DIRECTORS’ ROLES AND RESPONSIBILITIES UNPACKED

The duties of directors of companies are found in the common law and in the Companies Act.

In terms of the Companies Act, not only registered directors owe these duties towards the company. The duties now also extend to alternate directors, prescribed officers, and members of board committees. This position naturally has far reaching implications for these officers of companies who do not necessarily have a seat on their company’s board.

As a quick reference guide, directors owe the following fiduciary duties to their company:

  1. The duty not to exceed the powers as set out in the Memorandum of Incorporation;
  2. The duty to exercise their powers for a proper purpose;
  3. The duty to exercise an independent and unfettered discretion;
  4. The duty to avoid conflicts of interest, which includes:

4.1    The duty not to make secret or incidental profits;

4.2    The duty not to take up corporate opportunities for personal gain;

4.3.   The duty not to compete with the company;  and

4.4.    The duty not to misuse confidential information;  and

  1.  The duty to act with care, skill and diligence.

Where a director breaches these duties and the breach causes harm to the company, the company will amongst others be able to claim damages from the director.

By disclosing his interest in another business a director may avoid breaching his duty to avoid a conflict of interest, provided the disclosure is done in writing and sets out the nature and extent of that interest.

The duty to act with care, skill and diligence can likewise be regarded as discharged if a director makes appropriate enquiries and obtains advice from experts and skilled advisors-  this being the application of the business judgment rule.

Whilst fiduciary duties may be regarded as onerous and in some instances even deter persons to accept the responsibilities thereof, it is regarded as necessary and in fact an imperative to ensure effective boards lead their companies to sustainability and cultivating good corporate citizenry.

For specialist advice on directors’ duties, training and induction sessions for directors contact Cindy Jonker who heads up the Corporate and Commercial Law Department at Goldberg &  de Villiers Inc. on 041 501 9806 / cindy@goldlaw.co.za

Do I really need a Will?

“I have no plan on dying any time soon!”

“Well, everything will go to my wife anyway when I die, so it doesn’t matter!”

“Oh yes,  we do have a Will,  we did one when we got married 30 years ago!”

“A Will? I don’t have much,  why would I need one?”

“We’re sorted – the bank did one for us a year or two ago when we got our bond”

Believe it or not,  these are commonly heard expressions,  when people are asked if they would consider preparing a Will –  or revising an existing Will.

Discussion of ones Will is often seen as an unpleasant, or slightly macabre activity, as if it presupposes that one is at death’s door. The complexities of ones family life may make the discussion difficult. Perhaps you feel that your estate does not warrant a Will, as it is fairly small, or that, being married with children, you would rather let the law – whatever it is – take its course should you die.

The fact is,  however,  that having a valid, up-to-date, legally sound Will is vital, whatever ones age, family circumstances, or financial standing.

A Will drafted many years ago will probably not provide adequately for your current circumstances. Dying without a Will can mean that your estate must be distributed according to a formula prescribed by the Intestate Succession Act, normally to ones closest relatives. This formula may mean that people you would like to benefit, do not, and those that do, must share assets in a way that simply does not make sense –  or even have to pay in money to “level the scales”. The administration of your Estate may also be delayed.

Changes in the law and in the tax system, may mean that you, your Estate and your family, may be better served with a revised Will – in fact, it is always prudent to relook at your Will at least annually, to ensure that it still makes legal sense!

A Will may well be the most important document you will ever sign, and it needs a professional to draft it, to ensure that it not only expresses your wishes, but “covers all bases”, makes legal sense – and critically, meets the legal formalities, so that it is valid and cannot be challenged!  Attempting to draft your own Will is playing with fire!

Ask yourself the following questions:

  • Have I had any children since I last executed a Will?  Are they properly provided for in the event of my death? Is a trust provided for their inheritance, and guardians nominated? Or have these children, in their turn, grown up, married and had children of their own?
  • Have people mentioned in the Will, died or otherwise moved out of my life?
  • Do I mention assets in my previous Wills, which have since been disposed of?
  • Did I draw my Will when I was young, before I had built up my Estate –  has my Estate changed in such a way, that I should plan to ensure that my Estate and heirs are not burdened with a heavy tax bill? In other words, is my Estate plan and Will, tax efficient?
  • Are the conditions in my Will practical or will my Executor be forced to sell assets or negotiate a complex redistribution of my assets, with my heirs?
  • Do I want my Estate to be administered by experienced professionals, who offer personalised service at negotiable rates?

