Legal update A brief overview of the Property Practitioners Bill

A brief overview of the Property Practitioners Bill

The Property Practitioners Bill 2018 is intended to replace and repeal the Estate Agency Affairs Act No. 112 of 1976, and is intended to govern, among others, estate agents. It was introduced to the National Assembly on 14 June 2018 and was passed by the National Assembly on 4 December 2018. It has since been passed by the National Council of Provinces on 28 March 2019, and has been sent to the president for assent Supplied by Dykes van Heerden INC

The Bill has been amended since it was first published, and our previous newsflash commented on the Bill in its initial form. This newsflash, based on the Bill in its current form as amended and approved (B21B-2018), is intended to provide a summary and a brief outline of the proposed changes that will be relevant and applicable to “property practitioners”.

The definition of “property practitioners” is extensive, and will regulate all estate agents. The Bill defines property practitioners as: a. any natural or juristic person who or which for the acquisition of gain on his, her or its own account or in partnership, in any manner holds himself, herself or itself out as a person who or which, directly or indirectly, on the instructions of or on behalf of any other person – (i) by auction or otherwise sells, purchases, manages

or publicly exhibits for sale property or any business undertaking or negotiates in connection therewith or canvasses or undertakes or offers to canvas a seller or purchaser in respect thereof; (ii) lets or hires or publicly exhibits for hire property or any business undertaking by electronic or any other means or negotiates in connection therewith or canvasses or undertakes or offers to canvass a lessee or lessor in respect thereof; (iii) collects or receives any monies payable on account of a lease of a property or a business undertaking; (iv) provides, procures, facilitates, secures or otherwise

obtains or markets financing for or in connection with the management, sale or lease of a property or a business undertaking, including a provider of bridging finance and a bond broker, but excluding any person contemplated in the definition of ‘‘financial institution’’ in Section 1 of the Financial Services Board Act, 1990 (Act No. 97 of 1990); (v) in any other way acts or provides services as

intermediary or facilitator with the primary purpose to, or to attempt to effect the conclusion of an agreement to sell and purchase, or hire or let, as the case may be, a property

or business undertaking, including, if performing the acts mentioned in this subparagraph, a home ownership association, but does not include – (aa) a person who does not do so in the ordinary course of business; (bb) where the person is a natural person and that person in the ordinary course of business offers a property for sale which belongs to him or her in his or her personal capacity; (cc) an attorney or candidate attorney as defined in Section 1 of the Attorneys Act, 1979 (Act No. 53 of 1979); or (dd) a sheriff as defined in Section 1 of the Sheriffs Act, 1986 (Act No. 90 of 1986), when he or she performs any functions contemplated in paragraph (a) of this definition, irrespective of whether or not he or she has been ordered by a court of law to do so. (vi) renders any other service specified by the Minister on the recommendation of the Board from time to time by notice in the Gazette; b. any person who sells, by auction or otherwise, or markets, promotes or advertises any part, unit or section of, or rights or shares, including time share and fractional ownership, in a property or property development; c. any person who for remuneration manages a property on behalf of another; d. a trust in respect of which the trustee, for the acquisition of gain on the account of the trust, directly or indirectly in any manner holds out that it is a business which, on the instruction of or on behalf of any other person, performs any act referred to in paragraph (a); e. for the purposes of Sections 34, 46, 48, 59, 60, 61 and 65 (i) any director of a company or a member of a close corporation who is a property practitioner as defined in paragraph (a); (ii) any person who is employed by a property practitioner as envisaged in paragraph (a) and performs on his, her or its behalf any act referred to in

subparagraph (i), (ii), (iv), (v) or (vi) of that paragraph; (iii) any trustee of a trust which is a property practitioner as envisaged in paragraph (d); (iv) any person who is employed by a property practitioner as envisaged in paragraph (b) and performs on its behalf any act referred to in subparagraph (i), (ii), (iv), (v) or (vi) of paragraph (a); and (v) any person who is employed by a property practitioner contemplated in paragraph (a) or (b) to manage, supervise or control the day-to-day operations of the business of that property practitioner; f. any person who is employed by or renders services to an attorney or a professional company as defined in Section 1 of the Attorneys Act, 1979, other than an attorney or candidate attorney, and whose duties consist wholly or primarily of the performance of any act referred to in subparagraph (i), (ii), (iii), (iv), (v) or (vi) of paragraph (a), on behalf of such attorney or professional company whose actions will be specifically covered by the Attorneys’ Fidelity Fund and not the Property Practitioners Fidelity Fund; g. for the purposes of section 61 and any regulation made under section 70, any person who was a property practitioner at the time when he or she was guilty of any act or omission which allegedly constitutes sanctionable conduct referred to in Section 62, but does not include an attorney who, on his own account or as a partner in a firm of attorneys or as a member of a professional company, as defined in Section 1 of the Attorneys Act, 1979, or a candidate attorney as defined in that section, who performs any act referred to in paragraph (a), in the course of and in the name of and from the premises of such attorney’s or professional company’s practice, provided that such an act may not be performed – (i) in partnership with any person other than a partner in the practice of that attorney as defined in Section 1 of the Attorneys Act, 1979; or (ii) through the medium of or as a director of a company other than such professional company, and ‘‘advertise’’ for the purposes of this definition does not include advertising in compliance with the provisions of any other law.

