BD Law & Tax October 2024

BUSINESS LAW & TAX

A REVIEW OF DEVELOPMENTS IN CORPORATE AND TAX LAW

Fifty shades of greylisting

• Can SA address the remaining 14 action items by January 2025?

Era Gunning ENS

SA is required to address 22 identified deficiencies within specified timeframes By June 2024, the country had addressed or largely addressed eight of these items

These items relate to the legal provisions criminalising terrorist financing and underpinning SA’ s targeted financial sanction regimes, increasing the use of financial intelligence from the Financial Intelligence Centre (FIC) to support money laundering investigations, the introduction of risk-based tools to identify higher-risk “Designated Non-Financial Businesses and Professions” , the updating of the Terror Financing National Risk Assessment, and increasing the resources and capacity of relevant authorities If SA addresses the remaining 14 action items by January 2025, it could be removed from the greylist by June 2025

In a media statement published on July 2 2024, National Treasury noted that while SA is on track to address all the outstanding action items, it remains a tough challenge

to address all 14 items by the deadline All relevant agencies and authorities will need to continue to demonstrate significant improvements, and that such improvements are being sustained and are effective

In one of the attempts to address the deficiencies identified by the FATF, the schedules to the Financial Intelligence Centre Act, 2001 (Fica) were amended in November 2022 by the addition of several accountable institutions that must now comply with Fica These include dealers in the retail and wholesale sector in highvalue goods (where an item is valued in that business at R100,000 or more), certain credit providers, crypto asset service providers and some trustees

ACCOUNTABILITY,

The FIC and the Prudential Authority of the South African Reserve Bank are actively conducting AML/CFT compliance inspections on accountable institutions

THE

FIC IS OBLIGED TO IMPOSE ADMINISTRATIVE SANCTIONS TO PROMOTE A CHANGE IN COMPLIANCE BEHAVIOUR

On August 13 2024, the FIC Appeal Board ruled in favour of the FIC in an appeal brought by Capital Point Properties, an estate agency (and accountable institution under Fica) The appeal challenged administrative sanctions (including financial sanctions totalling R266,000) imposed by the FIC due to Capital Point Properties’ failure to develop and implement a risk management and compliance programme in a timely manner and not scrutinising clients against the

targeted financial sanctions list The business also failed to comply with Directive 6 of 2023, which required accountable institutions to submit a risk and compliance return questionnaire by a specified deadline

In his ruling, Judge Louis Harms, chair of the FIC Act Appeal Board, held: “The fact that a transgression has been rectified does not mean that it was not a transgression and cannot or should not be subject to a sanction ” Executive Manager for Compliance and Prevention at the FIC, Christopher Malan, has confirmed the FIC is obliged to impose adminis-

trative sanctions to promote a change in compliance behaviour

The implications are clear: Fica is not going away, and all accountable institutions must get their AML/CTF houses in order or face serious penalties, including imprisonment for a period not exceeding 15 years or fines not exceeding R100m

By way of background, the Financial Action Task Force (FATF) is an independent intergovernmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of

proliferation of weapons of mass destruction

The FATF recommendations are recognised as the global anti-money laundering (AML) and counterterrorist financing (CTF) standards It identifies jurisdictions with weak AML/CTF measures in public documents that are issued three times a year By June 2024, 133 countries and jurisdictions had been reviewed, with 108 publicly identified as noncompliant Eighty-four of these jurisdictions have made the necessary reforms to address their AML/CTF weaknesses and have been removed from the process

SA has been a FATF member since 2003 In a Mutual Evaluation Report in 2019, the FATF concluded that SA had a solid legal framework for combating money laundering and terrorist financing, but significant shortcomings remained These findings led to SA being greylisted in February 2023

The FATF’ s greylist identifies countries that are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing Such jurisdictions must resolve the identified strategic deficiencies within agreed timeframes and are subject to increased monitoring

Time to get your will in place

• While current needs are vital, forward planning is key

Evan Pickworth Business Law & Tax Editor

Last month’ s Wills Week may have passed many by with so much attention on cashing in any available money on their vested “pot” after the launch of the “two-pot” retirement system

One of SA’ s largest retirement fund managers, Sanlam, reported as many as 66,000 withdrawal claims in the first three weeks of the system, totalling R1 3bn Momentum saw more than 112,000, totalling R1 7bn; companies like Discovery and Old Mutual adopted a conservative approach and

did not switch on withdrawals on September 1, but those withdrawals will all be coming through now It is clear hundreds of thousands of South Africans are taking advantage of the ability to access some extra cash notwithstanding the tax consequences to get ahead of debt, inflation and the general cost of living Very few are likely to be able to splurge on anything special

this is more about keeping heads above water as a maximum of R30,000 and a minimum of R2,000 will hardly break the bank

However, as much as the focus needs to be on current needs especially where debt is a problem these same investors should place as much attention on their long-term estates and legacy Cash withdrawals and hefty taxes at the marginal rate will eat into these estates, so ensuring proper estate planning accompanies these decisions is equally important

In this regard, you have a free privilege freedom of testation This ensures your assets are disposed of by your wishes after your death

The Law Society of SA, in its Wills Week communication, notes that often a will is not valid because the person who drafts it does not have the necessary legal knowledge to ensure that the

requirements of the law are met I have been involved in assisting with drafting wills during Wills Week, and it always strikes me that even what may appear to be the simplest of estates has many complexities attached

Single-parent families with minor children need very specific clauses that ensure the best wishes of children are taken care of after death through, for instance, the selection of trusted executors and trustees who would need to administer a trust on behalf of the child/children Leaving this up to the state or someone you do not know is a dangerous situation to leave unaddressed

Yet it is mind-boggling that less than 15% of South Africans have a will when they die If you die without leaving a valid will, your assets will be distributed according to the provisions of the Intestate Succession Act

The provisions of this act are generally fair and ensure that your possessions are transferred to your spouse and children and, where applicable, to siblings, parents and, if required, then to the extended family in terms of degrees of relationships and those who were dependent on you for financial support

The Law Society highlights the following problems may arise if you die without leaving a will:

● Your assets may not be left to the person of your choice

● It can take a long time to have an executor appointed

The executor appointed may

THERE ARE MANY CASES COMING BEFORE SA’S COURTS OF PEOPLE WITH A WILL BUT WHERE THE WILL IS NOT VALID

be somebody you may not have chosen yourself

● There can be extra and unnecessary costs

● There can be unhappiness and conflict among family members because there are no clear instructions on distributing your assets

There are many cases coming before SA’ s courts of people with a will but where the will is not valid Reasons could be incapacity (in one recent case, a testator on death’ s door was found to have been bullied into making a will by an ex-spouse they were divorced 17 years prior suddenly became a beneficiary to the detriment of the testator’ s daughter Fortunately, the court smelt a rat and exercised its powers to invalidate the will

The law is a powerful friend in these situations; however, it is best to avoid these lengthy and nasty fights ahead of time by getting a valid will in place

SA’ s AI policy lays foundation for the future

Wendy Rosenberg Werksmans

On August 14 2024, the department of communications & digital technologies published the draft National AI Policy Framework for public input

This initial step in the development of SA’ s national AI policy is intended to serve as the framework underlying the national AI policy which, in turn, will serve as the foundational basis for creating AI regulations and potentially an AI Act in SA, with a view to guiding the responsible and ethical development and utilisation of AI across all industries

On July 12 2024, the European Artificial Intelligence Act was published in the Official Journal of the European Union It is complex legislation which entered into force on August 1 2024, but whose provisions will come into operation gradually, with some provisions applying as early as February 2 2025, while the act will generally apply starting on August 2 2026

The European AI Act is more than four years in the making, with the European Commission having published its White Paper on Artificial Intelligence A European approach to excellence and trust in February 2020 A long road now lies

ahead for the European AI Act, with many milestones to be achieved before the substantive provisions of the AI Act begin to apply

Several bodies will be established to implement and enforce the European AI Act, involving both public authorities and private sector participation, including:

● An AI Office, established by the European Commission, to coordinate the implementation of the AI Act in EU member states;

● A European Artificial Intelligence Board, with one representative from each EU member state, to provide recommendations, opinions, expertise and the like;

● An Advisory Forum to provide technical expertise and contribute stakeholder input on the implementation of the act; and

● A scientific panel of independent experts to advise the AI Office and national authorities in EU member states

The commencement of the EU AI Act broadly coincided with the publication,

here in SA, of the draft South African National Artificial Intelligence Policy Framework by the department of communications & digital technologies

The draft AI Policy Framework acknowledges global trends in AI governance and the need to harmonise with international standards, pushing SA to develop its own AI policies It seeks to align with international norms and standards to ensure ethical and effective AI deployment

