D'Amico Incorporated Attorneys

24/02/2023

So honoured to be appointed the new chairperson for FASA.

I together with the CEO of FASA will aim to bridge the gap between the recent eventful past few years with a determined effort.

01/09/2022

CALL OUT TO COMPANY DIRECTORS! TAKE YOUR DUTIES SERIOUSLY...
OR YOU FACE THE PROSPECT OF BEING DECLARED ‘DELINQUENT’

To some becoming a ‘director’ is a career achievement but often is not taken with the gravitas that it should. To some people, sitting on a company board as a director is often viewed as a golden ticket to picking up a large remuneration without doing too much work and more importantly not understanding the duties and responsibilities attached to that ‘directorship’.

In recent years, the spotlight has fallen on many companies and in particular government State Owned Entities (SOEs) that are run as business entities with a board of directors. Gross dereliction of duties has finally caught up with some of those put in positions of authority. The most high-profile matter in 2020 was the landmark judgement of ‘delinquent director’ on Ms Duduzile Myeni (Myeni), former non-executive chairperson of SAA.

In a judgment delivered by Judge Tolmay on 27 May 2020 in the matter of Organisation Undoing Tax Abuse and Another v Myeni and Others (case number 15996/2017), the High Court of South Africa (Gauteng Division, Pretoria) declared Myeni, a “delinquent director” in terms of section 162(5) of the Companies Act 71 of 2008 (Companies Act) based on the finding that she seriously misconducted herself during her tenure as the previous non-executive chairperson of South African Airways SOC Limited (SAA).

The court found that Myeni acted dishonestly, recklessly and with gross negligence and breached her fiduciary duties during the tenure of her directorship, causing significant harm to both SAA and the country as a whole. An order of delinquency in these circumstances is to subsist for a minimum of seven years. However, given the gravity and seriousness of Myeni’s conduct, the court found it appropriate to impose a lifelong delinquency order, which Myeni may apply to have suspended after three years under certain circumstances.

Although Myeni was a non-executive director, she was held by the courts to be a director for all intents and purposes and had a legal and ethical duty to SAA.

According to Maria D’Amico, founder of D’Amico Incorporated Attorneys, this serves as a reminder to directors, both individually and acting as a collective, to take steps to ensure that they abide by the high standards expected of them. “When someone becomes a director they are expected to perform in good faith, in the best interests of the company and with a degree of care, skill and diligence that may reasonably be expected of such person, and if they do not then they can be accountable for any loss to the company that arose directly or indirectly from such conduct.”

The word “director” is wide and not only limited to a director who is registered as such for a company at the Commission of Intellectual Property Commission (CIPC) but includes an alternate director, prescribed officer, and a person who is a member of the committee of the Board, or of the audit committee of the Company.

A “prescribed officer” is a person that exercises general executive control over and management of the whole, or a significant portion, of the business and activities of the company and regularly participates to a material degree in the exercise of general executive control over and management of the whole, or a significant portion, of the business and activities of a company.

In conducting his/her duties as a director, a director ought to be aware of the following that will assist him/her in operating in accordance with the Companies Act:

1. There is a standard that a director must adhere to (see sec 76):

1.1. a director must not use his/her position as a director, or any information obtained whilst acting in the capacity as a director, to gain any advantage for himself or another person; or knowingly cause harm to the Company or subsidiary of the Company (sec 76(2)(a));

1.2. A director must inform the Board at the earliest practicable opportunity of any information that comes to the director’s attention unless the director reasonably believes that the information is immaterial to the Company or generally available to the public or known to the other directors or he is bound not to disclose the information by a legal or ethical obligation of confidentiality (sec 76(2)(b));

1.3. A director must exercise his powers and perform the functions of a director in good faith and for a proper purpose, in the best interest of the Company and with a degree of care, skill and diligence that may be reasonably expected of a person in his position (sec76(3).

2. Liability of directors (sec 77):

2.1. A director may be held accountable for any loss, damages, or costs sustained by the Company as a consequence of any breach by the director of duty;

2.2. A director may be held liable in terms of common law relating to delict for any loss, damages or costs sustained by the Company as a consequence:

2.2.1. of any breach by the director of a duty contemplated in sec 76(3)(c);

2.2.2. any provision of the Companies Act not otherwise mentioned in sec 77; or

2.2.3. any provision of the Company’s memorandum of incorporation (MOI).