At Goldberg & de Villiers, we are able to offer clients a seamless, cost-efficient personalised service in this important field – from Estate planning, to preparing or revising your Will, to dealing with the intricacies of administering your Estate, as, or on behalf of your Executors.

Never before has the importance of revising ones Will regularly been so important. More than ever, the value of a cost-efficient, personalised service in Estate administration – as opposed to entrusting ones Estate to a faceless corporate, or an inexperienced administrator – has been proven.

We are proud to offer the services of our Estate Planning and Administration Department, headed by director Nicholas Mitchell, who has more than ten years’ experience specialising in this field of law, as well as specialist qualification in Deceased Estates Practice. The Department benefits from operating in a firm with an experienced team of attorneys and paralegals, whose expertise is at the department’s disposal. Our clients can benefit from the specialised knowledge of our 16 professionals in the various fields. We will consult with you at our comfortable offices, conveniently located in the historic heart of Port Elizabeth, or at your home or office, as you prefer – and navigate with you these important and inescapable issues.

Very importantly, we can offer the necessary flexibility on fees, so you can have peace of mind when planning your future.

Contact Nicholas on 041-501 9812 or 084 768 5942, or e-mail him on nicholas@goldlaw.co.za to set up a consultation today.

It will be our pleasure to do your business!

COPYRIGHT IN CYBERSPACE: NEW GUIDELINES FOR ONLINE PUBLISHERS

“Is a stolen copyright a copy-wrong?” – (Anonymous)

The high profile “Moneyweb v Fin 24” High Court judgment is significant for all online publishers. In a nutshell, Fin 24 was ordered to pay damages to Moneyweb for copyright infringement in respect of one article, but the Court found against Moneyweb in regard to six other articles and ordered it to pay 70% of Fin 24’s legal costs. Both sides in the litigation have claimed victory but the important message for us all is this – original creative works are protected by copyright even when posted online.

Strong protections – a summary

Let’s start with our Copyright Act, which since 1978 has been protecting the creators of original works –  literary, musical, artistic, photographic, and more recently computer programming, website creation and the like –  from plagiarists. The idea of course is to encourage creativity, but without upsetting the balance between a creator’s rights and the public interest. Copyright protection kicks in automatically as soon as you create an original work.

No paperwork or registration is required, and you are covered internationally in all Berne Convention countries (map here) https://en.wikipedia.org/wiki/Berne_Convention#/media/File:Berne_Convention_signatories.svg).

To be protected you don’t have to mark your works with the copyright sign, but it’s good practice to do so, together with your name and the year of creation.

And if your copyright is infringed you can both claim damages from the copycat and put a stop to the infringement.

In cyberspace: What’s fair game? And is it enough to acknowledge source?

What has not been clear until now is the extent to which these protections apply to re-publishing online. The common misperception that anything on the Internet is fair game for wholesale re-publication without permission is of course totally incorrect, and now we have from our courts some solid guidelines which both the creators of online creative works, and those re-publishing them, need to pay heed to.

In outline (this is inevitably just a summary of some very complex legal issues, so seek advice on your specific case)

  • To qualify for protection the work must be “original” (resulting from “sufficient application of the author’s mind” rather than “slavish”copying), and it is for the creator to prove originality
  • It isn’t necessary to prove word-for-word plagiarism –  copyright is infringed where a “substantial part”of the work has been reproduced. The court will make a value judgment here, based on the work as a whole and “focusing more on the quality of what has been taken than on the quantity”
  • There are exceptions –  no copyright protection at all is given to things like legislation, political speeches and “news of the day that are mere items of press information” (this last being the aspect relevant to the Moneyweb case)
  • “Fair dealing” is a defence available to re-publishers of literary or musical works only for the purposes of research, private study, personal/private use, criticism/review, and (the aspect relevant to the Moneyweb case) the reporting of “current events”. A re-publisher claiming fair dealing must prove it, and again the court will make a value judgment on fairness after considering all the facts of each case. Where fair dealing has been proved, both the source and author must be mentioned by the re-publisher. The Court held that a hyperlink back to the original article, together with mention of the author’s name, is sufficient compliance.
  • Note however that acknowledging source –  for example via a hyperlink back to the original source –  doesn’t in itself establish fair dealing. Fair dealing has to be proved separately as above –  if it isn’t, the copyright holder’s permission to re-publish is essential.