The draft AI Policy Framework articulates the depart-

ment s ambition for SA to be a leader in AI within the African continent and a significant player on the global stage, influencing global AI ethics and governance frameworks

According to sources within the department, the draft AI Policy Framework is intended to provide a framework which sets out, in broad strokes, the framework for AI policy in SA, drawing on international benchmarking done by the department

This initial step in the development of SA s national AI policy is intended to set the

stage for a future where AI is harnessed responsibly and effectively, driving digital transformation and promoting inclusive growth

The development of a South African national AI policy is a strategic imperative by the department to guide the responsible and ethical development, deployment and utilisation of AI across all sectors of society

The national AI policy is intended to serve as the foundational basis for creating AI regulations and potentially an AI Act in SA, and guide the development of robust regulatory mechanisms that ensure AI applications are safe, ethical and in the public interest It aims to ensure AI systems are developed and implemented with considerations for fairness, accountability, transparency and inclusivity, while mitigating potential risks such as bias and discrimination in AI applications

Ultimately, the national AI policy is intended to provide clear guidelines and a struc-

tured approach to harnessing AI’ s potential, while mitigating its risks and ensuring AI technologies are developed in a manner that aligns with SA’ s socioeconomic goals and values

One of the department s key rationales for establishing this policy is to foster sectoral strategies that will address specific needs and opportunities within different industries, such as health care, education and finance The department hopes that, by laying down overarching policy positions, the national AI policy will enable the development of tailored strategies that leverage AI to drive innovation and efficiency in each sector

The draft AI Policy Framework outlines key pillars such as robust data governance frameworks, infrastructure enhancement and significant investments in research and innovation, which the department believes are crucial for creating an enabling environment where AI technologies can thrive and contribute meaningfully to sectors such as health care, education and public administration

The draft AI Policy Framework seeks to lay the groundwork for SA to emerge as a leader in AI innovation while addressing challenges and opportunities in a holistic, sustainable manner

BUSINESS LAW & TAX

Amendment Acts bring change

• Shift in regulatory framework for private companies in SA

Verushca Pillay, Tanya Seitz & Kamogelo Mashigo Baker Mckenzie

The recent amend-

ments to the Companies Act, signed into law by President Cyril Ramaphosa on July 26 2024, introduce noteworthy changes to the regulatory landscape for certain private companies in SA undergoing transactions

These changes, introduced through the Companies Amendment Bill and Companies Second Amendment Bill, aim to refine the criteria for what constitutes a “regulated company ” and revise the applicability of the Takeover Regulations, striking a balance between safeguarding shareholders’ rights and reducing the administrative burden for private companies

On August 28 2023, the trade, industry & competition minister published proposed amendments to the Companies Amendment Bill and Companies Second Amendment Bill (collectively the bills) to the Companies Act No 71 of 2008 (the Companies Act) On July 26 2024, President Ramaphosa assented and signed the bills into law (collectively the Amendment Acts)

The Amendment Acts introduce a number of welcome changes to the Companies Act, including amendments to the application of Part B and Part C of the Companies Act and the Takeover Regulations (takeover provisions) to Private Companies

The takeover provisions do not apply to all companies, but rather only to “regulated companies Private companies which fall within the category of a regulated company would have to comply

with additional requirements in the takeover provisions before implementing an “affected transaction” “

Affected transactions” are primarily transactions by a regulated company concerning (a) its acquisition or change in control (control being measured at 35%), (b) a sale of all or a greater part of its assets or undertaking, (c) a scheme of arrangement with its shareholders, or (d) an amalgamation or merger

While the amendments were gazetted on July 30 2024, their commencement date is yet to be determined by the President and there is no clarity as to their anticipated commencement date However, once in effect, these changes will significantly impact large private

THE INCLUSION OF INDIRECT SHAREHOLDING IN THE AMENDMENTS ALSO BROADENS THE SCOPE OF APPLICATION

companies intending to undertake affected transactions, while easing the administrative burden of complying with the takeover provisions for all other private companies previously caught under the “regulated company ” definition

The takeover provisions, regulated by the takeover regulation panel (TRP), aim to protect shareholders rights, particularly minority shareholders, during affected transactions These provisions ensure that all shareholders are treated equitably and fairly and have access to the same information when

STRIKING A BALANCE

exercising their rights

Currently, the takeover provisions and, therefore, the jurisdiction of the TRP, apply only to private companies if 10% or more of that company ’ s shares have been transferred within the preceding 24 months, or where the memorandum of incorporation expressly provides for such application The rationale behind linking the applicability of the takeover provisions to historic share transfers is unclear However, it is generally believed that the intention was to capture private companies that frequently traded shares, because this was indicative of a characteristic more akin to a public company

The amendments now stipulate that, unless exempted by the TRP in terms of section 119(6), the takeover provisions will only apply to private companies (a) with 10 or more shareholders with a direct or indirect shareholding in the company and (b) that meet the thresholds determined by the minister

(thresholds) These thresholds will be set based on the company ’ s annual turnover or asset value in SA, either generally or for specific industries

The inclusion of indirect shareholding in the amendments also broadens the scope of application of the takeover provisions, considering not just immediate shareholders of a relevant private company but also its ultimate beneficial owners (UBOs) We assume that each holding company in the chain up to the UBO will not count as a “shareholder” for purposes of calculating the number of shareholders This raises questions about the appropriateness of extending the definition to indirect shareholding, given the TRP s mandate and the jurisdictional and enforcement challenges with indirect shareholders outside SA

Therefore, including indirect shareholding in the determination of whether a private company qualifies as a regulated company under

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MAXKABAKOV

the takeover provisions appears to be a stretch, especially since the TRP focuses primarily on the interests of direct shareholders, unless the takeover provisions stipulate otherwise and, where necessary, contain protections for an indirect expropriation of assets

As of now, no thresholds have been set The minister has the discretion to establish thresholds that will apply to all private companies or different thresholds for specific industries In our view, it’ s unlikely that industry-specific thresholds will be set by the minister immediately, given that stakeholder input will be required

The TRP may, wholly or

FOR CERTAIN LARGER PRIVATE COMPANIES, THESE CHANGES IMPLY A NEW LEVEL OF SCRUTINY AND COMPLIANCE

partially, and with or without conditions, exempt a private company from compliance with the takeover provisions if (a) there is no reasonable potential of the affected transaction prejudicing existing shareholders’ interests, (b) if the cost of compliance is disproportionate relative to the value of the affected transaction or (c) if it is otherwise reasonable and justifiable in the circumstances having regard to the principles and purposes of the takeover provisions

Previously, it was relatively easy for private companies to obtain exemptions given the seemingly arbitrary test which applied to private companies, but the current amendments targeting larger private companies with a broader shareholder base may make it more challenging to prove grounds for exemption

For certain larger private companies, these changes imply a new level of scrutiny and compliance when undergoing an affected transaction As such, the changes represent a shift in the regulatory framework for private companies in SA By refining the criteria for what constitutes a regulated company and revising the applicability of the takeover regulations, the amendments seek to balance safeguarding shareholders’ rights with the administrative burden of compliance

Introducing thresholds and applying the test to companies with multiple shareholders aims to limit the takeover provisions applicability to larger private companies, ensuring adequate protections for shareholders during affected transactions

While these amendments are welcome, questions remain about their implementation, which will hopefully be clarified with the promulgation of regulations by the minister

Long wait for Johannesburg High Court hearing dates

Aslam Moosajee & Shenaaz Munga ENS

The Deputy Judge President of the Johannesburg High Court published a further bulletin of lead times for the set down of matters for hearing by the Johannesburg High Court as at August 31 2024

Currently, the lead times to set matters down are as follows:

● For unopposed divorce matters (which are set down on Fridays), if one applied now for a hearing date, one is

likely to be allocated a date after November 1 2024;

● For special commercial trials, one is likely to end up with a hearing date during the fourth term of 2025;

● For trials involving the minister of police, one is likely to end up with a hearing date after November 16 2027;

● For divorce trials, one is likely to end up with a hearing date after March 17 2025;

● For other trials, subject to what is set out below, one is likely to end up with a hearing date after February 15

2027;

● For any trial matter that requires more than five days, one is likely to end up with a date after July 19 2027;

● For special tax court matters, one is likely to get a date in the term that follows the term in which the application for a hearing date is made;

● For opposed motion roll matters, one is likely to get a date after May 26 2025;

● For any application that requires a day or more to be heard (namely, matters designated for the special motions roll), one is likely to

get a date after August 11 2025;

● For unopposed matters, one is likely to get a date after November 26 2024, being 12 weeks notice;

● For the special interlocutory roll, one is likely to get a date after October 7 2024; For settlements to be made an order of court, one is likely to get a date after September 19 2024;

