ISSN: 1996-2118
Affiliations: University of KwaZulu-Natal
Source: South African Journal of Criminal Justice, Volume 35 Issue 3, p. 412 – 426
https://doi.org/10.47348/SACJ/v35/i3a8
None
ISSN: 2219-1585
Affiliations: Tax Consultant, Cape Town
Source: Business Tax & Company Law Quarterly, Volume 14 Issue 2, 2023, p. 1 – 7
The introduction of full residence-based taxation in 2001 brought with it the concept of a ‘Controlled Foreign Company’ (CFC), whose profits (calculated on SA income tax principles) would be attributed to qualifying South African shareholders (‘participants’) as taxable income. Exempted from attribution were those profits of a CFC which arose from a ‘business establishment’, a term which was tightly defined and relied in part upon the establishment displaying the hallmarks of a real operating business in the foreign country and not having been set up for the purpose of tax avoidance. Since those early days, the definition of what is now a ‘foreign business establishment’ (FBE) has undergone detail change. Today, and central to the definition, is the requirement that in order to qualify there must be a ‘fixed place of business’ located in the foreign country and ‘used for the carrying on of the business of the CFC , … where that fixed place of business is (inter alia) … suitably staffed with on-site managerial and operational employees … who conduct the primary operations of that business …’. Over the years there has been much comment in the tax specialist press dealing with the extent to which the operations of an FBE can be outsourced, before it is no longer ‘suitably staffed’ for conducting its primary operations. Silke and Income Tax South Africa took slightly different positions on this issue and now the SCA has handed down judgement in Commissioner for the South African Revenue Service v Coronation Investment Management SA (Pty) Ltd 2023 JDR 0295 (SCA), which sets out that court’s view on the point. In Volume 14, Issue 1 of this journal Wally Horak criticised elements of this judgment and in this edition David Clegg raises some additional concerns. These are whether the court was correct in its identification of the ‘primary operations’, and in finding that a ‘primary operation’ cannot, in principle, be outsourced. Clegg also addresses what he sees as a fundamental mistake made by the taxpayer, in setting up his foreign business.
ISSN: 2219-1585
Affiliations: N/A
Source: Business Tax & Company Law Quarterly, Volume 14 Issue 2, 2023, p. 8 – 12
The Companies Act implicitly permits the memorandum of incorporation of a company to depart from the default or general position of ‘one director, one vote’. But, as I have endeavoured to set out, the freedom to do so is not unlimited. A regime for directors’ voting rights that weights votes in proportion to the shareholding of the shareholder that appointed the director in question should in my view withstand court scrutiny. It is simply another means by which to confer majority control over the board (in the sense explained below) — which is in line with the company law principle of majoritarianism, and in my view unobjectionable. That the weighting of directors’ voting rights results in a situation in which individual directors have equal responsibilities, but unequal ‘rights’, is in my view not in itself problematic. Duties are imposed on individual directors in order to ensure the effective governance of companies (not because those duties are commensurate with the director’s ‘rights’). Thus, the diminution of a director’s ‘rights’ need not bring about a commensurate reduction in his or her responsibilities.
ISSN: 2219-1585
Affiliations: Partner, M&A, Bowmans
Source: Business Tax & Company Law Quarterly, Volume 14 Issue 2, 2023, p. 13 – 18
The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 (GLAA) was introduced in 2022 and amends the Companies Act 71 of 2008 (Companies Act) by (i) providing for a comprehensive mechanism through which the Companies and Intellectual Property Commission can keep accurate and up-to-date beneficial ownership information; (ii) requiring a company, which is not an ‘affected company’ for purposes of the Companies Act, to keep, and fi le with CIPC, a record of the ’beneficial owners’ of a company, and by providing for specified timelines within which a company must record any changes in this information; (iii) requiring a company, which is an ‘affected company’ for purposes of the Companies Act, to establish and maintain a register of the persons who hold beneficial interests equal to or in excess of 5% of the total number of securities of that class issued by the company, together with the extent of those beneficial interests; and (iv) specifying that persons who are convicted of offences relating to money laundering, terrorist financing, or proliferation financing activities or are subject to a resolution of the UN Security Council are prohibited from registering as company directors. Key to the amendments is the distinction between a company which falls within the definition of an ’affected company‘ for purposes of the Companies Act, on the one hand, and a company which does not fall within the definition of an ;affected company; for purposes of the Companies Act, on the other hand. Also key is the definition of ‘beneficial owner’ and the manner in which it will be interpreted — which remains to be seen. Time will tell as to how beneficial these provisions are and whether they can assist in having South Africa removed as a grey list country. Enforcement may be more effective if the sanction for non-compliance is a criminal sanction (in addition to a financial sanction) — as is the case in Mauritius, which managed to convince the Financial Action Task Force to remove it from the grey list.