Maria D’Amico, legal advisor to countless companies and franchises for the past thirty-two, backs the Institute of Directors in South Africa (IoDSA)’s long-standing contention that directors must inform themselves properly about not only the legal nature and extent of their duties, but also on the King IV Reports on Corporate Governance. Together, these provide a sound framework to guide directors in fulfilling their fiduciary and other duties satisfactorily.

South African company law prescribes that the Board bears the responsibility for the functioning and management of the company and is ultimately accountable for its performance. If a director does not follow the standard of conduct required by them as set out in the Companies Act, they may be held jointly and severally liable for breaching their fiduciary duties – whether they are as contemplated in the Companies Act, as directors of SOEs or of the Public Finance Management Act, 199 (PFMA).

In addition, a director will be liable for any loss, damages or costs sustained by the Company as a direct/indirect consequence of the director having:

 Acted in the name of the Company, signed anything on behalf of the Company, or purported to bind the Company or authorize the taking of any action by or on behalf of the Company, despite knowing that the director lacked the authority to do so;

 Was complacent in the carrying on of the Company’s business despite knowing that it was being conducted in a manner prohibited by sec 22(1) (reckless trading);

 Participating in an act/omission despite knowing that such act/omission was calculated to defraud a creditor, employee or shareholder of the Company, or had another fraudulent purpose.

“The appointment of directors” says Maria D’Amico, “needs to be taken seriously, and those who accept directorships must be fully aware of the standard that they are expected to adhere to which is to perform in good faith, in the best interests of the company and with a degree of care, skill and diligence that may reasonably be expected of such person.”

Disclaimer
This article has been compiled for information purposes only and does not constitute legal advice. D’Amico Incorporated cannot accept liability for any loss or damage caused to any individual or entity that has acted or omitted to act on the basis of this information.

16/11/2021

A big congratulations to Maria D’Amico on her selection by her peers for inclusion in the 13th Edition of The Best Lawyers in South Africa. Maria D'Amico has been recognized by Best Lawyers in Franchise Law for 2022 -

Maria D'Amico is a Franchise Law attorney in Johannesburg, South Africa. Read Maria D'Amico's profile to learn more about them and discover their...

20/07/2021

Guidelines on submitting your SASRIA insurance claim.

The recent looting and rioting in South Africa here is a guide on how to submit your SASRIA Claim.

19/05/2021

https://www.franchisingplus.co.za/do-some-franchise-agreements-need-to-be-updated-in-light-of-the-consequences-of-lockdown/

Lockdown regulations have resulted in an increase in the use of 3rd party delivery provider in the delivery of products from store owner to the customer

03/05/2021

GUIDELINES TO ENSURE THAT FRANCHISORS AND FRANCHISEES OPERATE WITHIN THE LAW

The Franchisor may believe that once a franchise agreement has been signed with the Franchisee and if the agreement contains the pertinent details that they discussed, then it is indisputable. What could possibly go wrong if anything at all.

Criteria that the Franchisor should consider to ensure it works within the parameters of the law:

1. The franchise agreement must comply with the Consumer
Protection Act (CPA), meaning that it the franchise agreement
ought to contain the relevant details as set out in the
regulations in terms of the CPA. Should the franchise
agreement not contain these details, the Franchisee may resile
from the agreement, affirming that the Franchisee may elect
to get out of the agreement, attracting no penalty to the
Franchisee. This means that the agreement is not binding on
the Franchisee.

2. The Franchisee must be given a ten-day cooling-off period
from the date of signing the agreement in which to cancel the
agreement. Should the Franchisee cancel the franchise
agreement, then the Franchisee is not liable for any costs
incurred by the Franchisor during the cooling-off period.

3. Should a deposit be paid on date of signature of the franchise
agreement, it ought not to be viewed as income for the
Franchisor until the cooling-off period has expired.

