EMAIL MANAGEMENT SYSTEM? GET IT BEFORE IT GETS YOU

If your company uses emails to communicate with clients, then it’s not enough to just rely on traditional ways of managing email, such as backing up emails periodically. There needs to be a well-equipped email management system in place that will keep your business safe.

The key point that relates to the heavy use of email, is the maintenance of the integrity of the email, and being able to prove that integrity. Unfortunately, you can’t simply do nothing and leave your email system as is and hope for the best. Firstly, it is important to understand the legal requirements. This includes the Electronic Communications and Transaction Act, 2002, or the ECT Act.

The ECT Act provides that information is not without legal force and effect simply because it is in electronic form. These are some of the rules set out by the ECT Act regarding electronic communications.

  1. An electronic document must be captured, retained and retrievable.
  2. Electronic documents must be accessible so as to be useable for subsequent reference, this includes the origin, destination, date and time it was sent or received.
  3. If a signature is required, it must be accompanied by an authentication service.

So what should you do?

All companies who wish to comply with the regulations should implement an effective email management system. The core requirements of a good email management system are as follows:

  1. The ability to monitor and intercept email;
  2. Effective capturing of all email;
  3. Cost effective storage of all email and efficient discarding of email that has lost its business value or is no longer required for legal or regulatory or compliance;
  4. Efficient and cost effective restoration of email;
  5. The ability to maintain the integrity of email and the contents thereof; and
  6. The ability to audit email use in order to be able to prove integrity.

Although it seems like a trivial matter, it is worthwhile to implement an email management system in your company. It will help protect your business in the event that you need a record of communication due to an incident or contract dispute. New regulations introduced by POPI will also make this a necessary part of how your company handles information.

Reference:

  • The Electronic Communications and Transaction Act, 2002

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

DOES YOUR BUSINESS NEED A LIQUOR LICENSE?

Liquor manufacturers and suppliers require a liquor license, as regulated by the National Liquor Authority. If your liquor registration has been cancelled, you cannot continue to trade. Trading without a license is an offence punishable by law.

What is the National Liquor Authority?

The National Liquor Authority is a regulatory body within the Department of Trade and Industry (the DTI) responsible for administering The National Liquor Act 2003 (Act No.59 of 2003).

What documents are required with my application?

  • A business zoning certificate for industrial purposed or a consent letter from the relevant municipality.
  • A comprehensive written representation in support of the application.
  • Any determination, consent approval or authority required by the Act.
  • A valid proof that the prescribed application fee has been deposited in the bank account of the Department of Trade and Industry.
  • A valid certified copy of ID of the applicant or a passport and trading business permit if the applicant is a foreigner.
  • A South African Police Services (SAPS) police clearance certificate not older than three 3 months from the date of issue.
  • If the applicant is a juristic person, valid copies of registration issued by the Companies and Intellectual Property Commission (CIPC) or any other relevant registration authority indicating the financial interest of all members, shareholders, partners or beneficiaries as the case may be;
  • A valid tax clearance certificate if the applicant is a juristic person issued by the South African Revenue Services (SARS) within twelve months from the date of application.
  • Verification certificate issued in terms of the Broad Based Black Economic Empowerment Act (B-BBEE).

A liquor licence is an extremely important document to possess for those who are planning on trading in, or manufacturing liquor. It is an official document issued to a premise on which liquor is to be sold or manufactured. It can be a time consuming and painstaking process for an individual to obtain a valid liquor licence on their own. There are many complicated legal requirements and steps to follow before a liquor licence can be granted. It is also critical to obtain the correct classification of liquor licence for the premises and/or occasion or event.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

WHO WILL TAKE OVER YOUR BUSINESS AFTER YOU’RE GONE?

Owning a business requires careful succession planning and is part of your estate planning as you have to determine who will succeed you, or who will purchase your shares, or who will be entitled to the income after your death. The future ownership of your business is at stake.

Partnership

A partnership automatically dissolves upon the death of a partner and the remaining partners will then have to dissolve it and divide the assets amongst them.

In the case of a company the shareholders may agree that:

  1. The remaining shareholders have a right of first refusal to purchase the deceased shareholder’s shareholding, as opposed to dealing with it in a will.
  2. The future of ownership of shares can be regulated by a written agreement between shareholders that is referred to as a “buy and sell” agreement and has an influence at the death of a partner or shareholder.
  3. The buy and sell agreement compels the executor of the deceased to offer the shares at a pre-determined price, and life policies between shareholders normally cover the purchase price.
  4. The remaining shareholders are the beneficiaries of the policy on the life of the deceased and use it to purchase the shares, normally pro rata to the shares they already own.
  5. Buy and sell policies fall outside the deceased estate and are not subject to estate duty provided that three requirements are met:
  • None of the premiums should have been paid by the deceased;
  • The shareholder relationship must have existed at the time of death;
  • A written agreement must exist.