ISSN: 1996-2207
Affiliations: Professor of Private Law, University of Cape Town; Senior Lecturer: Research, The IIE’s Varsity College, South Africa; Extraordinary Professor of Private Law, University of the Free State; Chief Executive Officer, Fiduciary Institute of Southern Africa
Source: Tydskrif vir die Suid-Afrikaanse Reg, Issue 3, 2023, p. 387 – 405
https://doi.org/10.47348/TSAR/2023/i3a1
Die Wysigingswet op Algemene Wette (Teengeldwassery en Bekamping van Terrorismefinansiering) 22 van 2022 is op 29 Desember 2022 bekragtig. Dié wet wysig, met 1 April 2023 as die inwerkingtredingsdatum van al hierdie wysigings, die Wet op die Beheer oor Trustgoed 57 van 1988 in verskeie opsigte. In hierdie bydrae neem ons twee wysigings onder die loep, naamlik die invoeging van ’n definisie van “uiteindelik geregtigde” (“beneficial owner”) in artikel 1 van Wet 57 van 1988 asook die vaslegging van die idee van “uiteindelike geregtigheid” (“beneficial ownership”) in artikel 11A van daardie wet. Ons voer aan dat beide toevoegings onvanpas is in die Suid-Afrikaanse trustreg aangesien dit nie strook met meerdere van die grondbeginsels van die Suid-Afrikaanse trustreg nie. Ons wys in die besonder daarop dat die wetgewer se gebruik van “uiteindelik geregtigde” en “uiteindelike geregtigheid”: (i) onder inhoudelike onsekerheid gebuk gaan; (ii) nie strook met sommige van Wet 57 van 1988 se bepalings nie, by uitstek die definisie van “trust” in artikel 1 en ’n trustee se sorgplig ingevolge artikel 9; (iii) oënskynlik berus op ’n mistasting oor die regsaard van ’n trust asook die aanvaarde regsbeginsels rakende die misbruik van die trustvorm en skyntrusts en (iv) die gevaar inhou van die voortydige verkryging van regte deur trustbegunstigdes. Ons argumenteer derhalwe dat die wetgewer se gebruik van “uiteindelik geregtigde” en “uiteindelike geregtigheid” in die wysigingswet en Wet 57 van 1988 teoretiese en praktiese onsekerhede skep wat nie alleen die begripsmatige onderbou en samehang van die Suid-Afrikaanse trustreg skaad nie, maar ook dermate uit pas is met sommige van die bestaande wet se bepalings dat hierdie wysigings bykans onmoontlike verpligtinge ten opsigte van die insameling, vaslegging en verslagdoening van inligting (ter nakoming van die – weliswaar prysenswaardige – oogmerke van die wysigingswet) op trustees plaas. Ten einde hierdie kwessies aan te spreek, doen ons ’n alternatiewe – en onses insiens werkbare – wetsbepaling aan die hand wat, alhoewel dit grootliks op die bestaande bewoording van die tersake bepalings van die wysigingswet gegrond is, wegdoen met “uiteindelik geregtigde” en “uiteindelike geregtigheid” terwyl dit steeds uitvoering aan die oogmerke van die wysigingswet gee. Die voorgestelde wetsbepaling spreek in die besonder die problematiek aan met betrekking tot die besit van of doelmatige beheer oor trustbates – wat sentraal tot die idee van ’n “uiteindelik geregtigde” staan. Dit beperk die voorskrifte oor die besit van of doelmatige beheer oor trustbates tot gevalle waarin trustees sinvolle uitvoering aan die tersake wetsbepaling kan gee.