● For full court civil appeals, one is likely to wait between one and two terms for a date to be allocated;

● For magistrates court civil

appeals, one is likely to wait about one term for the allocation of a date;

● For full court criminal appeals, one is likely to wait five to six months (subject to availability of slots on the roll) for the allocation of a date; and

● For magistrates court criminal appeals, one is likely to wait four months (subject to availability of slots on the roll) for the allocation of a date

We again highlight that the shortage of judges at the Johannesburg High Court

impacts on the court s ability to render an effective litigation service

Legal practitioners have a duty to assist the court in its efforts to reduce these lead times and experienced practitioners should be encouraged to make themselves available to act as judges in order to help reduce the significant backlogs at the Johannesburg High Court Litigants should also be encouraged to refer disputes to mediation, if the dispute is capable of an amicable resolution

BUSINESS LAW & TAX

Call for broad cybersecurity compliance

• Companies must prepare for a future where digital threats are as common as digital opportunities

Candice Wilson EY Partner and Western Cape Consulting Leader

In the dynamic world of financial services, cybersecurity and IT governance are no longer just about protecting data, they’ re about ensuring regulatory compliance

While many financial institutions have aligned themselves with standards such as the National Institute of Standards and Technology (NIST) Cybersecurity Framework, the International Organisation for Standardisation (ISO) and the Centre for Internet Security (CIS), among others, are global industry standards for cybersecurity and IT governance

They are optional but developed by global industry bodies and largely accepted as best practice

But now new regulations issued jointly by the South African Reserve Bank’ s Prudential Authority and the Financial Sector Conduct Authority are pushing the envelope further These regu-

lations include standards for cybersecurity and IT governance, introducing several critical requirements that demand a deeper integration of cybersecurity and IT governance practices into the fabric of the organisation

The first significant shift is the emphasis on board-level accountability

EDUCATING AND INVOLVING THE BOARD IN CYBERSECURITY DISCUSSIONS SETS THE TONE FOR THE ENTIRE ORGANISATION

Cybersecurity isn’t just an IT issue anymore; it’ s a governance issue Boards are now expected to embed cybersecurity and IT governance practices into the organisation’ s culture, ensuring it’ s not just a policy on paper but a living, breathing part of daily operations

Second, there’ s a requirement for demonstrable compliance It’ s not enough to say you ’ re following best practices; you must prove it This means regular reporting on how systems are tested and improved, and how quickly material incidents are reported Compliance is now about showing, not just claiming

Third, independent assurance is crucial Self-assessment is out; external validation is in Whether through internal audits or third-party assessments, there must be an impartial confirmation that the controls in place are working as intended

The scope of these regulations extends to the “entire ecosystem” , including third parties and suppliers This holistic approach ensures no part of the chain is weak, as cybersecurity is only as strong as its weakest link

Last, there’ s a push towards a risk-based approach This means identifying and prioritising controls based on potential impact, ensuring that resources are allocated where they are

KEEP CONTROL

most needed

PRACTICAL STEPS FOR COMPLIANCE

To navigate these changes effectively, institutions should start with board engagement

Educating and involving the board in cybersecurity discussions sets the tone for the entire organisation They need to understand not just the risks but also their role in mitigating them

Next, there should be a thorough discovery and prioritisation process This involves mapping out all critical assets, processes and dependencies, especially those involving third parties Prioritising these based on risk ensures the most important and most vulnerable areas receive the most attention

Updating policies to reflect these new requirements is essential This isn’t about creating new policies but enhancing existing ones to

CONSUMER BILLS

include the additional regulatory demands, making them practical and effective

Clarity on roles and responsibilities across the ecosystem is vital Everyone, from internal staff to external vendors, must understand their part in maintaining compliance This clarity fosters a collective responsibility towards cybersecurity

Finally, establishing mechanisms for continuous monitoring is crucial This could be through dashboards or regular compliance reports that provide real-time insights into the organisation’ s security posture, ensuring compliance isn’t a one-time event but an ongoing process

PITFALLS TO AVOID

One of the biggest mistakes is treating compliance as a tickbox exercise True compliance should lead to a cultural shift towards cybersecurity,

not just a checklist to be completed

Relying solely on existing frameworks without adapting them to the new regulations can lead to gaps in compliance These frameworks are a starting point, not the finish line

Approaching compliance as a one-time effort is another pitfall Compliance should be seen as an ongoing journey of improvement, not a destination

A one-size-fits-all approach to controls can be inefficient Tailoring controls to specific risks ensures resources are used effectively, neither overprotecting nor leaving vulnerabilities exposed

Last, ignoring the broader ecosystem can be detrimental Cybersecurity is a chain; if one link, like a third-party vendor, is weak, the entire chain is compromised

The new regulatory environment in financial services is not just about meeting minimum standards; it’ s about preparing for a future where digital threats are as common as digital opportunities

By viewing these regulations as a chance to enhance cybersecurity practices, financial institutions can not only comply but also strengthen their overall security posture This approach, rooted in board engagement, risk assessment, policy enhancement and continuous improvement, ensures that organisations are not just compliant today but are also resilient against tomorrow’ s challenges

This proactive stance not only satisfies regulatory bodies but also builds trust with all stakeholders, safeguarding the integrity and future of financial operations in an increasingly digital world

Money, it seems, is no longer the monarch

Access to cash has become an important subject of debate Coins have been with us for three millennia, and bank notes for one-and-ahalf, but the availability of cash is diminishing as the digital payments market surges in growth It is a development that needs to be carefully handled

In September 2024 the Financial Conduct Authority of the UK issued final rules for their access to cash regime The UK Parliament had directed the FCA to ensure the reasonable provision of cash deposits and withdrawal services for personal and business current accounts across the UK This includes access to both notes and coins that is free of charge for consumers with personal current accounts

PAT R I C K B R AC H E R

Despite the overall decline over recent years, cash remains a highly important mechanism for payment SA, like other emerging markets, has a strong reliance on cash as a payment method This won ’t last forever because of our sophisticated banking and electronic payment systems

The growing number of digital banks and providers of mobile money is changing the landscape

Losing access to cash services disproportionately affects vulnerable

consumers who are more likely to rely on cash As access to cash becomes limited, the costs of access will increase and the costs of travelling to the limited branches and outlets will be unfairly borne by those with the least amount of money

The impact of our high unemployment rate is mitigated by a vibrant informal sector, making up more than 20% of total employment in the country, according to recent statistics Much of that informal sector depends on cash as its lifeblood The unfortunate people asking for money at traffic lights from the motorised electronic bank customers are finding that fewer and fewer people have cash to hand out no matter how benevolent they may feel Special arrangements have to be made by generous

motorists to keep cash in the car

All of these problems need, dare I say it, regulation as in the case of the UK The FCA Guidance Rules require those involved in providing access to money to undertake cash access assessments to determine the need for such facilities Residents, communities and their representatives must be asked to comment, and local deficiencies must be plugged Cash facilities must not be closed until required cash services are identified where needed Customers must be provided with clear information about where they can access cash services and how to raise their concerns

The obvious current issue is the closing of bank branches, and limited access to ATMs Costs could be

reduced by banks combining their ATMs, but the more access to cash is concentrated, the more criminal activity is assisted People will tend to spend where they withdraw money which may adversely concentrate retail spending

There is clearly a need for a dual approach On the one hand, easy payment mechanisms must be developed to the extent possible so that mobile money penetration is optimised On the other hand, deficiencies in cash delivery must be controlled

PEOPLE WILL TEND TO SPEND WHERE THEY WITHDRAW MONEY WHICH MAY ADVERSELY CONCENTRATE RETAIL SPENDING

The FCA policy document is more than 250 pages and that is not what we need We can hopefully rely on our dynamic banking and electronic payment sector in SA that has always been forward-thinking, with their actions rapidly catching up to the thinking

Like access to Wi-Fi, unlimited access to digital money is a great leveller and needs to be front-of-mind by everyone involved Nice as it may seem to most of us, a rapid leap into digital money must not detrimentally affect the most vulnerable consumers, because economic imbalance is the surest route to social unrest

● Patrick Bracher (@PBracher1) is a director at Norton Rose Fulbright

BUSINESS LAW & TAX

Check out red flags in credit applications

• Ten signs of potential fraud and what a vigilant business can do to protect itself and its customers

Roy Gillespie ENS

Should your company receive a credit application, several red flags may indicate potential fraud Be on the alert for the following:

● Inconsistent information: Discrepancies in the applicant’ s information, such as different addresses, phone numbers or employment details across documents

● Forged or altered documents: Signs of tampering in documents such as bank statements, pay slips or bank confirmation letters Pay particular attention to inconsistencies in fonts, signatures and the formatting and alignment of documents

● Incomplete or blank sections: Applications with missing or incomplete sections might suggest the applicant is trying to hide information

● Unusually high income:

Claims of excessively high income that don’t match the applicant’ s occupation or industry can be a red flag

● Lack of documentation: Applicants who avoid providing documentation or offer insufficient information

● Sudden financial changes: Rapid changes in financial behaviour, such as a sudden

CONTACTING TRADE REFERENCES AND PREVIOUS CREDITORS

CAN PROVIDE INSIGHTS INTO THE APPLICANT’S PAYMENT HISTORY

surge in credit inquiries or opening multiple new accounts over a short period

● Suspicious delivery addresses, such as delivery to leased warehousing pre-

mises with no signage of the purported customer, deliveries to construction sites or, in some cases, even at meeting points on a highway

● Suspicious information: Identifying information that doesn’t match records or seems suspicious, such as a photo in an ID book that does not resemble the applicant

● Alerts from credit agencies: Notifications of fraud alerts or address discrepancies from credit reporting agencies

● Unusual account activity: Patterns of activity that are inconsistent with the applicant’ s history, such as a significant increase in credit inquiries or new credit relationships

What should corporates be doing to prevent credit application fraud?