…..6. When the skill and knowledge of a partner is essential for the survival of the business, “key man insurance” can be taken out on the life of such a partner or shareholder. The premiums are paid by the business and the benefit is paid to the business to prevent financial loss or to appoint and train a replacement.

Sole Proprietor

In the case of a “sole proprietor”, succession planning is dealt with in the Last Will and Testament.

  1. All the value of the business vests in the deceased estate.
  2. Planning is essential as the business terminates at death, although the executor may sell it as a going concern.
  3. It is a good idea to grant a right of first refusal to an associate, who can purchase the business and intellectual capital at the time of the death.
  4. A life policy can provide for cover on the life of the owner, with the associate being the beneficiary, and the proceeds at time of the death utilised to purchase the business.
  5. It deserves no debate that planning increases the benefit for the estate as opposed to closing the business down, where the assets will be worth far less.

Continued succession planning must be part of your business strategy to ensure your hard work benefits the right people.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

WHO MAY BE APPOINTED AS DIRECTOR?

Certain people are not eligible to be appointed as directors of a company. In this article we look at who is disqualified from being a director as well as the effects of the actions of such persons while still acting as director.

A company must not knowingly permit an ineligible or disqualified person to serve or act as a director, according to section 69(3) of the Companies Act 71 of 2008. “Knowingly” includes the situation where the company should reasonably have known that the person is ineligible or disqualified.

Section 69(7) lists the persons on which there are an absolute prohibition, being juristic persons, minors or any persons disqualified in terms of the Memorandum of Incorporation. Section 69(8) lists the persons that are disqualified on a temporary basis, being someone who has been prohibited by the court or whom the court has declared a delinquent, unrehabilitated insolvents, persons who were removed from an office of trust on the grounds of misconduct involving dishonesty, and persons who were found guilty of a criminal offence and imprisoned without the option of a fine, or were ordered to pay a higher fine for being found guilty of any dishonesty crimes.[1]

A question that arises here is what the effect would be of appointing a prohibited director. Section 69(4) says that a person immediately ceases to be a director if they are prohibited from being a director, but section 71(3) states that if a shareholder alleges that a person is disqualified then the person must be removed by a board resolution before they cease to be a director. This means that any act done by such a person, despite his disqualification, will be valid and binding on the company unless the third party who was involved in the act was aware that the person they were dealing with was disqualified.[2]

Section 162(5) (a)-(f) sets out the grounds for an order of delinquency. A court must make an order declaring a person to be a delinquent director if the person:

  1. consented to serve as a director, or acted in the capacity of a director or prescribed officer, while ineligible or disqualified to be a director;
  2. acted as a director in a manner that contravened an order of probation;
  3. grossly abused the position of director while being a director;
  4. took personal advantage of information or an opportunity, or intentionally or by gross negligence inflicted harm upon the company or a subsidiary while being a director;
  5. acted in a manner that amounted to gross negligence, wilful misconduct or breach of trust while being a director; or as contemplated in section 77(3) (a), (b) or (c);
  6. has repeatedly been personally subject to a compliance notice or similar enforcement mechanism;
  7. has been convicted of an offence at least twice, or subjected to an administrative fine or similar penalty; or
  8. was a director of a company or a managing member of a close corporation, or controlled or participated in the control of a juristic person that was convicted of an offence, or subjected to a fine or similar penalty, within a period of five years. [3] & [4]

If a person is declared a delinquent in terms of section 162(5) (a) or (b) it is unconditional and for the lifetime of the person. If a person is declared a delinquent in terms of section 162(5) (c)-(f) this is temporary for a minimum of 7 years.[5]

It is therefore very important, when appointing a director, to make sure that he is qualified in terms of the new Companies Act. One must do proper research about a person accordingly before appointing him as a director of a company because it is possible that if you do not do so, the company in which you are a shareholder may have to bear the consequences of the actions of this disqualified person.

Reference list:

  • Companies Act 71 of 2008
  • FHI Cassim et al Contemporary Company Law (2012)
  • [1] Section 69(7) – (8) of the Companies Act 71 of 2008.
  • [2] Section 69(4) and 71(3) of the Companies Act 71 of 2008.
  • [3] Section 162(5) (a)-(f) of the Companies Act.
  • [4] FHI Cassim et al Contemporary Company Law (2012) 435 – 437.
  • [5] FHI Cassim et al Contemporary Company Law (2012) 438.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

WHAT’S THE BUZZ ABOUT BUSINESS RESCUE?