Companies – How Private are Shareholders’ Details?

 “Privacy, like other rights, is not absolute. As a person moves into communal relations and activities such as business and social interaction, the scope of personal space shrinks” (Extract from judgment below)

All companies – big and small, public and private – must keep registers of their shareholders and directors. And, as the SCA (Supreme Court of Appeal)made clear recently, even “private” companies’ registers aren’t private at all.

An investigative journalist digs for detail

A financial journalist, investigating a controversial investment scheme, was tasked with investigating the shareholding structures of three companies.

The companies refused him access to their securities registers and he approached the High Court for assistance.

The companies asked the Court to exercise a discretion to refuse such access, and in hearing an appeal around this issue, the SCA has clarified the public’s rights as follows :

  • The public at large (including the media) have an unqualified right to inspect or copy those registers on payment of a statutory fee.
  • The motive of the person seeking access is totally irrelevant; nor does he/she have to show that the request is “reasonable”.
  • It is not necessary to comply with the requirements of PAIA (the Promotion of Access to Information Act) although of course PAIA can be a useful tool to force access to company documents other than these registers.
  • It is a criminal offence for a company to refuse such access or to “otherwise impede, interfere with, or attempt to frustrate, the reasonable exercise by any person” of these rights.

So what shareholder information is public and what is confidential?

A shareholder is only required to provide :

  • His/her name,
  • His/her business, residential or postal address, and
  • “An identifying number that is unique to that person”.

The shareholder can also voluntarily provide an e-mail address.

Confidentiality can be claimed – by either the company or the shareholder – for the e-mail address (if supplied) and for the identity number. Names and addresses are public, full stop.

Meter Wars – A Consumer Strikes Back

“You can’t fight city hall” (old idiom decrying the futility of trying to fight a bureaucracy?

You challenge the accuracy of a services account from your local municipality,  thus:  “Your meter must be wrong, no way was my consumption that high”.   The reply:   “We’ve tested the meter and it works fine. Pay up or face disconnection”.

Off to court you go.   Can you “fight city hall” and who has to prove what?

There’s good news here for consumers in a recent High Court decision dealing with just such a situation.

The R4.5m water claim and the disconnection

  • A municipality installed a new water meter at commercial premises
  • When read for the first time 18 months later,  it showed a spike of 13 times the historic average consumption measured by the old meter
  • Alarmed,  the consumer requested that the meter be tested.   The municipality duly removed it,  tested it,  reported that it functioned correctly,  and then (for an undisclosed reason? disposed of it
  • A third meter was installed.   Although the consumer’s business had by then grown substantially,  water consumption was shown at three times less than the quantities measured by the previous meter
  • The consumer had paid the water account according to its own calculations. Nevertheless disconnection of supply followed,  and then the municipality refused to issue a clearance certificate when the property was sold.   In all the consumer was forced to make two payments totalling R16.5m, which it did under protest and with reservation of rights
  • Sued by the municipality for just under R4.5m, the consumer defended the action and counter-claimed for R9.5m (the amount it claimed to have overpaid).

Who must prove what?

Finding in favour of the consumer, the Court held that,  once the consumer had raised a bona fide (“in good faith”) dispute,  the onus was clearly on the municipality to prove that the meter had measured the water supply correctly and accurately.

That, held the Court,  it had failed to do –  its expert evidence concerning the testing was found to be unsatisfactory and insufficient.

The end result is that the municipality has to repay the consumer R8m – a substantial victory.

Consumers –  a critical factor

Note that a critical factor here was that when the consumer made the two disputed payments to the municipality it did so under protest,  without waiver or abandonment of any rights and without admission of liability that the amount was due.   Without those provisions, the onus would probably have been on the other foot, i.e. on the consumer to prove that the readings were not accurate.   That’s often going to be a near-impossibility when only the municipality has the legal right to test its meters and when it has control of all consumption data.   So pay nothing on a contested account without legal advice.

Municipalities –  what you must prove  

Make sure you can prove that meter tests comply fully with all prescribed requirements. And (this of course should go without saying)  don’t dispose of any contentious meters until litigation has been well and truly put to bed!