Application of the Act (Chapter 1) The Act applies to the marketing, promotion, managing, sale, letting, financing and purchase of immovable property, and to any rights, obligations, interests, duties or powers associated with or relevant to such property.

It is possible to apply for an exemption from the application of the Act in terms of Section 4.

Certain persons are excluded from the definition of property practitioner in the Bill. This exclusion applies to a person offering a property for sale which belongs to him/ her/it in his/her/its personal capacity. It also excludes a sheriff acting in an intermediary/facilitating capacity when he or she performs any functions contemplated in the Bill, irrespective of whether or not he or she has been ordered by a court of law to do so. In addition, attorneys and candidates are excluded from the definition of property practitioner.

Property Practitioners Regulatory Authority (Chapters 1, 2 & 3) The Property Practitioners Regulatory Authority (the “Authority”) will be the new regulatory body of property practitioners and will be governed by and will act through the Board of the Authority.

This Authority will replace the Estate Agency Affairs Board and will be funded by government monies and fees paid by property practitioners.

The Act deals with administrative matters such as the composition, appointment, disqualification, and termination of members of the board, powers and duties of the board, meetings, committees and dissolution of the board, appointment of the CEO and staff of the Authority. The Authority must in the performing of its functions, among others: ● regulate the conduct of the property practitioners in dealing with consumers; ● regulate the conduct of property practitioners insofar as marketing, managing, financing, letting, renting, hiring, sale and purchase of property are concerned; ● ensure that the Act is complied with; ● ensure that consumers are protected from undesirable and sanctionable practices (set out in Sections 62 and 63); ● regulate any other conduct which falls within the ambit of the Act in as far as property practitioners and consumers in this market are concerned; ● provide for the education, training and development of property practitioners and candidate property practitioners; ● educate and inform consumers of their rights; ● implement measures to ensure that the property sector is transformed.

Transformation of property sector (Chapter 4) The Property Sector Transformation Charter Code applies to all property practitioners.

When procuring property related goods and services, all organs of state must utilise the services of property practitioners who comply with the broad-based black economic empowerment and employment equity legislation and policies.

The Authority must, from time to time – (a) implement and assess measures to

progressively promote an inclusive and integrated property sector; (b) implement appropriate measures and assess the state of transformation within the property sector; (c) create such mechanisms for the continuous

monitoring and evaluation of the sector performance on the transformation imperatives and granting of incentives as may be prescribed; and (d) introduce measures to be implemented, which may include incubation and capacity building programmes to redress the imbalances of the past.

Section 21 deals with the establishment of the Property Sector Transformation Fund. The Minister may prescribe measures to promote economic transformation by facilitating the accessibility of finance for property ownership, property development and investment in order to enable the meaningful participation of historically disadvantaged individuals, including women, youth and people with disabilities.

The Authority must utilise the property sector Transformation Fund in such a manner as may be prescribed, which may include the following transformation and empowerment programmes:

(a) Principalisation Programme, to promote black-owned firms and principals. (b) Regularisation Programme, to promote

and encourage participation of the historically disadvantaged due to non-compliance. (c) Consumer Awareness Programme, to

promote awareness of property transactions and business undertaking. (d) Work Readiness Programme, to promote

and enhance participation of the historically disadvantaged in the property sector.

The Authority must, in consultation with the services of the Sector Education and Training Authority (SETA), develop special dispensation for the training and development of the historically disadvantaged which must include recognition of prior learning.

Inspectors and Compliance (Chapter 5) The Authority (through the CEO) must appoint duly qualified persons to act as inspectors to determine whether the Act is being complied with.

