystem. It is a professional accountant’s responsibility to play their part in ensuring that fair and reliable financial reporting and disclosures are issued to the public.

With this, it is important to remember that as professional accountants we have a responsibility to act in the public interest, with the Saica Code as the ultimate guide in helping us to navigate these uncertain times.

About Saica

The South African Institute of Chartered Accountants (Saica), South Africa’s pre-eminent accountancy body, is widely recognised as one of the world’s leading accounting institutes. The Institute provides a wide range of support services to more than 50 000 members and associates who are chartered accountants (CAs[SA]), as well as associate general accountants (AGAs[SA]) and accounting technicians (ATs[SA]), who hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in every sphere of commerce and industry, and who play a significant role in the nation’s highly dynamic business sector and economic development.

Chartered accountants are highly valued for their versatile skill set and creative lateral thinking, that’s why all of the top 100 global brands employ chartered accountants.

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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