Credit departments need to be vigilant and look beyond just the credit application Here are some suggested steps to enhance the verifica-

tion process and assist the credit department in making more informed and secure decisions:

● Policy and procedure: Ensure your company has an updated credit application policy and clear procedures for onboarding new clients, including the various checks and controls that need to be in place to safeguard your business

● Telephonic verification: Cross-check the landline numbers supplied on the credit application form and in the email against the listed landline numbers of the company applying for the credit

Contact the applicant using the verified landline number (not the telephone numbers provided in the email or on the application form) to confirm the details submitted

Additionally, run the mobile numbers provided

TAXING MATTERS

through the TrueCaller app and search online to identify whether there are any adverse comments linked to those numbers

● Confirm the email domain name: Check that the email domain name matches the email domain name of the legitimate company that is applying for the credit

● Site visits: Conduct a site visit to confirm the applicant’ s address and business operations as well as the delivery address for the goods (if applicable) Take pictures of the outside and inside of the delivery address and provide these pictures to the delivery driver to ensure the goods are delivered to the correct address

● Document verification: Ensure that all submitted documents are authentic and have not been tampered with This includes checking for spelling mistakes and consistency in fonts, signa-

tures, and formatting of documents and emails

● Reference checks: Contacting trade references and previous creditors can provide insights into the applicant’ s payment history and reliability

● Public records check:

Reviewing public records for any legal issues, bankruptcies or loans can help assess the applicant’ s financial stability

● Regular employee training: Hold regular training and awareness sessions for credit department and sales employees to recognise signs of cyber scams and fraud and to understand the latest trends This will ensure that employees remain vigilant and can respond quickly when they suspect fraud By implementing these measures, companies can minimise the risk of credit application fraud and safeguard both their businesses and their customers

Disposing of immovable property without pain

Angelique Stronkhorst

AJM

Adverse tax consequences arise when a person disposes of immovable property for proceeds exceeding the base cost

However, section 42 of the Income Tax Act No 58 of 1962 (act) provides relief where the consideration for such disposal is the issue of equity shares by a resident company, and certain other requirements are met

Pursuant to section 42 of the act, no adverse tax consequences will arise as a result of the disposal because the immovable property is deemed to be disposed of at its base cost Section 42 of the act provides for the rollover of the tax history of the asset onto the acquiring company and that company s shares for future tax purposes

One of the requirements

qualify as a section 42 assetfor-share transaction is that the person (ie the transferor) must hold a “qualifying interest” in the acquiring company (ie the transferee) at the close of the day on which the asset is disposed of Where the disposal takes place to an unlisted company, a qualifying interest means at least 10% of the equity shares that confers at least 10% of the voting rights in that company In other words, on the date of the disposal, the transferor must hold at least 10% of the equity shares of the transferee

It is, therefore, important to determine the date of disposal of the asset In terms of section 41 of the act, disposal is defined with reference to the definition of disposal in paragraph 1 of the Eighth Schedule to the act (Eighth Schedule) It follows that the time of such disposal (ie the date of the disposal) will also be regulated by the

Eighth Schedule and, in particular, by paragraph 13 When dealing with immovable property, the sale agreement will generally be subject to certain suspensive conditions In terms of paragraph 13 of the Eighth Schedule, the time of disposal in these instances will be when the suspensive conditions in such an agreement are satisfied

Practically this date will be well in advance of the transfer date in the Deeds Office

With reference to the qualifying interest requirement of section 42, the transferor must acquire at least 10% of the equity shares of the transferee company on the date that the suspensive conditions are satisfied, notwithstanding that the transfer of ownership will only take place much later Stated differently, the transferee company must pay consideration (through the

issue of shares) before it takes ownership of the asset

This does not have a significant impact on 100%held transferee companies; however, when third parties are involved, such practicalities should be considered when negotiating a transaction

WHERE TO FROM HERE?

Although there are potential arguments relating to when a person can be said to hold equity shares (in broad terms, such arguments consider whether a person can hold shares without being the shareholder in terms of the Companies Act), such arguments are complex and involved As noncompliance with the requirements will result in the inapplicability of the section 42 rollover (giving rise to adverse tax consequences), the prudent approach is to ensure that the transferee company issues the required shares to

the transferor on the date on which the suspensive conditions are fulfilled

Commercially it would still be important to provide the necessary safeguards to the transferee company as provided consideration for an asset it is still to receive

Although section 42 asset-for-share transactions have become commonplace, the above illustrates the importance of consulting with your tax advisor before entering into any significant transaction

The general provisions almost always have nuances that may not have been relevant to previous transactions but may result in significant adverse tax if implemented incorrectly

TAKEAWAY FOR TAXPAYERS

Although the withdrawal of Practice Note 31 coincides with the introduction of section 11G of the act, it is important for taxpayers to reconsider any deductions claimed with respect to interest expenditure It is crucial to ensure compliance with tax legislation on an annual basis and to not merely repeat prior year treatment This is particularly true where previous positions (or a Practice Note in this instance) are changed and replaced with new provisions (ie section 11G) We recommend that advice and assistance be sought from reputable tax advisors if you are uncertain of the new requirements for a deduction of interest incurred

Staving off fraud by loan, credit scams

• There are multiple victims in credit application scams when fraudsters use stolen information

Roy Gillespie ENS

ENS’ forensics team has seen an upsurge in clients who have fallen victim to credit application fraud, a particular type of cybercrime

This type of fraud usually results in substantial losses with limited prognosis for the recovery of funds or goods and, in most instances, clients lack the necessary insurance cover for protection against such incidents

The SA Police Service (SAPS) can investigate these crimes through its dedicated unit known as the SA Police Service Computer Crime Unit (SAPS CCU), which works closely with other law enforcement agencies and private sector partners to investigate and prosecute cybercriminals

The Cybercrimes Act, enacted in 2020, also provides SAPS with extensive powers to investigate, search, access and seize digital devices and data related to cybercrimes

However, like many law enforcement agencies worldwide, SAPS faces challenges such as the shortage of appropriate skills, and the need for continuous training and resources to keep up with the rapidly evolving nature of cyber threats In reality, law enforcement responses to these crimes are often slow and fragmented and seldom result in successful prosecutions

Credit or loan application fraud, a form of identity theft, occurs when fraudsters use stolen personal and/or company information to apply for credit with a provider, all without the knowledge or

consent of the individual or business involved

Once the line of credit is granted by the unsuspecting credit provider or lender, the fraudsters purchase goods to the value of the credit limit

The discovery of these scams will usually go unnoticed for a couple of months until the credit provider discovers that their payment request has been ignored

MODUS OPERANDI

There are multiple victims in the credit application scam, the first being the individual or company whose identity has been stolen

EMAIL IS EASY TO USE, SIMPLE AND INEXPENSIVE AND CAN BE SENT BY FRAUDSTERS FROM HALFWAY ACROSS THE GLOBE

The fraudsters assume this identity and use it to apply for various forms of credit, such as a retail store credit card, a bank account with an overdraft, a personal loan from an insurance company or purchasing a motor vehicle on credit

The second victim is the unsuspecting credit provider or lender who grants the credit to the fraudsters While their loss is not a stolen identity or information, it does result in financial loss

HOW DO FRAUDSTERS STEAL YOUR PERSONAL IDENTITY?

