1 Changes in Legislation 2016 Presented by ProBeta Training (Pty) Ltd. 1 Money Laundering Act (FICA) and Regulations The Prevention of Organised Crime Act 121 of 1998 (POCA) which came into force on 21 January 1999 The Financial Intelligence Centre Act (FICA) (as amended by the Protection of Constitutional Democracy against Terrorist and Related Activities Act 33 of 2004 (POCDATARA)) Prevention and Combating of Corrupt Activities Act (PRECCA) Impact of the new Financial Intelligence Centre Bill that was tabled at the beginning of June 2016
Transcript
1
Changes in Legislation 2016
Presented by
ProBeta Training (Pty) Ltd.
1
Money Laundering Act (FICA) and Regulations
The Prevention of Organised Crime Act 121 of 1998 (POCA) which came into
force on 21 January 1999
The Financial Intelligence Centre Act (FICA) (as amended by the Protection of
Constitutional Democracy against Terrorist and Related Activities Act 33 of
2004 (POCDATARA))
Prevention and Combating of Corrupt Activities Act (PRECCA)
Impact of the new Financial Intelligence Centre Bill that was tabled at the
beginning of June 2016
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The new Financial Intelligence Centre
Bill 2015• The new Financial Intelligence Centre Bill which was tabled at the
beginning of June 2016
• Improvements in the legislation which will make it simpler for accountable
institutions to comply with the FIC Act
• On the other hand regulators will now impose heavy fines on financial
institutions’ failure to comply
Reasons for the amendments• Governments, financial institutions and businesses in many countries are
reluctant to do business with countries considered to have weak AML/CFT
regimes
• Non-compliance could result in South Africa being on a global ‘blacklist’
• South African financial institutions may face heavy fines by overseas
regulators
• These fines can damage the reputation of the country and financial system
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Key amendments to the legislation• Risk based approached to be followed by Accountable Institutions
• New customer due diligence measures
• Implementation of the UN Security Council Resolutions
• Enhancing certain administrative and enforcement mechanisms
What is money laundering?
• Money Laundering is the process used by criminals to hide, conceal or
disguise the nature, source, location, disposition or movement of the
proceeds of unlawful activities or any interest which anyone has in such
proceeds
• There are three stages to the process:
– Placement
– Layering
– Integration
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What is terror financing?
• Financing of terrorism is the collection or provision of funds for the
purpose of enhancing the ability of an entity or anyone who is involved in
terrorism or related activities to commit an act that is regarded as a
terrorist act
• Funds may be raised from legitimate sources, such as personal donations
and profits from businesses and charitable organisations, as well as from
criminal sources, such as the drug trade, the smuggling of weapons and
other goods, fraud, kidnapping and extortion
FICA: Who is affected by the legislation?
• General businesses
• Accountable institutions
• Reportable institutions
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Accountable institutions
• Act lists 16 types of “Accountable Institutions”:
– Attorneys
– Estate agents
– Banks
– Long term insurance businesses
– Businesses dealing in foreign exchange
– Person who carries on the business of a financial services provider
registered with FSB
– Approved investment managers
– Trustee of a trust
– More…..