What To Do If A Debt Collector Comes Knocking On Your Door

SARS has appointed 3 debt collection agencies (currently named as CSS Credit Solutions, NDS Credit Management and Lekgotla Trifecta Capital Consortium) to chase up outstanding taxes.

But with reports of scamsters contacting taxpayers, pretending to be SARS officials or official debt collectors, and demanding immediate payment, SARS advises to Direct queries to the SARS Contact Centre at 0800 00 7277 (0800 00 SARS).  Any suspicious activity should be reported to the SARS Anti-Corruption and Fraud Hotline at 0800 00 2870

Outstanding tax, VAT or duties must only be deposited directly into SARS bank accounts.

For any tax related queries, contact our team on 041 501 9800.

Know the Zoning of your Property

The Spatial Planning and Land Use Management Act, 2013 (Act 16 of 2013), (the Act), came into operation on 1 July 2015. In order to give effect to the Act, municipalities must adopt land use schemes and by-laws to regulate zoning of land and procedures for land use management in their municipal areas.

It is important for property developers, business owners and property owners to take note of the imminent changes in land use management and the implications thereof.

These implications and changes include the following:

  1. New procedures will apply in respect of applications for the rezoning of property, consent uses or departures from the existing zoning scheme or, once adopted, a new land use scheme. New appeal procedures will also apply in respect of appeals.
  1. Municipalities must embark on public participation processes in the development of their new land use schemes before they replace existing zoning schemes. It will be important for property and business owners to take note when draft land use schemes are published for comment, as it may propose changes to zoning of land that may affect property rights. It will be important for property owners to submit comments, if their rights will be affected.
  1. A land use scheme must allocate a zoning or zoning category to each property in the municipal area. The zoning of a property determines the primary use and other ancillary uses that the property may be utilised for. The zoning also determines the restrictions or parameters within which the applicable use rights may be exercised or if the consent of the municipality is required for the use.
  1. It is an offence to utilise land in a manner other than prescribed by an applicable zoning scheme or land use scheme. It is therefore important for property owners, business owners and prospective property purchasers to understand what their property may lawfully be utilised for and the restrictions and parameters within which the applicable use rights may be exercised.

We recommend that prospective purchasers consult an attorney, who specialises in Property Law, to advise them regarding the zoning, restrictions in terms of the zoning or land use scheme, restrictive title conditions and servitudes applicable to the relevant property.

At Goldberg & de Villiers Inc, the Directors in our Property Law Department, namely Adri Ludorf, Tracey Watson-Gill and Nicolas Mitchell, assisted by Bardine Hall and a team of highly-qualified paralegals, will gladly assist you with any of your Property Law-related needs or, if assistance is required, to preparecomments for submission to a municipality on a draft land use scheme that may affect the zoning of your property.

DIRECTORS, MANAGERS – YOUR NEW RISK OF “CARTEL CONDUCT” CRIMINAL LIABILITY IS EVEN WIDER THAN REPORTED

“A cartel involves an agreement or concerted practice between two or more competitors to engage in fixing prices and/or trading conditions,  dividing markets and/or collusive tendering.   By artificially limiting competition that would normally prevail between them,  firms avoid exactly the kind of pressures that lead them to innovate, both in terms of product development and production methods. This results ultimately in high prices and reduced consumer choice. ” (Competition Commission)

Government’s determination to crack down on cartel conduct is evidenced in the newly-introduced criminal liabilities imposed on individuals by amendments to the Competition Act.   Offending businesses already face substantial penalties,  and now any director or manager of a business guilty of causing or permitting it to engage in a “prohibited practice” is also personally liable to prosecution,  risking heavy fines (up to R500,000) and/or imprisonment (up to 10 years).

A “prohibited practice” here means “directly or indirectly fixing a purchase or selling price or any other trading condition”,  “dividing markets by allocating customers, suppliers, territories,  or specific types of goods or services”, or “collusive tendering”.

Legal commentators are suggesting that even more severe sanctions (possible life imprisonment, blacklisting from public tenders etc)  imposed by separate anti-corruption legislation could also come into play.

Don’t forget also that these penalties for directors and managers personally are in addition to the existing and substantial penalties already faced by the businesses themselves.

Don’t take any chances here –  get advice before embarking on any course of conduct which might be regarded as falling foul of these provisions.

Contact our professional legal team on 041 501 9800.