The inspector may, at any reasonable time and without prior notice, conduct an inspection and may, without a warrant: a. enter and inspect any business premises, except a private residence, of a property practitioner;

b. require the property practitioner, manager, employee or an agent of the property practitioner to – (i) produce to him or her the fidelity fund certificate of that property practitioner; (ii) produce to him or her any book, record or other document related to the inspection and in the possession or under the control of that property practitioner, manager, employee or agent; or (iii) furnish him or her with such information in respect of the fidelity fund certificate, book, record or other document at such a place and in such manner as the inspector may determine; and

c. examine or make extracts from, or copies of,

any such fidelity fund certificate, book, record or other document.

If a property practitioner conducts business from his private residence the inspector is required to notify the property practitioner in advance of such inspection and the details of the inspection.

If the inspector obtained a warrant from a judge or magistrate, he/she has wider search and inspection powers.

Fidelity Fund and indemnity insurance (Chapter 7) The Estate Agents Fidelity Fund (in terms of the Estate Agents Affairs Act) will continue to operate but under the name Property Practitioners Fidelity Fund. The running costs of the Authority, including insurance premiums, will also be paid from this Fund.

The primary purpose of the fund is to reimburse persons who suffer financial loss as a result of – ● theft of trust money committed by a property practitioner who was in possession of a Fidelity Fund certificate at the time of the theft; or ● the failure by a property practitioner to apply timeously or to make payment for his or her Fidelity Fund certificate.

No person has any claim against the Authority unless the claimant has – ● within three years after the circumstances giving rise to a claim came into being, given notice to the Authority of such claim; or ● within the three-year period contemplated in paragraph above after a written request was sent to him or her by the Authority, furnished to the Authority such proof as it may reasonably require.

Anyone seeking to claim compensation from the Fund must give notice thereof to the Authority in the prescribed manner, the Act further provides that a person can’t claim against the Authority in respect of theft of trust money by a property

practitioner unless such a person has, before lodging a claim with the Authority, laid a criminal charge against that property practitioner. As such it is clear that theft of trust monies will be dealt with seriously by the Authority, and that criminal sanctions will be imposed.

In terms of Section 43, no person may commence an action against the Authority for payment from the Fund after the expiry of three years from the date that the Authority rejects a claim or requires compliance in terms of Section 42. A claimant may not recover from the Authority any amount larger than the difference between the amount of the loss suffered and the amount or other benefits received from another source in respect of such loss (such as insurance).

No right of action lies against the Authority in respect of any loss suffered by: ● the spouse, life partner, business partner or immediate family member of a property practitioner by reason of any negligent or intentional conduct including theft committed by such property practitioner; or ● any property practitioner by reason of any negligent or intentional conduct including theft committed – – by his, her or its business partner; – if such property practitioner is a company, by any director of such company; – if he or she is a director of a company, by any co-director in such company; – if such property practitioner is a close corporation, by any member of such corporation; – if he or she is a partner in a partnership, by any other partner of such partnership; or – by any person employed by him or her as a property practitioner; ● any person as a result of negligent or intentional conduct including theft, or as a result of any other act or omission in connection with trust monies held or received on account of any other person, by any person referred to in paragraph (d) of the definition of ‘‘property practitioner’’ in Section 1.

Fidelity Fund certificates (Chapter 8) In terms of Section 47, every property practitioner must every three years apply to the Authority for a Fidelity Fund certificate, and such application must be accompanied by the prescribed fees and penalty fees applicable if any. (Penalties are payable if the application is made late or the fees were not paid with the application.)

The Authority must supply the certificate within 30 days (unless extended by the Authority for a period of up to 20 working days on “good grounds” in writing), failing which it is deemed that the application for the certificate was compliant and the practitioner may then make demand for the issue of the certificate within 10 working days. Property practitioners must notify the Authority within 14 days of any change in contact details.

Certain disqualifications apply, as set out in Section 50, in which circumstances the Authority may not issue a Fidelity Fund certificate, one of which is if the property practitioner is not in possession of a BEE certificate. The Bill does not further deal with minimum levels in this regard, and does not otherwise deal with this aspect in detail.

No-one may act as a property practitioner unless he or she or it is in possession of a Fidelity Fund certificate, or if he or she or it employs any other person as a property practitioner, that person is also in possession of a Fidelity Fund certificate. If an entity is a company, a close corporation, a trust or a partnership, then every director of such a company, every member of such a close corporation, every trustee of such a trust and every partner of such a partnership, as the case may be, must be in possession of the Fidelity Fund certificate.