If a company/close corporation is in financial trouble and all possible avenues to save the business have been exhausted, there is one last option available to save the business: it can lodge an application for business rescue at the CIPC. In order to qualify for business rescue proceedings, the business must satisfy the requirements as set out in the next paragraph.

A company/close corporation will only be considered as a business rescue candidate if all three the following requirements are met:

  • The decision to start business rescue proceedings must be taken before any liquidation proceedings have been instituted against the business.
  • The business is financially distressed.

A business is seen as financially distressed if:

  • It seems reasonably unlikely that the business can pay its debts in the normal course of business for the next six months, or
  • It seems reasonably likely that the business will be insolvent in the next six months.
  • There seems to be a reasonable chance of rescuing the business.

What is the aim of a business rescue plan?

The aim of placing a company/close corporation under business rescue is to give the business some breathing space to implement the business rescue plan and give the business a fair chance to become a going concern again.

Alternatively, if the business is liquidated despite the business rescue proceedings, the aim is to hopefully have a higher return available for the creditors and shareholders than would have been the case if the business was liquidated before undertaking any business rescue proceedings.

To give a business the maximum chance of recovering its finances and to continue operating as a solvent enterprise, the business rescue plan normally restructures a business’ assets, liabilities and equity, as well as its way of doing business.

Who can be appointed as a business rescue practitioner?

There is a list of licensed business rescue practitioners available on the CIPC’s website.

What does a business rescue practitioner do?

The appointed business rescue practitioner will investigate the business’ situation and propose a business rescue plan. After the business rescue plan has been approved by the creditors and shareholders, the business rescue practitioner will implement the plan. The reason why the creditors and shareholders must approve the business rescue plan is that they will withhold their rights against the business to claim payment as long as the business is operating under the business rescue plan.

After implementing the business rescue plan, the business rescue practitioner will temporarily oversee and manage the business together with the current management.

The business rescue practitioner also takes over dealing with the creditors and shareholders. In addition, the business rescue practitioner will communicate with registered trade unions which represent employees of the business. If there are employees who are not members of any registered trade union, the business rescue practitioner will deal with these employees or their representatives as well.

The first step to start with a business rescue is for a business to file a notice with the CIPC that it wants to start with business rescue proceedings. The rest of the business rescue process and the business rescue documents which are required to be submitted to the CIPC, is set out on the CIPC’s website.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)

Reference list:

REQUIREMENTS TO RESTORE A DEREGISTERED COMPANY

There are various circumstances in which a company (or close corporation) can become deregistered at the CIPC.

  1. The company itself can apply for deregistration at the CIPC, for any number of reasons.
  2. If a company has not submitted and paid its annual returns for more than two successive years, the CIPC will inform such a company of the fact and the intention of the CIPC to deregister said company. If such a company does not take any steps to remedy the situation, the CIPC will proceed to finally deregister it.
  3. If the CIPC believes that the company has been inactive for seven or more years.

However, it is possible to restore such a company or close corporation which has been finally deregistered, but all outstanding information and annual returns (including the fees) will have to be lodged with the CIPC. An additional R200 prescribed re-instatement fee must also be paid.

Recently, the CIPC has set additional requirements to do this, which also impacts on the time, administration and cost to restore such a company. These requirements took effect from 1 November 2012.

The steps and requirements for the re-instatement process are:

  1. The proper application CoR40.5 form Application for Re-instatement of Deregistered Company must be completed and submitted, originally signed by the duly authorised person.
  2. A certified copy of the identity document of the applicant (director / member) must be submitted.
  3. A certified copy of the identity document of the person filing the application must be submitted.
  4. A Deed Search, reflecting the ownership of any immovable property (or not) by the company, must be obtained and submitted together with the application.
  5. If the company does in fact own any immovable property, a letter from National Treasury must be submitted, indicating that the department has no objection to the re-instatement of the company.
  6. Also, if the company does in fact own any immovable property, a letter from the Department of Public Works must be submitted, indicating that the department has no objection to the re-instatement of the company.
  7. An advertisement must be placed in a local newspaper where the business of the company is conducted, giving 21 days’ notice of the proposed application for re-instatement.
  8. If the deregistration was due to non-compliance with regards to annual returns, an affidavit indicating the reasons for the non-filing of annual returns must be submitted.
  9. If the company itself applied for deregistration, an affidavit indicating the reasons for the original request for deregistration must be submitted.
  10. Sufficient documentary proof indicating that the company was in business or that it had any assets or liabilities at the time of deregistration must be submitted.
  11. All outstanding annual returns must be submitted and paid, along with any penalties.

Upon compliance of all of the above requirements, the CIPC will issue a notice to the company that it is restored.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)