4. Options available to the Franchisor when enabling the
Franchisee to facilitate operating the business successfully:

6.1 Conduct initial training and offer proper ongoing training;

6.2 Communicate regularly with the Franchisee and provide continued guidance; and

6.4 Notify the Franchisee as to whatever needs to be done.

Should a prospective Franchisee wish to purchase a franchised business, the following points should not be overlooked:

1. Have the franchise agreement checked by an attorney.

2. Have the disclosure document checked by an accountant to
ascertain whether the financial projections in the disclose
disclosure document is feasible and realistic.

3. Conduct a proper due diligence on the franchised operation.
Gather as much information as possible on the franchised
business.

4. Contact the existing franchisees and determine whether they
are satisfied with the franchised business.

5. Communicate with the Franchisor should the Franchisee have
any queries.

6. Attend any training or meeting that the Franchisor provides.

These criteria will guide the Franchisor and Franchisee to operate their franchised businesses more effectively.

Article prepared by Maria D’Amico

Disclaimer
This article has been compiled for information purposes only and does not constitute legal advice. D’Amico Incorporated cannot accept liability for any loss or damage caused to any individual or entity that has acted or omitted to act based on this information.

27/10/2020

Franchising manages a narrow escape in the New Property Act

This is an updated article to the article published on the D’Amico Incorporated page on 15 October 2019

In the Property Practitioners Bill which preceded the Property Act, section 64 dealt with franchising. It stated that the Property Practitioners Regulatory Authority, which now replaces the Estate Agents Affairs Board, may hold a Franchisor responsible for any prohibited or sanctionable conduct of the franchisee. Thankfully, this was not carried forward into the Property Act.

Section 65 of the Property Act deals with franchising and fortunately does not make a Franchisor liable for any sanctionable conduct made by a Franchisee. If section 64 of the draft bill had been carried forward to the Property Act, this would have been draconian and would have resulted in a Franchisor needing to “police” the conduct of a Franchisee to avoid liability.

The Property Practitioners Act, no 22 of 2019 (the Property Act), was signed into law by President Cyril Ramaphosa on the 3rd of October 2019, which replaces the Estate Agencies Affairs Act, no 112 of 1976. The Property Act is not yet in force. The date when it applies, will be promulgated in the Government Gazette. Until then the old Act applies.

Section 65 of the Property Act provides that Franchisee Property Practitioners (currently called Estate Agents):

1. may not carry on business under the name of a franchise
unless they are the holders of Fidelity Fund certificates; and
2. must disclose in all communication and marketing material,
that they operate in terms of a franchise agreement, as well as
the name of the franchisor.

The Property Practitioners Regulatory Authority may withdraw the Fidelity Fund Certificate of any Franchisee Property Practitioner who carries on business in contravention of Section 65. Without a Fidelity Fund Certificate, a Property Practitioner may not work.

Direct reference to franchising in new legislation shows the impact that franchising is having on business.

Article prepared by Maria D’Amico

Disclaimer
This article has been compiled for information purposes only and does not constitute legal advice. D’Amico Incorporated cannot accept liability for any loss or damage caused to any individual or entity that has acted or omitted to act based on this information.

20/10/2020

WHAT CHANGES HAVE BEEN MADE TO THE PROPOSED EXPROPRIATION BILL?

The Expropriation Bill 2020 (the Bill) was submitted to Parliament on 9 October 2020. It is set to replace the Expropriation Act of 1975 as that Act is inconsistent with the Constitution.
By way of background, the Bill:

1. is framework legislation that spells out clearly how and when
expropriation can take place;
2. is a law of general application which applies to all three tiers
of government, namely national, provincial and local;
3. outlines circumstances when it would be just and equitable for
no compensation to be paid; and
4. has been drafted to be consistent with the Constitution as it
currently stands.

Section 12(3) of the Bill has been amended regarding the circumstances that can lead to a nil compensation for property and now reads that:

“12(3) It may be just and equitable for nil compensation to be
paid where land is expropriated in the public interest,
having regard to all relevant circumstances, including but
not limited to:

(a) where the land is not being used and the owner’s main
purpose is not to develop the land or use it to generate
income, but to benefit from appreciation of its market value;
(b) where an organ of state holds land that it is not using for its
core functions and is not reasonably likely to require the land
for its future activities in that regard, and the organ of state
acquired the land for no consideration;
(c) notwithstanding registration of ownership in terms of the
Deeds Registration Act, 937 (Act No. 47 of 1937), where an
owner has abandoned the land by failing to exercise control
over it;
(d) where the market value of the land is equivalent to, or less
than, the present value of direct state investment or subsidy in
the acquisition and beneficial capital improvement of the land;
and
(e) when the nature or condition of the property poses a health,
safety or physical risk to persons or to other property.”