A person who contravenes this requirement must immediately upon receipt of a request from any relevant party in writing repay any amount received in respect of or as a result of any property transaction during such contravention (Section 48(4)), and is not entitled to remuneration in terms of Section 56. A conveyancer may not pay any monies to a property practitioner unless he or she received a copy of the practitioner’s certificate (Section 56(5)).

The Authority in terms of Section 52 may, on its own initiative, in terms of an order of a court of law, or in terms of an order from an adjudicator, withdraw a Fidelity Fund certificate in certain circumstances, which include if any person is summoned to appear before the Authority and without just cause fails to comply with the summons and has prior to such date not been excused by the Authority from appearing. Importantly, the Fidelity Fund certificate must be prominently displayed in every place of business from where property transactions are conducted to enable consumers to easily inspect it; ensure that the prescribed sentence regarding holding a Fidelity Fund certificate is reproduced in legible lettering on any letter head or marketing material relating to that property practitioner; and in any agreement relating to property transactions include the prescribed clause that ensures that he, she or it guarantees the validity of the certificate.

Conduct of Property Practitioners (Chapter 9) The Minister, in consultation with the Authority, must prescribe a code of conduct to be complied with, which must be published on the Department and Authority’s websites. On request, a property practitioner must provide a consumer with a copy of such code of conduct.

Section 62 of the Act sets out sanctionable conduct of property practitioners, which includes, if a property practitioner – ● in the same transaction acts as a property practitioner on behalf of two or more persons whose interests are not in all material respects identical and received remuneration from both (unless the parties agree thereto in writing); ● fails to give the Authority a full explanation in writing within 30 days of being called to do so; ● fails to pay any money due to the Authority or in respect of the Fund within one month after such monies become due; ● contravenes any provision of the code of conduct; ● in his or her capacity as a director of a company, or member contemplated in paragraph (b) of the definition of ‘‘property practitioner’’ in Section 1, of a close corporation, or trustee of a trust, which is a property practitioner and which failed to comply with Section 50 or 51, did not take all reasonable steps to prevent such failure; ● carries on an undesirable practice prohibited under Section 63; ● commits an offence involving an element of dishonesty; ● fails to inform the Authority within 14 days of a change in his, her or its contact details; ● differentiates, distinguishes or excludes consumers directly or indirectly on the basis of their race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language and birth or commits a criminal offence while performing a function of a property practitioner; ● fails to comply with or contravenes any provision of this Act.

In terms of Section 63, the Minister may, after consultation with the board, declare a particular business practice in the property market to be undesirable and prohibited.

In terms of Section 64, a candidate property practitioner may not draft, complete any document or clause conferring a mandate or relating to the sale or lease of property. If such person is in contravention of this section, that person and the property practitioner who allowed this may not receive remuneration.

In terms of Section 65, a franchisee property practitioner must state clearly and unambiguously in all of his written communications, advertising and marketing materials that he or she operates in terms of a franchise agreement, as well as the name of the franchisor.

Section 66 prohibits a property practitioner, whether by means of financial or other incentives, to influence a person who issues a certificate in respect of the condition or defects of electric wiring, the presence of vermin, the presence of water or damp, or any other matter or condition provided for in law. Any contravention hereof is an offence.

Consumer Protection (Chapter 10) In terms of Section 67, a property practitioner may not accept a mandate unless a lessor or seller of the property has provided him with a fully completed and signed mandatory disclosure form, and such practitioner must provide a copy of the completed mandatory disclosure form to a prospective lessee or purchaser who intends to make an offer to lease or buy the property. The mandatory disclosure must be signed by all parties, and forms an integral part of the agreement.

If such disclosure form is not completed, signed or attached, the agreement must be interpreted as if no defects or deficiencies in the property were disclosed to the purchaser.

If a property practitioner fails to obtain a completed mandatory disclosure from the seller or lessor, the property practitioner may be held liable by the affected consumer. Section 68 provides that an agreement to sell or lease and the mandatory disclosure form must be drafted by the seller or developer for his own account. In addition, the Authority must publish updated guideline agreements on its website from time to time.

Section 69 states that the Authority must conduct campaigns to educate and inform the general public of their rights in property transactions, and property practitioners of their functions, duties and obligations.

Importantly, Section 69(2) provides that the property practitioner owes a buyer and seller a duty of care. It is noted that no corresponding duty of care towards both a lessor and lessee is recorded in the Bill.

Chapter 11 (General) Section 71 provides that a person convicted of an offence in terms of the Act is liable to a fine or to imprisonment for a period not exceeding 10 years.

