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Dividend Withholding Tax

by Nicci - Posted 17 January 2012

Secondary Tax on Companies (STC) will be replaced by a Dividend Withholding Tax (DWT) as from 01 April 2012.    A company declaring and paying a dividend will be liable to withhold a dividend tax of 10% of the amount paid to a shareholder.   The amount must then be paid to SARS by the last day of the month following the month in which the dividend was paid.

A company does not need to withhold dividends tax if it receives a written declaration that the shareholder is entitled to an exemption from the tax.  

The new tax has extended the personal liability of directors of private companies though - directors are personally liable where the dividends tax is not withheld and paid by the company.

Dividends paid to the following entities are exempt from dividends tax::

1.    A company that is resident in South Africa.

2.    The Government or a Municipality.

3.    A Public Benefits Organisation.

4.    A rehabilitation trust.

5.    A Pension or Provident Fund or a registered Medical Scheme.

6.    A shareholder in a registered micro business.

7.    A shareholder that is a natural person and the dividend is a transfer of an interest in a residence (available until 31 December      2012).

 

 

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time is ticking...

by Ashley - Posted 02 December 2011

 

 
The deadline is fast approaching for businesses to submit their Promotion of Access to Information Act manuals. Should a business fail to submit their manuals on or before 31 December 2011 they may face the risk of a fine and/or imprisonment.
Which business must submit a manual?
In terms of the Promotion of Access to Information Act(“the Act”) all former and existing  sole proprietorships, partnerships, companies and close corporations are obliged to prepare and publish manuals which explain to the public what records that business holds and how to access those records.
The manual is a roadmap of the business and is commonly referred to as a Section 51 manual.
Who is responsible for ensuring that a business complies with its obligations in terms of the Act?
The Act refers to the head of a business which means it is either the natural person in the case of a sole proprietorship, a partner in the case of a partnership, the CEO of a company or the member of a close corporation, who is solely responsible for ensuring compliance.
What information should the manual contain?
Generally, the manual should include:
1.    The business postal, street and email address as well as a telephone and fax number;
2.    The description of available records generated by the business stating those which are automatically available and those that are available on request;
3.    Details outlining the request procedure;
4.    Details of the head of the business i.e. CEO, partner, managing member;
5.    Remedies available if a person’s request for information from the business is not met;
6.    Details facilitating a request for access to a record.
How and where are the Section 51 manuals submitted?
The Section 51 manual must be submitted to the Human Rights Commission head office. A copy of the manual may be submitted electronically but must be followed by a hard copy of the original.  

Should you require any assistance and/or simply a guide to preparing a Section 51 manual please do not hesitate to contact us on (021) 465-9175.  

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The ‘distinctiveness’ of a trade mark: an important factor

by Ashley - Posted 27 October 2011

 

 
The Apartheid Museum which is located near Gold Reef City in Johannesburg was launched in 2001 and since then has become a well-known institution.
It has also been the subject matter of intense litigation, the most recent of which came before the South Gauteng High Court in South African Apartheid Museum at Freedom Park v Stainbank and Another.
Prior to the establishment of The Apartheid Museum the trade mark THE APARTHEID MUSEUM was registered in Arnold Stainbank’s favour in 1998. Arnold Stainbank accused the South African Apartheid Museum of stealing his idea of an apartheid museum and alleged that they were infringing the trade mark registered in his favour.
The South African Apartheid Museum challenged Stainbank’s rights to the exclusive use of the words THE APARTHEID MUSEUM and asked the court to order the Registrar of Trade Marks to expunge the registered trademark from its records.
Stainbank tried to argue that “the apartheid museum” had been his very own, original idea for several decades and, adoringly, he should enjoy exclusive use of the expression contained in the trademark. The Court was quick to point out that apartheid had formed part of the ‘collective consciousness’ of all South Africans and that the ‘memory’ was owned by all the people of South Africa, collectively. Therefore it could not be the subject of ownership by private persons and the memory was incapable of being stolen.
In terms of section 9 of the Trade Marks Act a trade mark must be capable of distinguishing the goods or services of a person in respect of which it is registered or proposed to be registered from the goods or services of another person either generally or subject to limitations. Should a trade mark fail the distinctiveness test it will not be registered.
The Court turned to consider whether the words “the apartheid museum” had the quality of distinctiveness.
The Court held that the words “the apartheid museum” did not stand apart from the ordinary, everyday use which members of the public have adopted or were likely to adopt to describe a similar service provided by another trader. Instead members of the public were likely, naturally and spontaneously, to adopt the words “the apartheid museum” when referring to any museum established with a view to focusing on apartheid. Therefore the words “the apartheid museum” were inherently incapable of distinguishing one apartheid museum from another.
The Court therefore found that Stainbank’s claim to have the exclusive use of the words “the apartheid museum” could not be justified and ordered that the trade mark be expunged from the Registrar of Trade Marks records.

