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- Volume 21, Issue 1, 2009
SA Mercantile Law Journal = SA Tydskrif vir Handelsreg - Volume 21, Issue 1, 2009
Volume 21, Issue 1, 2009
Source: SA Mercantile Law Journal = SA Tydskrif vir Handelsreg 21, pp 1 –32 (2009)More Less
Beneficiary nominations are an integral but controversial part of insurance law. The controversial aspects are partly attributable to the assimilation of beneficiary nominations with contracts in favour of third parties, a topic that in academic and even judicial circles continues to be polemic. Most if not all of the run-of-the-mill uncertainties have been pre-empted by express provisions in standard policies, but some facets remain troublesome or yet unexplored. This article aims to survey the entire field of beneficiary nominations and to map a course for negotiating questionable or uncharted areas.
Author Kathleen Van Der LindeSource: SA Mercantile Law Journal = SA Tydskrif vir Handelsreg 21, pp 33 –50 (2009)More Less
Transactions through which share capital flows into or out of a company, as well as those giving a return on share capital, have significant potential to cause conflict between different stakeholders. Conflicts may thus arise between creditors and shareholders; between controlling and minority shareholders; and between management and shareholders. The regulation of conflict situations between these parties, which may of course also arise from transactions unrelated to share capital, is a central concern of company law.
Theories of company law describe these conflict situations in different terms, and advocate different approaches to resolving them. Law and economics scholars, eg, view these conflict situations as 'agency problems' arising from the opportunistic and self-interested behaviour of market participants. They regard the law as useful to the extent that it succeeds in reducing overall transaction costs.
This article considers the regulation of share capital from two perspectives : the protection of creditors and the fair treatment of shareholders. I begin by clarifying the role of share capital against the background of modern theoretical perspectives on company law and distinguishing between the legal and economic functions of share capital.
I then identify the situations that give rise to share capital-related conflicts of interest between shareholders internally and between creditors and shareholders, and I outline the main approaches to the protection of shareholders and creditors. I show that the regulation of share capital is important to shareholders because their relative rights are determined by the share capital structure of the company. Although the conflict between shareholders and creditors derives from the role of share capital as a risk allocation device, creditor protection can be achieved without reliance on the size or structure of a company's share capital.
Author Annet Wanyana OguttuSource: SA Mercantile Law Journal = SA Tydskrif vir Handelsreg 21, pp 51 –73 (2009)More Less
Tax avoidance (by contrast with tax evasion) involves using perfectly legal methods of arranging one's affairs to pay less tax. This is done by utilising loopholes in tax laws and exploiting them within legal parameters. So, for instance, taxpayers often exploit the fact that there are tax variations across international borders and international tax systems that can be used avoid taxes. This article deals with the resulting tax avoidance when taxpayers invest in entities that two or more countries classify differently for tax purposes. These entities, often referred to as 'hybrid entities', are basically legal relationships in which the entity is treated as a taxable entity (eg, a corporation) in one jurisdiction and as a transparent (non-taxable) entity in another. In a treaty context, the different tax treatment of these entities may be used to take advantage of treaty benefits and even to avoid taxes. Hybrid entities usually take the form of trusts or partnership structures. This article covers only partnership structures.
In South Africa, the topic of the taxation of hybrid entities has received little attention, and there is no legislation in place dealing with the taxation of these entities. However, a number of South African residents have been known to invest in offshore hybrid entities whereby it is possible to avoid South African taxes on their income. This article discusses the difficulties of taxing partnership hybrid structures and the methods of manipulating these difficulties to avoid taxes. The challenges of taxing these entities in South Africa are also discussed, and recommendations are provided on how the ensuing tax avoidance can be prevented.
The role of a modern central bank in managing consumer bankruptcies and corporate failures : a South African public-law angle of incidenceSource: SA Mercantile Law Journal = SA Tydskrif vir Handelsreg 21, pp 74 –91 (2009)More Less
Most people know little about their country's central bank; so far as they are concerned, a central bank is merely involved in determining the interest rate on their home loans and overdrafts. As recent events in the global financial markets have shown, however, there is more to a central bank than lending rates and signatures on banknotes. On Wednesday, 8 October 2008, world central banks intervened in an effort to alleviate clogged money markets and reinstil confidence in the panic-stricken international financial system and the global economy. Six central banks, including the United States Federal Reserve, the European Central Bank and the Bank of England, cut interest rates together. Other central banks that also cut interest rates included those of Canada, Sweden, and Switzerland. China also cut interest rates, though it did not join in the group statement. This was the first coordinated interest rate reduction since the terrorist attacks in the United States of America in September 2001.