Fraudsters can steal personal identities through various methods Here are some common techniques:

● Data breaches: Large-scale data breaches can expose personal information, which fraudsters can use or sell on the dark web

● Phishing, smishing and vishing: These involve fraudsters sending deceptive emails, text messages or phone calls to trick individuals into revealing their personal information

● Malware: Scammers send out malicious software via email which can infect devices When clicked or opened, it allows the fraudsters to steal information directly from the device, for example login and password information giving scammers access to mailboxes etc

● Card skimming: Devices attached to card readers can capture card information during legitimate transactions, for example at restaurants

● Unsecured browsing: Using unsecured Wi-Fi networks at airports, shopping malls or restaurants and entering information into unsecured websites can expose personal data to attackers

● Physical theft: Thieves or pickpockets steal wallets, purses, laptops, mobile devices or physical mail which can provide access to personal documents and information

● Social engineering: Manipulating individuals into divulging personal information through impersonation or other deceptive tactics

HOW DO FRAUDSTERS

STEAL YOUR COMPANY INFORMATION?

Fraudsters use several methods to steal company information for identity theft Here are some common tactics:

● Phishing attacks: Scam-

mers send deceptive emails that appear to be from legitimate sources, tricking employees into sending them company documents and records or revealing sensitive information or enticing employees to click on malicious links

● Social engineering: Fraudsters manipulate employees into divulging confidential information by impersonating trusted individuals or creating a sense of urgency

● Malware and ransomware: Malicious software can be used to infiltrate company systems, steal data or lock systems until a ransom is paid

LAW ENFORCEMENT RESPONSES ARE OFTEN SLOW AND FRAGMENTED AND SELDOM RESULT IN SUCCESSFUL PROSECUTIONS

● Insider threats: Disgruntled or compromised employees may steal or leak sensitive information Our experience shows that call centre employees are particularly at risk due to several factors including personal financial pressure Syndicates understand that call centre employees usually have legitimate access to multiple layers of company records

and often solicit or intimidate these employees to provide this information Information is exchanged for gratification or due to threats of intimidation Call centre employees may also lack the necessary training and awareness and may not recognise the signs of a scam or understand the importance of following security protocols

● Physical theft: Stealing physical documents and devices or accessing unsecured areas within a company can provide valuable information

● Unsecured networks:

Using unsecured Wi-Fi networks or failing to properly secure company networks can expose data and company records to attackers

● Fake websites and spoofing: Creating fake websites that mimic legitimate company sites to capture login credentials and other sensitive information

HOW THE FRAUDSTERS APPLY FOR THE CREDIT

Once the fraudsters have stolen the identification of an individual or company, the next step is to apply for credit with a credit provider

There are several ways to do this and the fraudsters will usually try to distance themselves from personal interaction and will usually make use of false email addresses to apply for the credit and use mobile phones with pay-asyou-go or unregistered SIM

cards to commit this type of fraud These methods provide anonymity and make it harder for authorities to trace their activities

The fraudsters will create an email domain which resembles the victim’ s name or company email domain then use this false email address to send through the credit application to the unsuspecting credit provider

Email is a significant attack vector used by fraudsters for credit application fraud for several reasons:

● Email has a wide reach and almost everyone has an email address making it a broad target for attackers

● Email is easy to use, simple and inexpensive and can be sent by fraudsters from halfway across the globe

● Fraudsters are easily able to impersonate trusted entities, such as banks, retailers or insurance companies to trick recipients

● Humans make errors and may inadvertently click on malicious links or download harmful attachments, especially when emails look legitimate

● Many users have not received any formal cyber training or awareness and are not fully aware of the various phishing scams and may easily fall for sophisticated scams Elderly computer users are also particularly vulnerable as they have limited computer usage experience

What is reasonable, when dealing with an unreasonable patient?

In a recent medical negligence claim that concerned a serious birth injury, the East London Circuit Court dealt with a contention on the part of the hospital staff and treating doctor that the mother was aggressive, violent and generally uncooperative during the labour process The uncooperative patient, they said, significantly impacted their ability to monitor her, to the detriment of the infant child

In the judgment in Phelekwa Magadlela obo Yibanathi Magadlela v MEC of the Executive Council for Health, Eastern Cape, 1118/2022, the court accepted it was reasonable for the doctor to believe that the plaintiff would acquiesce to the foetal monitoring and treatment on counselling

The decision to perform a caesarean section was arrived at following the plaintiff s continued aggression and lack of cooperation, together with a suspicious CTG reading, which he was later alerted to This decision was rea-

sonable The court found, based on all the evidence, the mother s behaviour impeded the medical staff s ability to detect and prevent the eventual harm to the infant The claim was dismissed

Critical to this outcome was the nursing staff s excellent record-keeping and strong oral testimony Moreover, when faced with the unreasonable patient, the staff acted reasonably by counselling her on the importance of cooperation and continuing with reasonable attempts to carry out their duties

Jay Page Bowmans

BUSINESS LAW & TAX

Holistic estate planning key to financial freedom

• A valid will, which covers all the key areas, is the perfect place to start this journey

Angelique Stronkhorst AJM

Wills week, which took place from September 16-20, came at a critical time to highlight the urgent need for holistic estate planning

In these challenging times, the security of your hardearned wealth is under threat Yet too many people are leaving their planning too late, resulting in dire consequences for those left behind A valid will, which covers all the key areas, is the perfect place to start this journey

A will can establish a trust, whether during a testator’ s lifetime or after death, and it can also ensure existing trusts and related assets are taken care of and appropriately managed after death A

simple issue like changing trustees or minimising capital gains tax consequences are essential if the goal of holistic estate planning is to be achieved This should all start with a will

TRUSTS PLAY A CRUCIAL ROLE ... BUT SHOULD ONLY BE ESTABLISHED WHEN THERE IS A CLEAR AND WELLDEFINED PURPOSE

If that box has already been ticked, it would be important for the will to be updated continuously Wills Week afforded one the perfect opportunity to review these affairs

Aside from having a will, there are other key matters to

consider in your estate

Depending on your circumstances, a trust can be a great tool for estate planning

Trusts play a crucial role in estate planning, but they should only be established when there is a clear and well-defined purpose A trust can serve as an effective means of safeguarding assets, managing wealth and securing long-term financial stability for beneficiaries, particularly when they are young or unable to manage assets independently

For example, if you have minor children, you can establish a testamentary trust in your will This trust will oversee and protect the assets intended for your children until they reach an age where they are capable of managing their own financial affairs In SA, this is a widely used and practical estate planning solution for parents

LEAVE YOUR LEGACY

Beyond testamentary trusts, there are additional reasons to consider creating a trust during your lifetime

For instance, you might want to transfer growth assets, such as shares or investments, into a trust to exclude them from your personal estate, which can help reduce estate duty Depending on the need, these assets can be consolidated under a holding company, which shares are wholly owned by the trust in question

Under the holding company, you can then segregate different assets for instance, all your property assets could be in one company Another company can be set up to own and hold all

IF YOU HAVE MANY OFFSHORE ASSETS, YOU COULD SET UP AN OFFSHORE TRUST THAT ALSO MAKES PROVISION FOR SA ASSETS

VIEWPOINT AFRICA

of your equity investments

This level of flexibility simplifies the administration of these assets before and after death and allows for family or business ventures to continue to prosper outside the normal estate duty net These companies and trusts will, of course, comply with all tax and duty regulations

The flexibility offered by trusts extends beyond this If you have many offshore assets, you could set up an offshore trust that also makes provision for SA assets

Additionally, it’ s crucial to consider the tax implications of your estate Estate duty is levied at a rate of 20% on the dutiable amount of an estate that does not exceed R30m and at a rate of 25% on the dutiable amount of an estate that exceeds R30m What most people forget is that in addition to the estate duty consequences there are also capital gains consequences, as death itself is deemed a CGT disposal of assets

The build-up of assets outside a trust can be signifi-

cant over a lifetime, and a hefty CGT bill could lie in wait The CGT exclusion in the year of death is now R300,000 (as opposed to R40,000 annually before death)

These tax costs can be hefty and for estates holding illiquid assets it may well mean disposing of assets to create liquidity to cover the tax consequences This can be particularly concerning in the case of immovable property, for example

Considering the above, each structure should be tailored to an individual’ s specific needs and optimised to ensure continuity The best outcome for many of these assets built up over a lifetime is to ensure they are not mired in red tape and cannot continue to grow after death and make distributions to beneficiaries

The most important step, however, is to ensure your will is properly set up to avoid any unpleasant surprises whether tax-related or otherwise

Court upholds move to expand vehicle supplier list

Phillip Karugaba & Martha Mutamba ENS

The high court has upheld a move by the Public Procurement and Disposal of Public Assets Authority to expand the list of potential suppliers of vehicles to public entities

The move seen as positive for competition and therefore consumer benefit was hotly contested by Ugandan representatives of vehicle manufacturers who hitherto enjoyed a virtual monopoly