Reportable institutions• Dealers in motor vehicles
– Includes motor vehicle related services provided by the motor vehicledealer and the buying and selling of motor vehicle parts
– Any person who is engaged in the business of buying, selling, orexchanging any new and second hand self-propelled vehicle, includinga vehicle having pedals and an engine, or an electric motor as anintegral part thereof or attached thereto and which is designed oradapted to be propelled by these means on land, as well as any trailerand caravan
• Dealers in Kruger Rands
– Any person who, as a regular feature of his/her business, deals injewellery, ornaments, watches or other objects that contain KrugerRands irrespective of the value of the turnover of the Kruger Randdealer
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Supervisory Bodies• The Financial Services Board
• The South African Reserve Bank
• The Estate Agency Affairs Board
• The Independent Regulatory Board for Auditors
• The National Gambling Board
• A Law Society
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Beneficial owner
• Beneficial owner in respect of a legal person, means a natural person who,
independently or together with another person, directly or indirectly:
– Owns the legal person
– Exercises effective control of the legal person
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Business relationship
• Three or more single transactions that appear to be linked to the same
person using the same product or service at regular intervals
• This definition has been amended, so that accountable institutions will not
be required to repeatedly identify and verify customers who regularly
conclude single transactions with the same accountable institution
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Domestic prominent influential person• Domestic prominent influential person means an individual who holds,
including in an acting position for a period exceeding six months, or hasheld at any time in the preceding 12 months, in the Republic:
– The President or a Deputy President
– A Minister or Deputy Minister
– The Premier of a province
– A member of the Executive Council of a province
– An executive mayor of a municipality
– A leader of a political party
– A member of a royal family or senior traditional leader
– A head or chief financial officer of a national or provincial departmentor government component
– A municipal manager
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Domestic prominent influential person– The chairperson of the controlling body, CEO, CFO or chief investment
officer of a public entity or a municipal entity
– A constitutional court judge or any other judge
– An ambassador or high commissioner or other senior representative of aforeign Government based in the Republic
– An officer of the South African National Defence Force above the rank ofmajor-general
– The position of:
• Chairperson of the Board of Directors
• Chairperson of the Audit Committee
• Executive officer
• Chief Financial Officer, of a company if the company provides goods orservices to an organ of state and the annual transactional value of thegoods or services or both exceeds an amount determined by theMinister by notice in the Gazette; or
– The position of head or other executive directly accountable to that head,of an international organisation based in the Republic
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Reporting of suspicious transactions• Any person who:
– Carries on a business
– Is in charge of a business
– Manages a business
– Is employed by a business
• And who knows or suspects that:
– The business has received or is about to receive the proceeds of
unlawful activities
– A transaction or series of transactions to which the business is a party
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Reporting cash transactions above
prescribed limit• Applicable to accountable institutions and reportable institutions
• Within 2 days
• Cash > R 24 999 or aggregate of smaller amounts
• Consider 24 hours for aggregation
• Filed electronically with Centre, may not be posted
• Cash is domestic and foreign notes and coins, and includes travellers
cheques
• Example: A motor vehicle dealer will also be responsible to report cash
received by an agent on their behalf, e.g. cash received by a bank on
behalf of a motor vehicle dealer
New reporting regulations• Accountable institutions (AIs) to submit TPRs
• AIs and Reportable Institutions (RIs) to submit CTRs
• All businesses to submit STRs
• Reporting done via goAML electronic platform, need to extend and
enhance business communication and IT infrastructure
• Breakdown of reports:
– Suspicious or Unusual Transaction Reports
– Suspicious or Unusual Activity Reports
– Terrorist Financing Transaction Reports
– Terrorist Financing Activity Reports
– Details to be submitted with reports – extra information to be
submitted
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Protection of persons making report• No action, criminal or civil lies against an Accountable Institution,
Reporting Institution, person or SARS complying in good faith (including an
accountant and auditor) even if suspicion was incorrect
• Not compellable to give evidence in criminal proceedings
• Identity of person making report not admissible as evidence in criminal
proceedings, unless person testifies at those proceedings
Confidentiality rules• No duty of secrecy or confidentiality affects compliance by an accountable
institution
• The reporter is explicitly exonerated from liability for any breach of
secrecy that occurs as a result of the disclosure of information in
compliance with his reporting obligation
• Does not apply to attorney-client privilege in a criminal defence context –
Information gained while undertaking ordinary civil work (Trusts, CC, PTY,
Estate Planning) does not fall within the ambit of the exemption
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Disclosure of report• A person who has made or must make a report may not disclose that fact
or any information regarding the contents of any such report to any other