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Two cabinet ministers given the boot

by Ashley - Posted 24 October 2011

 

President Jacob Zuma announced a cabinet re-shuffle in which two ministers have lost their jobs following damning reports by the public protector.
Sicelo Shiceka, the minister of co-operative governance and traditional affairs and Gwen Mahlangu-Nkabinde, the public works minister, were given the boot.
Mr Shiceka, went on sick leave in February this year and while on leave he misspent about R1 million on hotel accommodation and a trip to Switzerland, allegedly to visit a girlfriend imprisoned for a drug-related crime.
Mr. Shiceka’s behaviour amounts to gross misconduct and unfortunately employers in the private sector are confronted with similar problems.
In terms of the Labour Relations Act an employee may be dismissed on one of the following grounds: misconduct, incapacity or operational requirements, otherwise referred to as retrenchments.
Examples of misconduct include abusive language, dishonesty, drinking on duty, drug use and long periods of absence from work.
A dismissal must be BOTH procedurally and substantively fair.
Should you require advice in this regard please do not hesitate to contact us.

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Not a good day for Multichoice and TopTv

by Ashley - Posted 21 October 2011

 

The National Consumer Commission has instructed Multichoice and TopTv to redraft contracts entered into with customers as they do not comply with the provisions of the Consumer Protection Act.
The Commission is demanding further that Multichoice and TopTv break down the prices for each channel, and group channels into genres, making it possible for customers to pay per channel.
The compliance notices have been sent to Multichoice and TopTv and the companies are considering whether to appeal to the National Consumer Tribunal to set aside or modify the notices.

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Goodwill of a business-something worth protecting

by Ashley - Posted 20 October 2011

 