In CFAO Motors Uganda Limited v The Public Procurement and Disposal of Public Assets (PPDA) the Ugandan representatives of several motor vehicle manufacturers sought to challenge a circular by the PPDA which permitted entities authorised by suppliers and distributors to

bid for the supply of vehicles to public entities Until this circular, it was only entities authorised directly by vehicle manufacturers that could bid The applicants argued that opening the space to supplier or distributor representatives would compromise the quality of supplies and negate the value for money principle in procurement They further argued that the circular perpetuated a state of illegality where a supplier falsely claims that it is authorised by a manufacturer to supply or distribute vehicles at the expense of dealers who are

genuinely authorised by manufacturers

The PPDA argued that its mandate included making changes to improve procurement efficiency and competition and that the circular was intended to encourage and promote competition, one of the principles of public procurement

The court agreed with the PPDA and found that the circular breathed life into the procurement exercise by opening it up to all potential providers It stated that the decision of the PPDA was well informed and intended to uphold the principle of competition in the procurement process which, in turn, helps to ensure value for money The court found that the changes by the PPDA would break the monopoly for the supply of motor vehicles that the applicants had long enjoyed

COMPETITION LAW CONSIDERATIONS

The judgment, while invoking competition principles is based solely on the Public Procurement and Disposal of Public Assets Act (Cap 205) The court did not consider the recently enacted Competition Act, (Cap 66) (act)

The act prohibits anticompetitive practices defined as practices that involve taking a decision or engaging in any concerted action or practice in the supply of goods which causes or is likely to cause an adverse effect on competition The act provides that inquiry into anticompetitive practices is the mandate of the ministry of trade, industry & cooperatives

In determining whether a practice is anticompetitive and likely to have an adverse effect on competition in the

market, the ministry would have to take into account whether the practice would result in the creation of a barrier to new entry, force existing competitors out of the market or result in any consumer benefit

To the extent that the applicants sought to restrict suppliers of vehicles to public entities, their action may be considered as having an adverse effect on competition Six of the applicants operate on the same level of the supply chain, selling, distributing and maintaining motor vehicles for well-known brands such Toyota,

THE MOVE WAS HOTLY CONTESTED BY UGANDAN REPRESENTATIVES OF VEHICLE MANUFACTURERS

Mercedes-Benz, Nissan, Mitsubishi, Hyundai and Tata, among others The seventh applicant, the Uganda Motor Industry Association, is a limited liability company formed by the same representatives of vehicle manufacturers

The suit was intended to maintain the applicants market power and restrict the entry of other players that are not directly authorised by manufacturers

In finding that the PPDA acted within its mandate when it issued the circular, the court s decision positively impacts competition in the public procurement of motor vehicles in Uganda

It will be interesting to see whether an appeal is filed and how the ministry of trade, industry & cooperatives will impact this corner of the market when it starts to implement the Competition Act

BUSINESS LAW & TAX

Clamping down on collusion

• Competition Commission set to address anticompetitive conduct in the country’ s solar energy value chain

Heather Irvine Bowmans

The Competition Commission recently announced it will investigate possible excessive pricing or collusion in the solar value chain

This follows an innovative settlement agreed by the commission which is intended to enhance the ability of suppliers of rooftop solar photovoltaic (PV) mounting products to compete in SA

The settlement was the result of a complaint to the commission by Metal Roof Innovations, trading as S-5!, an American-based supplier of high-quality roof attachment products including solar panel mounting clamps

The company ’ s products are accepted by some of the most highly regarded quality assurance organisations in the world

It alleged that Global Roofing Solutions (GRS), one of the leading suppliers of concealed fix and standing seam roofing in SA, had engaged in an abuse of dominance because GRS’ standard customer warranty provided that only roofing attachments which were manufactured by GRS could be installed on a GRS roof Attaching any other attachment to a GRS roof would automatically void the customer s warranty

A significant number of

Angling

South African customers who had fitted GRS roofing were accordingly not willing to fit attachments other than those manufactured by GRS

Since a significant proportion of this kind of roofing in SA has been installed by GRS, over many years, its warranty (which applies for extended time periods) had the effect of excluding rivals from the clamp markets, including S-5!’ s This, it alleged, constituted a contravention of section 8(c) the Competition Act,

THE GRS WARRANTY OUGHT TO ALLOW CUSTOMERS TO USE CLAMPS MANUFACTURED BY OTHER SUPPLIERS

which restricts dominant suppliers from engaging in an “exclusionary act” and/or section 8(d)(I) of the act, which restricts a dominant supplier from requiring or inducing a customer not to deal with a competitor After investigating this complaint, the commission found that “suppliers of solar mounting clamps had in some instances been unable to supply their own clamps to projects to which GRS had supplied standing seam and/or concealed fix roofing

products because customers preferred GRS clamps to ensure that the warranty given by GRS in respect of its products would not be negatively impacted and that a number of suppliers had tried to have their clamps preapproved by GRS for use on GRS products”

The commission’ s view was that the GRS warranty ought to allow customers to use clamps manufactured by other suppliers, as long as these complied with GRS’ technical requirements Whist GRS did not admit to a contravention of the Competition Act, it entered into a settlement agreement with the commission in terms of which it agreed to amend its warranty to make it clear GRS can only reject or exclude a customer’ s warranty claim related to the deterioration or failure of its roofing because of fitment of clamps manufactured by other manufacturers, if it can demonstrate this failure was actually caused by the use of clamps which did not meet GRS specifications

GRS agreed to provide confirmation to the commission it has amended its warranty terms, and must also share details of all warranty claims with the commission, so that it can check GRS is not rejecting customers warranty claims to dissuade them from using rival solar attachment products

Furthermore, GRS undertook to ensure its published technical specifications and installation methodology would be determined from time to time with reference to industry best practices and sound technical and engineering standards GRS agreed to put the terms of the tribunal order on its website and to write to all of its current roofing customers to let them know that it has amended its warranty

The commission will monitor that GRS complies with the tribunal’ s order on an ongoing basis This settlement will enable installers of solar panels in SA to recommend a wider range of solar panel clamps and other kinds of roofing attachments to GRS roof owners, and future GRS customers

The solar industry investigations announced by the commission in September 2024 follow a survey by the commission of 979 households and 300 businesses in SA This revealed these consumers consider renewable energy systems are expensive, despite prices decreasing globally

The commission will

accordingly investigate whether any dominant suppliers in SA are charging excessive prices, a practice which is prohibited by section 8 of the act

The survey also identified that businesses are of the view “there is a widespread practice of uniform pricing strategies by suppliers in the market which results in similar prices”

The commission will accordingly investigate whether there are agreements or understandings between competitors in the value chain to directly or indirectly fix prices or trading conditions, or divide markets

Section 4(1)(b) of the act imposes an outright prohibition on this kind of conduct, and these arrangements accordingly cannot be justified on the basis they produce

THE RENEWABLE ENERGY INDUSTRY IS CRITICAL TO SUPPORT ECONOMIC DEVELOPMENT AND JOB CREATION IN SA

efficiency or technological benefits which outweigh their anticompetitive effects

Competitors who enter into agreements or understandings of this kind can potentially be fined up to 10% of their turnover, even for a first-time contravention of the act Directors or managers who direct or knowingly acquiesce in these arrangements may also face criminal charges

The renewable energy industry is critical to support economic development and job creation in SA, especially following the load-shedding crisis and Eskom’ s subsequent announcement it will apply to Nersa to implement substantial price increases to maintain its operations

The commission s investigations are critical to support the growth and development of this sector, and to ensure its growth is not hampered by anticompetitive conduct Companies operating in this sector should ensure they have a comprehensive competition law compliance policy in place, and that their staff are adequately trained on the restrictions imposed by the Competition Act

arts confirmed but there are bigger fish to fry

Peter Blanckenberg Blanckenberg and Associates Inc

In a recent Supreme Court of Appeal judgment, Gannet Works (Pty) Ltd and Others v Middleton Sue NO and Another (Case No 492/2023) [2024] ZASCA 112, a unanimous bench held that drones, bait-carrying remote controlled boats and other remotely operated devices are in certain circumstances

prohibited in terms of the Marine Living Resources Act 18 of 1998

The judgment dealt specifically with recreational angling, which may only be carried on by an angler in possession of an official fishing permit which indicates angling on the application form

In the regulations of the Marine Act, angling is defined as recreational fishing

by manually operating a rod, reel and line , and recreational fishing is defined by the Marine Act itself as any fishing done for leisure or sport and not for sale

The court held that the word manually excluded any use of a fishing method other than the actual operation of a rod, reel and line

Interestingly, the court s judgment would probably also exclude the placing of

bait by swimming the bait out to its desired location, as swimming does not include the manual use of a rod and reel

The court referred to section 24 (b) of the constitution, which imposes a legal obligation on the minister of forestry, fisheries & the environment to protect the environment for the benefit of the present and future generations through reasonable

legislative and other measures that promote conservation and the use of natural resources

