Frequently Asked Questions

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What is an MOI?

The term “MOI” is an abbreviation for “Memorandum of Incorporation”. It is a document that sets out the rights, duties and responsibilities of shareholders, directors and other persons involved in a company. Every company registered in South Africa needs to have an MOI.

What is the purpose of having an estate plan?

Estate planning aims to create, protect and distribute your wealth in line with your wishes. Every estate plan should be unique and customised for each individual’s circumstances and purpose in order to achieve a number of goals, which include:

What is a Shareholders Agreement?

A shareholders agreement is a contract made between all shareholders of the company, or can be made by just some of them (for example between two shareholders who each have a large shareholding in the company).

The shareholders can be individuals or corporate bodies. A shareholders agreement can be made at any time during the lifetime of the company but it is most commonly made when a new company is set up because it establishes areas of agreement, at an early stage, between those involved with the company.

Why should I have a contract in place?

The contract of employment is a vital document as it regulates the terms and conditions of employment between the employer and the employee.

The failure to make use of written contracts of employment is particularly prevalent in many small businesses where there is a relaxed atmosphere where entrepreneurs assume that their dealings with employees can be handled verbally.

Who can be a party to a contract?

South African law dictates that in order for an agreement to be recognized as a valid and binding contract, it must meet certain requirements. These requirements are as follows:

  • There must be consensus between the parties
  • The parties must have intended for the agreement to result in terms which can be enforced
  • The necessary formalities must be observed
  • The agreement must be lawful
  • The contractual obligations must be possible to perform
  • The parties must have the capacity to act

The first limitation relates to age. A person under 7 years of age has no capacity to act, this is because they would not be able to appreciate the possible consequences of their actions. Such person would need to have a parent or guardian acting on their behalf.

When someone is between the ages of 7 and 18 years, they are regarded as a minor. The limitation placed on this age group is that, although persons in this age category would have capacity to enter into a contract they would have to be duly assisted by a parent or guardian in this instance.

The age of majority in terms of the Children’s Act 38 of 2005 is 18 years. Thus, a person who is over the age of 18 years is able to enter into contractual agreements on their own behalf.

There are certain instances whereby a major person would not be able to contract on their own behalf. One such instance is when a person is declared insolvent, in such an instance the appointed Trustee would make all the decisions pertaining to that person’s estate.

Another such instance would be where a person is declared a prodigal. In this instance such person is declared to be incapable of managing their own affairs and any agreement entered into by such a person would have to be ratified by the Curator of their estate.

A person who is mentally ill also does not have the capacity to enter into an agreement.

Do I need to comply with POPI?

Compliance to the Protection of Personal Information Act (POPIA), also known as the POPI Act, will be mandatory for most organisations in South Africa. As the Information Regulator develops the POPI Regulations further, so the dates and requirments will become clearer.

You need to comply if:

  • your organisation is domiciled in South Africa, or
  • your organisation is not domiciled in South Africa, but processes personal information in South Africa.

Whether or not you process in South Africa can be difficult to answer. This is important to understand, because POPIA can apply even if your organisation is domiciled outside South Africa.

Why do I need HR policies?

Effective HR policies and procedures are extremely important, as they provide structure, control, consistency and fairness within an organisation. It ensures compliance with relevant employment legislation and informs employees of the Company’s expectations and their own responsibilities.

What are the types of matrimonial property regimes?

There are three types of Matrimonial Property Regimes to choose from in South Africa:

  • Marriage in community of property;
  • Marriage out of community of property, without the application of the accrual system; and
  • Marriage out of community of property, with the application of the accrual system.
Marriage in community of property

Marriage in community of property is the ‘default’ Matrimonial Property Regime in South Africa. If a couple (heterosexual or same-sex) does not enter into an Antenuptial Contract before their marriage, they will automatically be married in community of property.

A marriage in community of property means that after their marriage, the parties to the marriage will lose their separate estates, and a joint estate will be formed. All of the assets and liabilities of both parties will fall into the joint estate and every asset will be jointly owned by both parties. A similar circumstance occurs when there are more than two parties to a marriage, but this is explored more fully in other articles by the same author. When spouses own assets in a joint estate, they co-own each asset and are responsible jointly for every debt. This means that one spouse can be held liable for the debts of the other, and neither spouse can alienate (sell) or encumber (use as security for a loan) any of the jointly owned assets without the consent of the other spouse (there are certain limited exceptions to this).

Marriage out of community of property, without the application of the accrual system

If a couple wants to exclude the community of property regime as above, they must enter into an Antenuptial Contract (“ANC”) with each other to such effect and the ANC must be validly lodged and registered as explained above thereafter. This means that the document itself must be properly and fully signed before a Notary, and the Notary must execute same, before the marriage takes place. Further the Notary must thereafter lodge the ANC with the Deeds Office for registration, within three months of it being signed, failing which the ANC will not be valid and binding on third parties. If an ANC is signed but not lodged or thereafter registered in time, the ANC will only be binding on the spouses, but not third parties.

Where accrual applies, the parties will retain their separate estates after the marriage. The assets and liabilities of each of the spouses do not merge into a joint estate – they remain separately owned by the spouses and neither has a claim to the assets or any responsibility for the liabilities of the other spouse. The parties will also be entitled to perform any legal actions relating to their separate estates as they deem fit without having to obtain the consent of the other party.

When the marriage is dissolved there will be no division of any joint estate and there will also be no accrual to be calculated with neither party being entitled to an accrual claim.

Marriage out of community of property with accrual

All of the principles as set out above relating to marriage out of community of property, without accrual, remains applicable here. The only difference is that in addition, accrual will apply.

In broad terms, the accrual system means that the parties to the marriage will, at the dissolution of the marriage, share in the growth that accrued to their estates during the existence of the marriage. Importantly, they do not become co-owners of each other’s assets, as neither spouse has any claim to any assets of the other spouse, at all. Further, what is shared between the parties is only the value of the growth on the assets, and only from the date of the marriage to the dissolution of the marriage (growth/value accruing before the marriage is not shared).

The calculation of the accrual of the respective estates basically works as follows (this is a very simplified explanation and there are many intricacies to the process omitted from this layman’s description):

  • The parties will have to state the commencement value of their estates either in the ANC itself or in a document filed seperately.
  • At the time of dissolution of the marriage, the value of their estates will be determined by normal valuation principles.
  • At the time of dissolution of the marriage, the commencement value of each estate will be adjusted to make provision for any change in the value of money(CPI).
  • The adjusted commencement value of each estate is subtracted from the value of the respective estates as at the end of the marriage. This amount will reflect the accrual in each of the estates.
  • Any assets that were excluded from accrual when the ANC was concluded, are not included in the above exercise and are effectively ignored as if they did not exist.

The party with the smaller accrual will have an accrual claim against the party with the larger accrual. The accrual claim is equal to 50% of the difference between the larger accrual and the smaller accrual. It is possible for spouses to agree that accrual will operate on a basis other than 50/50 – they can stipulate the percentages that they would like to apply when they sign their ANC.

Certain assets are automatically excluded from the accrual calculation. Examples of these assets are:

  • Inheritances and donations as well as any asset that was obtained due to the possession or prior possession thereof;
  • Assets which are specifically excluded by the ANC itself, as well as any asset that was obtained due to the possession or prior possession thereof;
  • Damages received, other than damages for patrimonial loss; and
  • Donations between spouses, excluding donations that are made in expectation of death.