Recent court cases have emphasised the importance of protecting the goodwill of a business, particularly when that business is sold as a going concern. 
The term ‘goodwill’ has proved difficult to define and is capable of different meanings, depending on the context.  However, in most instances it means the following:  ‘the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force which lures or entices clients or potential clients to support a particular business.’ 
Buying a business is an exciting new chapter in any businessman’s life. It can however, quickly turn into a nightmare if the seller of that business opens up shop around the corner to compete with you. The law creates the necessary mechanism to protect the buyer in this situation and the cases below demonstrate why a Restraint of Trade Agreement is vitally important.
In RICAMA CC v Twynham, a case which came before the Eastern Cape High Court in June 2011, RICAMA CC had purchased the business of a restaurant under the name and style of ‘Bella Vita’ and a bed and breakfast business from Ms. Twynham.
A restraint of trade clause was included in the Agreement of Purchase which prohibited Ms. Twynham from directly or indirectly engaging in a business or activity similar to the business carried on by RICAMA CC, within the City of Grahamstown and Makana Municipal area for a period of three years.
Shortly after Twynham sold her business to RICAMA CC she opened up a sushi bar within a radius of 3 kilometres of “Bella Vita” restaurant.
RICAMA approached the Court in an attempt to enforce the restraint of trade. The court held that the sushi bar opened by Twynham operated as a restaurant and was therefore subject to the restraint of trade clause. The Court found further that Twynham’s conduct amounted to a breach of the restraint and an interdict was granted against Twynham.
In September 2011 another matter came before the Supreme Court of Appeal whereby the Court had to decide whether a restraint of trade was enforceable or not. In Van Der Watt and Another v Jonker and another, Mr. Jonker had established the following businesses:
1.       Agriwen (Pty)Ltd, which specialised in the sale of agricultural products to farmers and the distribution of Engen Petroleum Products in certain areas of the Free State province;
2.       Agri-petroleum which specialised in the sale and distribution of Engen Petroleum products under the Zenex brand within certain areas of the Free State namely, Bothaville, Bultfontein and Virginia; and
3.       Agri-diesel, which specialised in the sale and distribution of Engen Petroleum Products to areas of the Free Stat not serviced by Agri-petroleum.
In 2005 Jonker and Van Der Watt started a new business in Randfontein selling and distributing Sasol Petroleum Products, mostly to industrial clients (the Agri group business distributed Engen petroleum products, mostly to farms).
In terms of a written agreement concluded between Jonker and Van Der Watt it was agreed that Van Der Watt would become the sole shareholder of the company which owned the Randfontein business and Jonker would become the sole shareholder of the Agri Group.  Jonker would pay Van Der Watt R 2 million and the agreement would include a restraint of trade clause.
In terms of the restraint of trade Van Der Watt was restrained for a period of 10 years from being involved in a business entailing the trading, storage, handling, sale, marketing or distribution of fuel, oil and/or related products in the areas serviced by the Agri group i.e. those particular parts of the Free State, for a period of 10 years.
Despite the restraint of trade Van Der Watt solicited customers of the Agri Group and he traded in areas serviced by Agri group under the name of Dynamic Fuel on both the distribution and retail sides. The Court held that the purpose of the restraint was to protect the goodwill of the business and that it was enforceable. The Court held further that Van Der Watt’s conduct constituted a breach of the restraint and the interdict granted against him was upheld.  
 

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CCMA Guidelines for Misconduct Arbitrations

by Nicci - Posted 16 October 2011

The CCMA have issued guidelines, in terms of the Labour Relations Act, which must be taken into account by Commissioners conducting arbitrations for dismissal for misconduct cases.   

The Guidelines deal with how an Arbitrator should:

-conduct arbitration proceedings

-evaluate evidence for the purpose of making an award

-assess the procedural fairness of a dismissal

-determine the remedy for an unfair dismissal

The rationale behind issuing these guidelines is to promote consistent decisions coming through from arbitrations dealing with misconduct dismissals.  The guidelines also reinforce the principle that the onus lies with the employer to prove the fairness of the dismissal.

A link to the Guidelines can be found here

 

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Public Officers

by Nicci - Posted 13 October 2011


THE ROLE OF A PUBLIC OFFICER

Every company carrying on business or having an office in South Africa must at all times be represented by an individual, the public officer,  who must be resident in South Africa.  If you are a director of a private company, or a member of a close corporation,  you may also serve as the entity's public officer.

The public officer, an appointment which is required in terms of Section 101 of the Income Tax Act 58 of 1962, is essentially responsible for representing the company in its dealings with SARS.   The individual must be appointed within one month after the company commences carrying on business or acquires an office in South Africa.  

It is a requirement of the Income Tax Act that the position of public officer must be kept filled at all times.  Such vacancies as may arise have  to be addressed by a company  as a matter of priority, by appointing a new public officer and notifying SARS of the change.  This must be done within fourteen days of the change occurring.   Section 101(4) of the Act provides that if there is no such appointment, the public officer of the company shall be the managing director, director, secretary or other officer of the company as the Commissioner for Inland Revenue determines.

The duties and responsibilities of the public officer include the following:

  • Managing the income tax affairs of the company, including the submission of tax returns, answering any questions or providing explanations which may be required to determine the tax liability of the company and  the payment of tax on behalf of the company.
  • The registration of the company as an employer.
  • The registration as a VAT vendor.