Section 75 deals with transitional provisions where members of the Estate Agents Affairs Board become members of the Property Practitioners Board.

This newsflash has been prepared for information purposes only, and does not constitute legal advice or a legal opinion. The practical application of the provisions of this newsflash will vary depending on the facts of each case.

South Africa’s new property laws you need to know about

The past few years have seen a number of important new laws and amendments introduced, which are having a drastic effect on selling and leasing of property, says Seeff property group

First published on Businesstech on 2 November 2019 businesstech.co.za/news/property/34946/south-africas-new-property-laws-you-need-to-know-about

Seeff says that the new Property Practitioner’s Act – which was recently signed into law, replacing the 43-year-old Estate Agency Affairs Act – brings important reform to the property industry as a whole and introduces a number of much-needed changes.

It outlines some of the major changes below. ● Defining who is a property practitioner The Act broadens the scope of legislation beyond traditional estate agents to cover commercial property brokers, bond originators, home inspectors, homeowners’ associations, companies selling timeshare and fractional title, property developers and property managers, who now all fall under the Act. ● Fidelity Fund Certificates Anyone who earns a commission or brokerage from the sale or leasing of a property needs a valid Fidelity Fund certificate, which must be produced on request from a seller or landlord. The Act tightens the regulations around Fidelity Fund certificates beyond the current requirements to include possession of a valid tax clearance and a BEE certificate. It is also required that not just the agent/s, but the agency/business and all of its property practitioners must be fully compliant. ● Property defects This is an important element that sellers and landlords need to be aware of. While it has for some time been best practice to include a comprehensive property defects disclosure document as part of a property transfer, it is now mandatory for all property sale and lease agreements. No mandate may be accepted from a seller or landlord without this document, which will then also form part of the sale and lease agreement. ● New Board of Authority The current Estate Agencies Affairs Board will be replaced by a new governing body known as the Board of Authority. This new board will govern the property profession across the board, not just estate agents as is currently the case.

Rental Housing Amendment Act Seeff also sets out the key changes in the new Rental Housing Amendment Act, which makes amendments to the Rental Housing Act of 1999:

● Lease agreement in writing All lease agreements must now be in writing and legally enforceable. The agreement and all provisions, duties and obligations must be explained to the tenant. All amendments to the lease must also be in writing. ● The property must be habitable The landlord must ensure that the rental property is in a habitable state, and that it is safe and suitable for living, is properly maintained and has access to basic services such as water and electricity. ● Tenant may not be denied access basic services or to the property Another important aspect is that the landlord may not cut off basic utilities such as electricity and water to non-paying tenants. Only a local authority can do so. A landlord may also not change the locks or deny the tenant access to the property without a proper court order. ● Defects to be recorded A joint inspection of the property must be done at the commencement of the lease to identify defects, including those that need to be repaired by the landlord. The defects list must be attached to the lease agreement. Upon expiry, another inspection must be done to determine whether any damage was caused during the tenant’s occupancy. ● Deposit must be invested and refunded According to the Act, the deposit must be deposited in an interest-bearing account. The landlord must issue a written receipt for all payments received from the tenant, including the deposit. The deposit, together with interest accrued, must be paid to the tenant within seven days of the expiration of the lease. Reasonable costs incurred to repair damage may be deducted from the deposit, but are subject to proof of damage and the costs.

Amendments to the regulation of primary and secondary listings on the Johanesburg Stock Exchange (JSE)

On 5 November, JSE Limited (the JSE) announced amendments to its Listings Requirements to strengthen the regulation of primary listings and secondary listings. The amendments follow an extensive consultation process with the market and the public that kicked off in September 2018 after the JSE released a consultation paper (Paper) on “possible regulatory responses to recent events surrounding listed issuers and trading in their shares”. (Click here to read the e-alert on the Paper.) Following the consultations, the JSE published draft amendments in April 2019 for formal comment. (Click here for the e-alert on the draft amendments.)

Words by Colin du Toit, Madelein Burger and Elodie Maume/Webber Wentzel

The amendments will become effective on 2 December 2019. The JSE will, however, allow for a transitional period for certain provisions, and will provide listed companies with guidance on the implementation of certain amendments before the effective date, to afford them enough time to adhere to the amendments.