The global economy is showing clear signs of financial duress and distress. National and international media reports are dominated by references to higher energy prices, higher food prices, a slowdown in economic growth, monetary instability and the ever-present fear of uncontrollable inflation. These concerns prevail not merely in one or two countries, but worldwide, involving some of the biggest economies and monetary role-players. Regular reference is made to the 'credit crunch' and sub-prime mortgage crises in the United States of America that have created extra-territorial financial losses in Europe and the United Kingdom in particular. There is a significant downturn in the United Kingdom housing market, whilst the European Union is experiencing a definite economic slowdown. The consequences of these issues are not only of concern to private companies, financial institutions and multinational corporations, but are equally important to all governments, public institutions, and ultimately every human being. As a result the turmoil in financial markets has a global impact, and quick and decisive steps would indeed be in the interest of both public and private sectors. Although often forgotten, the poorest people of the world are the hardest hit in troubled times. Every government has a responsibility to act, taking appropriate steps to protect its people and ensure that appropriate mechanisms are in place to aid them during difficult times.
The central bank is one of the most important institutions created to manage economic growth and fiscal stability in a country. It is customary for most states in the world to create and empower a specific institution to manage and oversee certain financial powers and functions. These institutions are of particular importance for financial markets and local economies because the proper fulfilment of their functions is directly attributable to economic growth, inflationary control and financial stability. Central banks were established throughout the world because of the realisation that under typical, normal conditions of banking and financial business, it was advantageous to have centralised monetary reserves, currency control and credit management that enjoyed the support of the state and were subject to some form of governmental supervision and participation. A central bank should be created by legislative intervention as a core pillar within a particular financial system. Given the differences of circumstances and political structures, the central banks in each country have different constitutional positions. However, these banks not only act 'offensively' (pro-actively), but are often also called upon to act defensively in times of financial trouble and instability. Although it must be noted that the creation of central banks is no guarantee against financial crisis, their quick and committed fulfilment of their powers and functions should have an important impact on financial markets, with resultant benefits for consumer bankruptcies and corporate failures and liquidations.
Author Neil CoetzerSource: SA Mercantile Law Journal = SA Tydskrif vir Handelsreg 21, pp 92 –101 (2009)More Less
Affirmative action is a topic with a tendency to evoke much emotion and spark heated debate amongst South Africans from all walks of life. Yet few can deny the need for measures of some sort to address the racial inequality in the labour market experienced during the apartheid years. With this in mind, I will first give a broad overview of why affirmative action was necessary in South Africa as a tool for social change. Secondly, I will sketch the landscape of South Africa's jurisprudence on affirmative action, touching on relevant legislation, though limiting the discussion to whether affirmative action is a right in the hands of the scorned employee or a defence to be raised by the employer against that employee, with reference to case law. Lastly, I will attempt to show how the labour courts have all answered this question unanimously in recent cases, in response to the decisions of Harmse v City of Cape Town ((2003) 24 ILJ 1130 (LC)) and Dudley v City of Cape Town & Others ((2004) 25 ILJ 305 (LC)).
Security for costs in corporate litigation and the right of access to courts : Giddey v J C Barnard and Partners : case commentSource: SA Mercantile Law Journal = SA Tydskrif vir Handelsreg 21, pp 102 –109 (2009)More Less
Section 34 of the Constitution of the Republic of South Africa, 1996 gives every person 'the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum'. (For a general discussion of the right of access to courts, see GE Devenish The South African Constitution (2005) in pars 151-6 at 168-73). However, s 36 of the Constitution permits a limitation by way of a law of general application, provided that the limitation is reasonable and justifiable. An example of such a limitation can be found in s 2(1)(a) of the Vexatious Proceedings Act 3 of 1956, which provides that a court may order that no legal proceedings be instituted if it is satisfied that a person has 'persistently and without any reasonable ground instituted legal proceedings'. This limitation was held to be reasonable and justifiable, taking into account all the relevant factors (Beinash & Another v Ernst & Young & Others 1999 (2) SA 116 (CC) in par 16 at 122-3).