A new section 12(4) has been inserted in the Bill which reads that:

“12(4) When a court or arbitrator determines the amount of
compensation in terms of section 23 of the Land Reform
(Labour Tenants) Act, 1996 (Act No. 3 of 1996), it may be
just and equitable for nil compensation to be paid,
having regard to all relevant circumstances.”

The effect of the updated Bill is that:

1. the circumstances have been updated as to when it would be
just and equitable for no compensation to be paid;

2. a court or arbitrator may determine it is just and equitable to
pay nil compensation.

The end result is that the owner of a property may not receive any compensation for his or her property when expropriated by the State.

Article written by Maria D’Amico

Disclaimer
This article has been compiled for information purposes only and does not constitute legal advice. D’Amico Incorporated cannot accept liability for any loss or damage caused to any individual or entity that has acted or omitted to act on the basis of this information.

05/06/2020

Delinquent Directors

Over the past few years, we have heard more and more often about applications being brought before the court to have directors declared delinquent.

What is the purpose of such an application? The aim of the delinquency remedy, as provided for in section 162 of the Companies Act 71 of 2008, is “to protect shareholders, stakeholders and the public from directors who are dishonest and incompetent, and directors who fail to properly manage the company’s business or have neglected their duties and/or obligations.”

Section 162(2) of the Act sets out who may institute an application to declare a director delinquent. These are:

1. Shareholder/s;

2. Director/s;

3. The Company Secretary;

4. The Prescribed Officer of the company;

5. A Registered trade union that represents employees of the company;

6. Other representatives of employees of the company.

Other organisations that may also apply to court for an order of delinquency include:

1. The Companies & Intellectual Property Commission (CIPC);

2. The Minister of Trade and Industry through the Takeover Regulation Panel;

3. Other Organs of State.

The above may apply to court for an order of delinquency against a director of the company or if the person was a director of the company within 24 months immediately preceding the application being brought to court.

A delinquency order prohibits a person from acting as a director for at least 7 years, or the ban can be for life in more serious cases.

When considering a delinquency application, the court uses both objective and subjective assessments to determine whether the director has breached any one or more grounds of delinquency. The grounds for declaring a director delinquent as set out in section 162(5) of the Act include:

· serving as a director (or acting director or prescribed officer) whilst ineligible or disqualified from doing so in terms of section 69 of the Act;

· serving as a director whilst under probation in terms of section 47 of the Act;

· grossly abusing the position of director;

· taking personal advantage of information or an opportunity that should have been given to the company;

· acting in a manner which amounted to gross negligence, wilful misconduct or breach of trust whilst performing the functions and duties of a director of the company.

It is clear from the above, and the attached article, that whilst the position of director comes with a level of prestige and privilege, so do high levels of accountability and responsibility. In the case of misconduct there can be heavy consequences.

Article written by Romaana Sheik

Disclaimer

This article has been compiled for information purposes only and does not constitute legal advice. D’Amico Incorporated cannot accept liability for any loss or damage cause to any individual or entity that has acted or omitted to act on the basis of this information.

Former South African Airways chair Dudu Myeni has been declared a delinquent director in terms of the Companies Act.

03/06/2020

Judge Davis declared the lockdown regulations pertaining to level 3 and 4 to be unconstitutional and invalid. The declaration of invalidity has been suspended until Minister of Cooperative Governance and Traditional Affairs (after consultation with the relevant Cabinet Ministers) has reviewed, amended and re-published these regulation and this has to be done within 14 business days from 2 June 2020.

The high court has ruled that government's lockdown regulations are not legal but they will nevertheless remain in place for at least the next 14 days.

01/06/2020

Summary of Level 3 Regulations

WHEN CAN I LEAVE MY HOME? You must remain at home at all times, except to: • Travel to and from work • Attend a school or learning institution oncethese are opened • Purchase goods or obtain services that areallowed at Level 3 • Exercise, between 6am and 6pm,and not in groups • Move childr...