Key amendments to the regulation of primary listings Stricter conditions for listing on the Main Board

The JSE introduces stricter listing criteria for entry on the Main Board, including the following: ● Subscribed capital requirement: companies seeking a listing on the Main Board must meet the subscribed capital requirements (of at least R50- million generally, or R500-million for companies without a profit history) before listing and not through listing. ● Shareholder spread requirement: the definition of “public shareholders” has been narrowed down. Shares held by a director’s extended family or by prescribed officers, or which are held by any person subject to a six-month or longer restricted trading period imposed by the issuer, are no

longer regarded as being held by the public. Prior to listing, the board of directors and the sponsor will be required to make a positive statement to the JSE that the public shareholder requirement has been achieved and evidence the basis for this conclusion. Where the listing is by way of introduction, the board of directors will additionally be required to make the positive statement confirming this requirement in the pre-listing statement (PLS). ● New listing announcement: companies applying for a listing on the JSE through a placing or an introduction will need to publish an announcement on the Stock Exchange News Service (SENS) 10 business days (increased from five business days) prior to the date of listing to give investors sufficient time to assess the listing. Sponsors and boards of directors will also be required to confirm in writing to the JSE on listing that no material objection was reported to either of them in respect of the listing during that period (and to immediately notify the JSE should any such objection be notified or reported). ● Appointment of sponsor: issuers must appoint an independent sponsor (as was the case prior to September 2014).

Enhanced disclosure requirements ● Dealings in securities: the disclosure requirements applicable to transactions in an issuer’s securities are enhanced. All dealings by prescribed officers or their associates in securities of the issuer must now be disclosed (in addition to disclosure by directors, the company secretary or their associates). Dealings in securities are extended to include agreements giving rise to security interests over the issuers’ securities. These types of agreements trigger an announcement obligation: at the time the agreement is concluded; at the time of any exercise of the lender’s rights thereunder; and at the time of any amendment or termination of the agreement. The number, value and class of securities offered as security, guarantee, collateral or otherwise must be disclosed, together with the nature, terms and amount of the financial obligation secured by the issuer’s securities. In addition, issuers must disclose in the their annual report and annual financial statements their directors’ (and associates’) holdings in securities which are subject to such security arrangements.

● Disclosure of compliance with applicable laws: the social and ethics committee (SEC) of the issuer must make a positive statement in the PLS that it has complied with its mandate set out in the Companies Act 2008 (the Act), read with the Companies Regulations 2011. The SEC must also either state that there is no material non-compliance to disclose, or disclose any such material non-compliance. This disclosure obligation places significant responsibility on the SEC. The board of directors is also required to make a positive statement in the PLS that the issuer complies with the provisions of the Act (or other relevant laws of its establishment) in relation to its incorporation, and that it operates in conformity with its constitutional documents, and must provide a narrative statement on compliance with this provision in its AFS. ● Material risks disclosure: all issuers must disclose in their PLS and their annual financial statements (AFS) all material risks which are specific to the issuer, its industry and/or its securities. The disclosure may be via a web link.

Corporate governance ● Board diversity: issuers are required to adopt a policy on the promotion of broader diversity on the board, focusing not only on gender and race (as is the present case) but also on the promotion of diversity attributes such as culture, age, field of knowledge, skills and experience. The company must also publish its performance against the policy annually. ● Appointment of auditor: the appointment of the auditors of listed companies must be approved by shareholders at each annual general meeting. Accordingly, auditors may no longer be reappointed automatically without a shareholders’ resolution to that effect. ● CEO and FD responsibility statements: the chief executive officer (CEO) and financial director (FD) are required annually to give substantive responsibility statements, including in respect of the accuracy and completeness of the company’s annual financial statements, and the adequacy and efficacy of the company’s internal financial controls.

Short-form announcements dealing with the annual financial statements Additional requirements now apply to short-form announcements dealing with the AFS, requiring, among others, specific disclosure of the presence of key audit matters through inclusion of the full auditors’ report and the annual financial statements via a link to the issuer’s website; details of the type of review conclusion/audit opinion that was reached (i.e. unqualified, qualified, disclaimer or adverse); and details of any increases/decreases in certain specified financial metrics.

Changes from the draft proposals The amendments adopted by the JSE are largely in line with the draft amendments published in April 2019 for formal comment, with the incremental changes largely reflecting drafting and conceptual refinements rather than substantive changes or additional provisions. One notable proposed amendment which was not adopted, however, was the proposal to lower from 10% to 5% the threshold at which a shareholder would be classified as “non-public”, and to aggregate associate holdings for this purpose. Given the significant number of institutional and other holdings that lie between 5% and 10%, this will no doubt come as a relief to the market.

