IN THIS ISSUE -
“Buy land – they’ve stopped making it” (Mark Twain)
Property can indeed be a great investment, just be aware that signing personal suretyship – which you will almost certainly have to do if you buy property in a company or trust with money borrowed from a bank – carries risks that you can and should actively manage. Whilst the bank’s first line of security will be a bond over the property, its second will be you personally as surety.
And several recent court decisions illustrate just one of the dangers that you face – sale of the property under value.
Sale under value
Take this scenario -
Can you escape your suretyship obligations if it is the bondholder that is responsible
for the sale below value? The answer is yes -
So you are at risk if…..
Thus in one recent case, Mr. A as director of a company arranged a sale of its property
for R3,3m, leaving the bondholder bank with a R2.5m shortfall for which it sued Mr.
B as surety. B’s defence was that A had only been authorised to sell for no less
than R3,85m, and that the sale at R3,3m was unlawful and well below market value
This wasn’t a critical issue in any of the cases in question, but it probably isn’t going to be easy to show that a theoretical valuation should trump the actual sale price – “market value” at the end of the day is what a willing buyer will pay to a willing seller.
You are bound by the terms of what you sign. In one of the above cases the terms
of the suretyship covered the bank regardless of "any negligence or breach of contract
on the part of the Bank or the debtor, or the non-
Take advice upfront
By all means invest in property through a company, but be aware of the risks associated with signing surety, and manage them at all times – in particular seek legal assistance before signing anything, and again at the first sign of trouble in your company or trust.
“I wonder too what happened to the person who I counted as a best friend for 15 years, and how this behaviour is justified. Remember I see the broken hearted faces of your girls every day. Should we blame the alcohol, the drugs, the church, or are they more reasons to not have to take responsibility for the consequences of your own behaviour? But mostly I wonder whether, when you look in the mirror in your drunken testosterone haze, do you still see a man?”
That’s the relevant portion of a Facebook post which the High Court recently ordered its author to remove, finding that she had acted out of malice. The judgment is an important one, breaking new legal ground and confirming that defamation is as much unlawful in the virtual world as it is in the physical one.
What can you safely say online?
In broad terms, publication of anything proved to be defamatory (damaging to another’s
reputation) is presumed to be both intentional and wrongful. That puts the onus
on you to prove lawful justification via one of the legal defences -
Note in particular that just because something is true, that doesn’t entitle you to tell the world about it – if it is defamatory you must also show that it is “to the public benefit or in the public interest that [it] be published”.
The high cost of getting it wrong
You risk not only being interdicted and having to bear the resulting legal costs
(as happened to the author of the post in this case); you could also face a claim
for damages, and perhaps even criminal charges. And social media comes with a new
and particular danger – once you post something online, it tends to live on in cyberspace
forever. Anything that captures the online community’s attention will be re-
Adjusting your privacy settings may give you a degree of protection, but there are no guarantees so rather err on the side of caution.
If your SME qualifies as a “Small Business Corporation” (SBC), you stand to benefit from new tax concessions announced in February’s Budget Speech.
To qualify as an SBC your business must be in a company, and it must meet the following (summarised – take advice on specifics) requirements –
More tax relief
For many years SBCs have paid a lot less than the normal company tax rate of 28%,
and now two new changes for the better have been proposed in the 2013/14 Budget -
The “turnover tax” option
As an alternative, if your annual turnover is R1m or less you could qualify for the
What are our courts doing about the scourge of tender fraud in South Africa?
The sentence: 3 years’ prison
It’s a hot topic yet again, and honest tenderers can take heart from the effective sentence of 3 years’ imprisonment recently imposed by the Supreme Court of Appeal on a man convicted of tender fraud relating to the Free State Education Department’s 2001 tender for the delivery of school books. A failure to disclose in the tender declaration that a person connected with the tenderer was employed by the province and married to an MEC in the provincial government was, the Court found, a fraudulent misrepresentation prejudicial both to other tenderers and to the community at large.
The Court held that the seriousness of the crime required a custodial sentence, despite the mitigating circumstances –
“Fraud in the procurement of state tenders” said the Court “is a particularly pervasive form of dishonest practice. It undermines public confidence in the government that awards tenders, apparently without regard for nepotism, and it creates perceptions unfavourable to the services provided pursuant to such tenders. It is proving notably difficult for the authorities to identify and root out such malpractices. The courts are obliged to render effective assistance lest the game be thought to be worth the candle.”
So if you lose out on a tender as a result of fraud, know that our courts are on
your side -
Don’t miss the 30 April 2013 deadline to bring your shareholder agreements and your company’s “MOI” (what used to be called your “Memorandum and Articles of Association” is now a “Memorandum of Incorporation”) into line with the new Companies Act. Take advice now if you aren’t sure what to do.
“Know your enemy” (Sun Tzu)
Protect yourself and your family from crime -
Start with Tony Schreiber’s “Twenty things your burglar won’t tell you” on his blog
Have a Great April!
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