Section 2 of the Marine Act, which outlines the objectives and purpose of the act, was extensively quoted

This section requires the minister to conserve marine living resources for both present and future generations and to apply precautionary approaches and the need

to protect the ecosystem as a whole

While one might well support the principle of this judgment (the art of fishing remains unchanged!), one might also hope that in due course the Supreme Court of Appeal shall have the opportunity to deal more comprehensively with the abuse of our coastlines by commercial fleets and other fishing businesses

/123RF DMRGRAPHIC

Big job ahead to roll out climate law

• Devil is in the detail as municipalities, minister and provinces tackle assessments and response plans

Peter Blanckenberg

Blanckenberg and Associates Inc

During July 2024

the president of SA signed the new Climate Change Act, which shall be proclaimed shortly

The act is a comprehensive attempt at setting out the broad principles to be followed by the various officials of the state in their application of the constitutional right of all citizens to an environment which is healthy, protected, secure and just

In essence, the act identifies the categories which require active protection and allocates such categories among various governmental and parastatal structures

These structures are then tasked with the formulation and implementation of environmental plans designed to establish the necessary protection of the environment and, further, compliance with international standards, where reasonably achievable

The purpose of this article shall be to focus only on some of the fundamental steps which must be undertaken by the main roleplayers, in particular the minister responsible for environmental affairs, the various MECs of the provinces and, last, the mayors of our municipalities

NATIONAL ADAPTATION OBJECTIVES

Of first importance is that within one year of the commencement of the act, the minister must, inter alia, determine the national adaptation objectives which will guide SA’ s adaptation to climate change impacts, together with the development of resilient and sustainable development; and the minister must publish those objectives by notice in the Government Gazette

THE STRATEGY AND PLAN MUST BE PUBLISHED WITHIN TWO YEARS OF COMING

INTO OPERATION OF THE ACT TIME

NATIONAL ADAPTATION STRATEGY AND PLAN

These objectives must then be managed in terms of a National Adaptation Strategy and Plan The strategy and plan must be published by the minister within two years of coming into operation of the act

CLIMATE CHANGE NEEDS AND RESPONSE ASSESSMENT

MECs and mayors are thereafter obliged, within one year of the publication of the

National Adaptation Strategy and Plan, to undertake their own climate change needs and response assessment

CLIMATE CHANGE RESPONSE IMPLEMENTATION PLAN

Thereafter, within two years of such formulation, the MECs and mayors are each obliged to develop, implement and publish (in the gazette) a climate change response implementation plan Both the assessment and the response plan must form a lawful component of the legislation of each province and municipality

PRINCIPLES

TO BE CONSIDERED

The act sets out, again, quite broadly, the various principles that all of such entities should consider in the formulation of their various plans For instance, the plans should take into account the relevant and/or unique components of the areas under the jurisdiction of each of such entities

INTEGRATED DEVELOPMENT PLAN

In the case of a municipality, the climate change response implementation plan must form a component of the relevant municipality’ s Integrated Development Plan adopted in terms of the Municipal Systems Act 32 of 2000

ENVIRONMENTAL IMPLEMENTATION PLAN

So far as provincial plans are concerned, they must form a component of the province’ s environmental implementation plan developed in terms of the National Environmental Management Act 107 of 1998 (Nema)

BINDING ON ALL ORGANS OF STATE

In section 4(2) of the act it is made quite clear that the act binds all organs of state

Further, the act must be read and applied in conjunction with Nema and where there is any conflict between the act and Nema (or any other act), the new act shall prevail

HUGE BODY OF WORK

From the above it is clear that a huge body of work awaits the administrators of SA insofar as the planning and regulation of action in respect of climate change

The time delays which I have described are inevitable bearing in mind the various teams of scientists and other

relevant professionals that shall have to be compiled and instructed, and from which in due course various reports shall no doubt emanate, which then, after due consideration, shall have to be summarised and incorporated in the various plans

These delays, which in the case of provinces and municipalities are effectively a period of five years (presuming compliance with the act), are regrettable bearing in mind the degree of urgency with which our current environmental challenges must be met

The question perhaps arises as to whether SA even possesses sufficient skilled scientists and other relevant professionals to undertake the sheer volume of work which shall have to be completed within the time defined by the act

If one considers that each municipality within SA is obliged to undertake, inter alia, its own climate change needs and response assessment, and thereafter a climate change response implemen-

tation plan, that work alone which indirectly shall collectively incorporate in essence the entire country shall no doubt test the availability of relevant administration and professional skills

OBJECTIVES AND CONFLICTS

The objectives of the act are commendable, in particular the first objective “[of] a coordinated and integrated response by the economy and society to climate change and its impacts in accordance with the principles of cooperative governance”

The devil, of course, shall be in the detail, which is still to be set out in the various plans

The all too common conflict, on the one hand, between the commercial needs of SA and, on the other hand, pure conservation, shall challenge the minds, first, of those persons tasked with the production of provisional reports, and, second, those politicians (and their administrators) tasked by the act to implement its provisions

Kuwait ratifies protocol to its tax treaty with SA

Esther

Geldenhuys & Aneria Bouwer Bowmans

On September 18 2024, Kuwait ratified the protocol to its double tax agreement with SA (Kuwaiti DTA)

The protocol will enter into force on the later of either Kuwait or SA notifying the other of the completion of the procedures required by law for bringing the protocol into force However, the protocol stipulates that its provisions will have effect from the date that dividends tax came into

effect in SA, namely April 1 2012

The protocol amends the articles of the Kuwaiti DTA dealing with the taxation of dividends, interest, capital gains and the exchange of information between the two states

The Kuwaiti DTA currently provides for a dividends tax rate of 0% for Kuwaiti qualifying shareholders As a result of the Most Favoured Nation (MFN) clauses in the DTA between SA and Sweden and SAand the Netherlands respectively, Swedish and

Dutch qualifying shareholders can also rely on the 0% dividends tax rate

Once effective, the protocol not only amends the Kuwaiti DTA, but also means that Swedish and Dutch qualifying shareholders can no longer rely on the MFN clause to reduce South African dividends tax to zero

RETROACTIVE

The fact that the amendment is intended to apply retroactively is hugely problematic for South African companies who have relied on the

Kuwaiti, Swedish or Dutch DTAs since April 1 2012 to not withhold dividends tax from dividends declared to qualifying shareholders

Nonretroactivity of treaties is well established in international law The retroactive application of the protocol goes against the international interpretation of treaties It is not yet clear whether the South African Revenue Service will attempt to recover dividends tax on a retroactive basis Doing so is likely to give rise to court challenges

Wills: Be sure to make your wishes clear

• Recent cases show how battles turn nasty and how vital it is to get all your legal ducks in a row

Anthony Fineberg PKF Octagon

Several recent cases before the courts highlight the importance of ensuring a testator’ s intention is crystal clear when drafting a will

A critical issue is ensuring a will is not found wanting down the line Complying with strict formalities, like the capacity to act or setting out a donation, is critical

A recent case, Lawrence v Van Huysteen (3700/2023) [2024] ZAECQBHC 52 (September 3 2024), highlights the importance of formalities concerning donations

The case concerned a donatio mortis causa, one of the valid forms of the pactum successorium, which is an agreement regulating the succession of a person ’ s estate upon their death

A mother and daughter (applicant and respondent, respectively) had been reunited late in the applicant’ s life after many years of being

apart without any contact

The applicant moved to the UK around 2009 and returned to SA during November 2019, after separating from her husband On arrival in SA the applicant stayed with the respondent

ENSURE YOUR WILL IS CONCISE, TO THE POINT, UP TO DATE AND DRAFTED BY A COMPETENT PERSON

and her family The applicant instituted an action for divorce against her husband around January 2020, but before the divorce action could be finalised the applicant’ s husband died Upon his death the applicant became the sole heir in her late husband’ s estate, which comprised about R10m (more than £770,000) Unfortunately, the court heard that the applicant’ s

windfall then invited discord into what could have been a harmonious relationship between mother and daughter in the applicant’ s golden years

The applicant launched a so-called Mareva injunction application in July 2022 against, inter alia, the respondent, which resulted in an order directing the return of certain funds to the applicant By then, the relationship between mother and daughter had soured

As main defence, the respondent alleged that although the property was viewed as an early inheritance, this was not done on the basis of a donatio mortis causa but as a gift an inter vivos donation The court dismissed the application and noted that it is settled that our law requires a donatio mortis causa to be executed in accordance with the statutory formalities which apply to the execution of a will and it is common cause that the donation by the applicant was not executed in this manner