Key amendments to the regulation of secondary listings The key changes in respect of secondary listings on the JSE are: ● Pre-approved list of foreign exchanges: prospectively, the JSE will only accept secondary listings on the Main Board of the JSE from issuers with a primary listing on an approved exchange. Approved exchanges for secondary listings on the Main Board are presently the Australian Securities Exchange, the London Stock Exchange, the NYSE, the Toronto Stock Exchange, the Nasdaq Stock Market, Euronext Amsterdam, Euronext Brussels, the Frankfurt Stock Exchange, the Luxembourg Stock Exchange and SIX Swiss Exchange. ● Required announcements: if the issuer issues notifications in relation to changes to beneficial ownership in a secondary listed issuer or dealings in such issuer by directors or those closely related to directors, as required by local legislation or exchange requirements, such changes or dealings must also be announced on SENS within 48 hours of such notification. ● Change in the primary listing from the JSE to another exchange: the JSE will only allow an issuer to electively move its primary listing from the JSE to another exchange while retaining a secondary listing on the JSE if the primary exchange it intends to move to is an approved exchange, and if the issuer’s shareholders have approved such move (the shareholder resolution must set out the key regulatory and disclosure differences between the JSE and the new primary exchange). The provisions that allow the JSE to re-classify a secondary listing on the JSE to a primary listing (and vice versa) if the value and volume of the issuer’s shares traded on the JSE exceeded 50% over a 12-month period have also been revised. These provisions now apply to a 24-month period, and only if the primary listing is on an exchange that is not an approved exchange.

As with the changes to the Listings Requirements for primary listings, the amendments adopted by the JSE are in line with those published in April 2019 for formal comment.

Arbitration agreement in construction contracts

In the construction and project space, the contracting parties often focus on and pay significant attention to the commercial provisions as well as the provisions relating to their goals and objectives. Although disputes are very common in the construction industry, it is likely that the rate at which they arise will increase even more due to the growing challenges faced by the industry. The provisions pertaining to the resolution of disputes should therefore not be neglected

Words by Antoinette van der Merwe and Jesicca Rajpal, senior associates at Fasken

Antoinette van der Merwe

Arbitration is generally the preferred method of dispute resolution in construction contracts, and is attractive because the parties have the opportunity of appointing an arbitrator with specialised knowledge and experience in the field (which is particularly important in the construction industry with its specialised standard forms of contract and technical provisions). It is also a less expensive means of settling a dispute expeditiously compared to litigation, and the proceedings and arbitration awards are confidential.

The arbitration agreement, setting out the framework for such arbitration proceedings, is typically contained within the principal construction contract – and, if regulated by South African law, requires a few considerations which are set out below.

Legislative framework The Arbitration Act 42 of 1965 defines an arbitration agreement as a “written agreement providing for the reference to arbitration of any existing dispute or any future dispute relating to a matter specified in the agreement”.

Although no particular form is prescribed for an arbitration agreement, it is clear from the above definition that, in order to fall within the ambit of the aforementioned Act, the arbitration agreement must be in writing and must expressly refer the dispute to arbitration.

Arbitration agreements and standard form construction contracts An arbitration clause in a construction contract can take many forms, from a simplistic declaration that the parties agree to refer any dispute arising between them to arbitration, to a more detailed agreement containing not only the consensus of the parties to arbitrate disputes, but also outlining the governing law of the arbitration, how the arbitrator/s should be appointed, the seat and rules of arbitration as well as the procedures to be adopted by the contracting parties in the process.

In the majority of standard form construction contracts (including FIDIC, NEC and JBCC), arbitration is the prescribed final method of dispute resolution and occurs under prescribed arbitration provisions. It should, however, be considered whether the arbitration provisions of each standard form contract are appropriate in view of the variable components applicable to each construction project, including, among others, the location of the project.

The contracting parties are at liberty to dictate the scope of the arbitration agreements, including the proceedings as well as the arbitrator’s powers, by drafting context-specific arbitration agreements, or supplementing the applicable provisions of standard form construction contracts. This will allow the parties to exercise greater control over the proceedings and

outcome of the arbitration, compared to court litigation.

The parties may, for example, decide that they do not wish to have a standing Dispute Adjudication Board throughout the lifespan of the project (as a precursor to arbitration) as provided for by FIDIC. They may also wish to change the rules of arbitration nominated by the standard form contracts based on considerations such as cost and enforceability.