Author Philip StoopSource: SA Mercantile Law Journal = SA Tydskrif vir Handelsreg 21, pp 110 –125 (2009)More Less
The recent decision of the Labour Court in Jafta v Ezemvelo KZN Wildlife ( 10 BLLR 954 (LC)) concerned the following issues :
- Does acceptance of an offer of employment sent by electronic mail (hereafter e-mail) or short message service (SMS) result in a valid contract?
- When is an acceptance of an offer sent by e-mail or SMS received?
- What is an electronic communication?
- Is an SMS an electronic communication?
In this note, I will summarise the facts and the reasoning of the judgment and then make some comments on the implications.
The bloody-handed, homicidal beneficiary and the materialisation of the life insurance risk : Danielz NO v De Wet & Another : case commentAuthor J.P. Van NiekerkSource: SA Mercantile Law Journal = SA Tydskrif vir Handelsreg 21, pp 126 –137 (2009)More Less
It is trite that insurance law is, generally speaking, nothing more than instances of the application of general principles of the law of obligations in a particular context. Thus, the general principles of the law of contract govern, or should govern, insurance contracts too. The general principles of the law of delict govern, or should govern, pre-contractual misrepresentation, including the duty of disclosure, in the case of insurance contracts too. And the general principles of the law of the law of unjustified enrichment should govern appropriate insurance situations such as the return of the insurance premium and subrogation too.
The notion of risk is one particularly associated with and is indeed an essential feature of the insurance contract. But even the operation of risk in the insurance situation should be governed by general principles where appropriate. That was nicely illustrated by the recent decision of the Cape High Court in Danielz NO v De Wet & Another (2008 JDR 0726 (C)), the facts of which were by no means novel, but the decision in which provides an opportune moment to reflect once again on the governing general principles.
Mars The Law of Insolvency in South Africa, Eberhard Bertelsmann, Roger G Evans, Adam Harris, Michelle Kelly-Louw, Anneli Loubser, Melanie Roestoff, Alastair Smith, Leonie Stander, Lee Steyn : book reviewAuthor Andre BoraineSource: SA Mercantile Law Journal = SA Tydskrif vir Handelsreg 21, pp 138 –141 (2009)More Less
Mars The Law of Insolvency in South Africa is a household name in all walks of insolvency life in South Africa. Since its very first edition in 1917, based on the then 1916 Insolvency Act (the first uniform insolvency legislation for the former Union of South Africa), it has established itself as a prime reference source on South African insolvency law. Over the years, the work has been enriched by the contributions and insights of various authors who have carried the work forward by updating and expanding it in view of new developments in this area of the law.
Author Jeannie Van WykSource: SA Mercantile Law Journal = SA Tydskrif vir Handelsreg 21, pp 141 –142 (2009)More Less
I applaud Michael Kidd for writing Environmental Law, published by Juta in 2008. Although not really a second edition of Professor Kidd's earlier work Environmental Law : A South African Guide (Cape Town: Juta & Co Ltd, 1997), its layout is similar to its predecessor. The new book is about 80 pages longer and is also mainly a student textbook. Some of the chapters are revisions of the previous edition. The book covers all of the most important aspects of environmental law in detail sufficient to give students a good grasp of the subject. Environmental law is a vast area of the law covering all aspects of conservation and pollution control. In that context, the book deals, in separate chapters, with issues such as the Constitution and Framework Environmental Legislation (chapter 2), International Environmental Law (chapter 3), Water Laws and the Environment (chapter 4), Conservation of Biodiversity (chapter 5), Pollution Control and Waste Management (chapter 6), Land Use and Planning (chapter 7), Implementation and Administration of Environmental Law (chapter 8) and Environmental Justice (chapter 9).
Rights for All - The South African Bill of Rights in All Official Languages, Juta's Statutes Editors : book reviewAuthor David TaylorSource: SA Mercantile Law Journal = SA Tydskrif vir Handelsreg 21, pp 142 –144 (2009)More Less
Rights for All is part of the very practical 'Juta's Pocket Statutes series'. The format of the book is designed to fit literally into the pocket. It is a noble idea that every South African should have a copy of the Bill of Rights in his or her pocket. I doubt that the publication would ever reach the 5 to 6.5 billion print run of Mao Zedong's 'Little Red Book', but it could have a more profound and positive impact, if like the 'Little Red Book', it were carried in the pocket of every citizen. The book contains a short (three pages) but easy-to-understand overview of the Bill of Rights. Rights for All also contains the words of the National Anthem of South Africa. A tribute to multilingualism, the South African anthem contains no fewer than five official languages. This may have prompted Juta to include an English translation of the anthem.