Individuals who serve as public officers should ensure that there is full compliance by the company with the requirements of SARS. 

The public officer is exposed to significant risk in carrying out his duties.  By signing returns, he is declaring that all the information provided therein is true.  Should it subsequently be found that this is not the case, the public officer may have action taken against him in his personal capacity.   If a company fails to comply with the requirements of the Income Tax Act,  the public  officer will be held responsible by SARS. 

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Unfair dismissals

by Nicci - Posted 09 October 2011

2 interesting unfair dismissal cases out of the Johannesburg Labour Court and CCMA were heard recently. 

Automatic termination clause:   can you contract out of the right not to be unfairly dismissed?

The first case (Mahlamu v CCMA & Others (2011) 4 BLLR 381 (LC) dealt with the validity of a contract of employment containing a clause which allowed the employer to automatically terminate the contract if he no longer needed the employee “for whatsoever reason”. The company could at any time, for any reason, simply state that his services were no longer needed.

Mr Mahlamu was employed as a guard by a security company.  When a client cancelled the contract with the company, Mahlamu was told that his services were no longer needed because there wasn’t another position for him.   The Court had to decide if contracts of the type between Mahlamu and the company were allowed by the Labour Relations Act.  It said no - this kind of clause in a contract had no legal effect because it tried to contract out of the dismissal provisions in the Labour Relations Act.  

Contracts between temporary employment services (labour brokers) and their employees often include “automatic termination” clauses which typically provide that the contract terminates automatically if the broker’s client no longer needs the services of the employee – a clause that allows a broker’s client to undermine the right not to be unfairly dismissed is against public policy.

This kind of clause must also be distinguished from “fixed term” contracts, which provides for its termination on the happening of a future specified event, eg. on completion of a project – this is not a dismissal in terms of the Labour Relations Act.

Incompatibility:

Ms Sondio was employed by the University of Fort Hare as the PA to the Dean of Law.  A number of complaints were received about her conduct, eg. fighting with a colleague and circulating derogatory emails about her head of department.  The University decided that the only way to resolve the conflict was to transfer her to another job, but no other departments would accept her.   She was given a notice to consult about retrenching her and when this failed, the University dismissed her for incompatibility.    Ms Sondio then filed a claim with the CCMA for unfair dismissal.

Incompatibility is recognized as a form of incapacity or misconduct, depending on the circumstances.  In either case though, the employer must first determine whether the employee was at fault.   The commissioner found that the University should have charged Ms Sondio with serious misconduct.  Instead, it simply accepted that the relationship between her and the Dean had broken down and decided to transfer her without properly investigating the allegations.   If the case had been treated as incapacity, then Ms Sondio should have been offered counselling.    

The University’s decision to retrench Ms Sondio showed that it did not regard her as being at fault.  The dismissal was therefore substantively and procedurally unfair and Ms Sondio was reinstated. 

 

 


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Consumer watchdog's bark turns into a bite

by Ashley - Posted 05 September 2011

The Consumer Protection Act affords consumers specific forms of relief when goods they purchase are defective.

The National Consumer Commission recently gave BMW South Africa  and one of its Johannesburg dealerships 15 days to replace a customer’s defective E 82 135i Coupe, worth R 450 000.00 or face being fined 10% of its annual turnover.  The Commission further ordered BMW South Africa to replace a broken armrest  on a 2008 Z4 M Coupe or risk being fined R 500 000.00.

A Fiat dealership was recently ordered to refund a customer or replace a Fiat Punto Active which had problems with the engine and tachometer a day after it was delivered.

Although BMW and the Fiat Dealership have stated that they will file objections to the Commission’s decision it is clear that the Commission is flexing its muscles and will in future not be shy to dish out hefty fines.

As a business owner it is important to ensure that your company’s policies, procedures and documentation comply with the new act.

 

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