Enforceability of domestic arbitration awards The enforcement of the arbitration award is undoubtedly the final and most important step in the arbitration process. In South Africa, a successful party may approach a court of competent jurisdiction to make the arbitration award an order of court. Once such arbitration award has been made an order of court, it may be enforced in the same way as any judgment or order. The advantage of arbitration is that its enforceability is easier at international level because of international treaties and conventions entrenching the enforcement and recognition of the arbitration award. Upon completion of arbitration proceedings, the successful party will seek to enforce the arbitration award. Through the New York Convention, a final arbitration award, if made internationally, between member-countries, can be recognised as an ordinary court judgment in South Africa subject to certain specified legal requirements.

It should be held in mind that a number of countries are not a party to the New York Convention. The extent of the complexity of enforcing an award depends on the regulatory framework of the specific nonconvention country, and extra caution must therefore be taken when concluding contracts with parties situated in nonconvention countries.

Enforceability of foreign arbitration awards Due to the nature of construction contracts and the projects that they relate to, various jurisdictional issues may arise, and arbitration proceedings may take place or require enforcement in foreign jurisdictions. A foreign arbitration award, viewed from a South African perspective, is an award made in a state other than South Africa.

Commonly referred to as the New York Convention, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 governs the enforcement of foreign arbitration awards. The New York Convention not only deals with the enforcement of foreign arbitration awards but also with the enforcement of arbitration agreements.

South Africa ratified the New York Convention in 1976, and enacted legislation to give effect to this ratification in 1977, adequately giving effect to South Africa’s obligations under the New York Convention.

Conclusion Arbitration is likely to remain the preferred method of dispute resolution in construction contracts. However, it is clear that the best method for ensuring that a construction dispute is correctly and fairly resolved is through properly drafted arbitration agreements. The contracting parties should accordingly not ascribe to generic arbitration agreements or standard form provisions, to the extent that they do not accord with the circumstances and context of the specific project.

In light of this, an arbitration agreement may require the parties to address the following issues: i. Seat and arbitration rules The seat or venue of arbitration proceedings is primarily a consideration of convenience and cost effectiveness, and ought to be selected on this basis. The rules in terms of which the arbitration proceedings are to be held is also a matter of agreement based on considerations of cost and enforceability.

ii. Governing law The parties may select a suitable law to govern the arbitration agreement (which may differ from the governing law of the principal construction contract), bearing in mind its impact on the enforceability of the arbitration award. iii. Commencement and duration of the arbitration In order to benefit from the expediency that the arbitration forum can offer, the parties may wish to be prescriptive with regards to timelines. iv. Appointment and role of the arbitrator/s The parties may prescribe the number of arbitrators, his or her qualification or credentials and area of expertise, as it is imperative that a suitable arbitrator is appointed with sufficient knowledge of the particular dispute. It is also advisable that provision is made for appointment by an independent party and its successor in title, in the event that the parties fail to appoint an arbitrator. The powers of the arbitrator are restricted by the provisions of the Arbitration Act and may be further delineated in the arbitration agreement. It is to be noted that unless provided otherwise, the arbitrator may determine the procedural rules of the arbitration, subject to the overriding requirement that the parties to the arbitration be treated equally and fairly. v. Option to review the award Finally, the parties have the option to decide whether the arbitration award should be final and binding or subject to review by a competent court.

Gauteng and KwaZulu-Natal Negotiation Skills Master Programme

SAPOA Gauteng and KwaZulu-Natal regions each hosted a two-day workshop. The Gauteng workshop was held on 24 and 25 October at the Fasken offices in Sandton, while the KwaZulu-Natal programme took the form of in-house training for executive staff at JT Ross on 28 and 29 October

A total of 14 delegates attended the KwaZulu-Natal Negotiation Skills Master Programme (in-house training)

Negotiators need to understand the psychology of the negotiating game – how to use heightened emotional intelligence to achieve desired outcomes and to manage other parties effectively. Both of these workshops, facilitated by Candis Cheyne of Corporate Intelligence, provided delegates with the fundamental tools, techniques and confidence they need to achieve the desired outcomes when negotiating.

In each case, the two-day programme included the following topics: ● Understanding the negotiation process and different negotiation styles; ● Correct approach to negotiation; ● Flexible and varied communication; ● Ability to achieve a win-win situation; ● Becoming more goal-focused when negotiating; ● Emotional intelligence;

Delegates who attended the Gauteng leg of the two-day Negotiation Skills Master Programme

● Confidence and self-esteem; ● Enhanced communication skills; ● Assertiveness; ● A winning negotiation style;

● Focusing and listening skills; ● Understanding personality profiles; ● Conflict management: the causes of conflict and how to handle it.