Another recent case, MEK and Another v Pokroy NO,

also highlights the risks for families when wills are not drawn up properly It also shows the devious side of human nature, when ailing testators can be taken advantage of

The plaintiff in this action, a chartered accountant and a retired pilot, contested the validity of several wills executed by her deceased father a few months prior to his demise after he was diagnosed with pancreatic cancer and in terms of which the plaintiff was excluded Notably, an ex-wife divorced from the deceased for 17 years was nominated as a beneficiary

The wills conveniently revoked a will which includ-

ed the plaintiff as a beneficiary that was executed by the deceased prior to his diagnosis

Fortunately, the court smelt a rat It found that due to his vulnerability, the exwife’ s dominance and his susceptibility to capitulate under pressure and instigation, the testator’ s wishes were replaced with the wish-

THIS CASE SHOWS THE DEVIOUS SIDE OF HUMAN NATURE, WHEN AILING TESTATORS CAN BE TAKEN ADVANTAGE OF

es of Ms W, such that the will does not reflect his wishes but that of Ms W who was actively involved in the arrangement for the execution of the wills, deciding on the beneficiaries and the manner of devolvement of the deceased’ s estate Through deception and exertion of pressure on the deceased, the ex-wife was one of the beneficiaries under the will to the exclusion of the deceased’ s other natural heirs

These types of battles become nasty when they happen, and it is vital to get all your legal ducks in a row by ensuring your will is concise, to the point, up to date and drafted by a competent person

Discipline balancing act on a digital tightrope

Jonathan Goldberg & John Botha Global Business Solutions

In the blink of an eye, the landscape of workplace communication has transformed

As we plunge deeper into the fourth industrial revolution, employees are no longer just workers they re digital citizens, constantly connected through a web of electronic platforms, social media and intricate systems

The speed at which this digital revolution is unfolding is nothing short of breathtaking Consider this: it took Netflix three-and-a-half years to amass 1-million subscribers Chat GPT? A mere five days And Threads? An astonishing five hours

This breakneck pace isn t just changing how we work, it s fundamentally altering the very fabric of workplace dis-

cipline Employers are finding themselves in a frantic race, struggling to stay ahead of the curve in preventing misconduct while simultaneously grappling with the need to address issues fairly and swiftly It s a high-stakes balancing act, and the tightrope is getting thinner by the day

LEGAL LABYRINTH

As if the technological challenges weren t enough, employers must now navigate an increasingly complex legal landscape In SA, a plethora of laws come into play:

● The Protection of Personal Information Act (Popi Act);

● The Promotion of Access to Information Act (Paia);

● The Cybercrimes Act;

● The Prevention and Combating of Hate Crimes and Hate Speech Bill; and

● The Employment Equity statutes

Each of these legal frame-

works adds another layer of complexity to the already daunting task of managing workplace discipline in the digital age But that s not all employers must also set their own standards of conduct through policies and practices governing user access, online behaviour and data protection

SOCIAL MEDIA CONUNDRUM

Perhaps the most vexing challenge of all is the thorny issue of social media conduct Gone are the days when an

EMPLOYERS WHO FAIL TO ADAPT RISK FINDING THEMSELVES ON THE WRONG SIDE OF BOTH THE LAW AND PUBLIC OPINION

employee’ s behaviour outside of work hours was strictly their own business

Today, a single ill-conceived post can ricochet across the internet, potentially tarnishing a company s reputation in minutes

Recent labour court decisions have made it crystal clear: posting inappropriate content on personal social media accounts, even outside of working hours, is not a getout-of-jail-free card If an individual can be traced back to their employer, and if their conduct could sow discord in the workplace, they may find themselves facing serious consequences

CALL TO ACTION

So, what s an employer to do in this brave new world? The answer is clear: get your house in order, and fast This means:

● Developing comprehen-

sive, up-to-date policies;

● Revising disciplinary categories to reflect the digital reality;

● Conducting regular awareness creation sessions;

● Investing in emotional intelligence (EQ) training; and

● Implementing impact assessments to continually review and refine your approach

But here s the kicker: none of this matters if you re leaving your employees behind

With projections suggesting that 50% of employee skills will be obsolete within three years, employers have a moral and practical imperative to invest in continuous learning and development

THE BOTTOM LINE

The digital revolution has brought unprecedented opportunities for connection, collaboration and innovation

But it has also ushered in a

new era of complexity when it comes to workplace discipline Employers who fail to adapt who cling to outdated policies and practices risk finding themselves on the wrong side of both the law and public opinion

The time for half measures and Band-Aid solutions is over

To thrive in this new landscape, employers must be proactive, adaptable and, above all, fair They must strike a delicate balance between protecting their interests and respecting their employees rights It s a tall order, to be sure But in a world where a single tweet can make or break a company s reputation, it s an investment no forward-thinking organisation can afford to ignore

The digital tightrope awaits Are you ready to walk it?

/123RF TADANOE

BUSINESS LAW & TAX

Software in computer programs: a local judgment

• Companies face off in high court over alleged copyright infringement

Delene Bertasso ENS

This article discusses a recent South African judgment dealing with alleged copyright infringement of a computer program, Emisha Software (Pty) Ltd v Servsol Software Solutions CC and others, June 6 2024, Ntlama-Makhanya

AJ The judgment offers a basic overview of South African copyright law as it now is, which readers may find helpful, noting that the copyright legislation is in the process of being amended and modernised

The applicant is Emisha Software which considers itself to be the sole owner of a computer program known as the Insurance Guard System program (IGS) Emisha felt that its copyright in the IGS program had been infringed by a company called Servsol Software Solutions CC, the respondent Emisha launched high court proceedings in which it sought, inter alia:

● An interdict; and

CERTAIN DEFINED WORKS SUCH AS COMPUTER PROGRAMS ARE ELIGIBLE FOR COPYRIGHT UNDER THE ACT

● An order for an enquiry into the damages suffered, or a reasonable royalty to which it is entitled as a result of the unlawful infringement of its copyright Servsol defended the case, denying that Emisha has exclusive ownership of the IGS program It claimed that it is a co-owner of the IGS program, following an informal agreement and a relationship with Emisha that has run for some 14 years and involved substantial fees

The IGS program is, according to the judgment, “designed to conduct business in the field of debt counselling (it) calculates insurance quotes, manages and

issues policies, manages bulk policy replacements, and allocates and manages premiums on behalf of the insurer in accordance with the regulatory requirements Ultimately, it is a set of instructions fixed or stored in a way, when used, (in)directly in a computer, directs its operation to bring about a result It accordingly constitutes a computer program as defined in the Copyright Act 198 of 1978 ”

It was alleged that the IGS program was first released towards the end of 2016, and that Servsol, described as the “developer” of the program, does not own the copyright but that the copyright belongs to Emisha, which has the exclusive right to reproduce, adapt and broadcast it Emisha discovered, however, that Servsol had been loading new clients onto the ICS program without its consent Emisha also discovered that it had lost access to the IGS program in June 2023, while it was still paying Servsol a significant fee

Acting Judge NtlamaMakhanya started with cer-

OWNERSHIP RIGHTS

tain observations on copyright in SA The judge referred to the judgment of Judge Harms in the Supreme Court of Appeal (SCA) case of King v South African Weather Services (716/07) [2008] ZASCA, and made these observations:

● Copyright is a creature of statute and has to be found within the four corners of the Copyright Act 98 of 1978

● Certain defined works such as computer programs are eligible for copyright under the act

● In the case of a computer program, the author is “the person who exercised control over the making of the computer program”

● The author of a work that attracts copyright is usually the first owner of the copyright, although this is not always the case An exception, which applies to computer program, among others, concerns the case of a work made in the course of the author s employment by

another person under a contract of service”

● The exclusive rights of the owner “depend on the nature of work In the case of computer programs, the important rights are those of reproduction, adaptation and rental ”

● In addressing the problems associated with computer programming the Copyright Act defines a computer program to include “ a version of the program in a programming language, code or notation different from that of the program, or a fixation of the program in or on a medium different from the

THE AUTHOR OF A WORK THAT ATTRACTS

COPYRIGHT IS USUALLY THE FIRST OWNER OF THE COPYRIGHT

medium of fixation of the program”

● The foundation for an interdict (injunction) based on copyright infringement is the following: a clear right to stop the alleged copyright infringement; conduct on the part of the respondent that constitutes copyright infringement; no alternative remedy to satisfy the claim see in Claasen v TEC Novation Solution (Pty) Limited (2017/40521) [2018] ZAGPPHC para 7)

Regarding co-ownership of the copyright, the judge held that “the first respondent admits that it is not the owner and does not have any right in the IGS program Thus, this court is of the view that the first respondent has not satisfied the requirements of coownership in that there is no legal basis upon which coownership could be claimed The application for an interdict was, accordingly, granted