person
• All accountable and reporting institutions and other persons who have
filed an STR with the FIC may not disclose, make available or discuss that a
STR has been filed with the FIC, or share that STR, or the content thereof,
with any person, including a supervisory body, even when that supervisory
body is exercising powers in terms of sections 45, 45A and 45B of the FIC
Act
• Failure to comply with section 29(3) of the FIC Act is a criminal offence in
terms of section 53 of the FIC Act
• Non-compliance is punishable by a fine not exceeding R100 million or a
term of imprisonment not exceeding 15 years
Duties of Accountable Institutions
• Register with FIC
• Customer due diligence
• Keeping of records of business relationships and transactions
• Formulation and implementation of Internal Rules
• Train employees on the Act and rules
• Appoint a Compliance Officer
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Risk based approach• Accountable institutions should identify, assess and understand its ML/TF
risks
• An accountable institution should then apply its knowledge and
understanding of its ML/TF risks when developing the control measures to
prevent and mitigate the risks identified
• Where higher risks are identified, accountable institutions are to take
enhanced measures to manage and mitigate the risks
• Simplified measures may be applied where lower risks have been
identified
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Customer due diligence (cont.)• Customer due diligence is comprised of four basic elements:
– Determining the customer’s identity
– Identifying the beneficial owner
– Understanding the purpose and intended nature of the business
relationship
– Conducting ongoing due diligence
• It also requires accountable institutions to:
– Record the purpose and intended nature of the business relationship
– Obtain information on the source of funds that the client expects to
use in the course of the business relationship
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Customer due diligence (cont.)• Institutions, in addition to verifying the identities of the customers which
are not natural persons, need to:
– Understand the nature of the entity’s business
– Understand its ownership and control structure
– Know who the natural persons are who ultimately own or control their
customers
• May not establish a business relationship or conclude a single transaction
with an anonymous client or a client with an apparent false or fictitious
name
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Ongoing due diligence
• On going due diligence implies the scrutiny of transactions to identify
deviations from expected behaviour
• Also includes confirming at regular intervals that the customer
information and risk classification in respect of the customer relationship
is correct
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Domestic prominent influential person
or a foreign prominent public official • Obtain senior management approval for establishing the business
relationship
• Take reasonable measures to establish the source of wealth and source offunds of the client
• Conduct enhanced ongoing monitoring of the business relationship
• Also applies to immediate family members and known close associates
• An immediate family member includes:
– The spouse, civil partner or life partner
– The previous spouse, civil partner or life partner, if applicable
– Children and step children and their spouse, civil partner or lifepartner
– Parents; and
– Sibling and step sibling and their spouse, civil partner or life partner
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Obligation to keep customer due
diligence records• The records must:
– Include copies of, or references to, information provided to or
obtained to verify a person’s identity; and
– In the case of a business relationship:
• The nature of the business relationship
• The intended purpose of the business relationship; and
• The source of the funds which the prospective client is expected to
use in concluding transactions in the course of the business
relationship
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Implementation of the UN Security
Council Resolutions• Providing for financial sanctions which entail the identification of persons
or entities against whom member states of the United Nations must take
the actions specified in the resolution
• No person may, directly or indirectly, in whole or in part, and by any
means or method:
– Acquire, collect, use, possess or own property
– Make available any financial or other service
– Make available economic support
• Requirements to freeze property and transactions of identified natural and
legal persons
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Permitted financial services and
dealing with property• The Minister may permit the provision of financial services or the dealing
with property if it is necessary to:
– Provide for basic expenses, including, at least foodstuffs, rent or
mortgage, medicines or medical treatment, taxes, insurance
premiums, public utility charges, maintenance orders, reasonable
professional fees, and reimbursement of expenses associated with the
provision of legal services or to satisfy a judgment or arbitral award
that was made before the date on which the person or entity was
identified by the Security Council of the United Nations
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Reporting obligations to advise Centre
of clients• If an authorised representative of the Centre requests an accountable
institution, a reporting institution or a person that is required to make a
report in terms of section 29 of this Act to advise:
– Whether a specified person is or has been a client
– Whether a specified person is acting or has acted on behalf of any client
– Whether a client has acted for a specified person
– Whether a number specified by the Centre was allocated to a person
with whom the accountable institution, reporting institution or person
has or has had a business relationship
– On the type and status of a business relationship with a client
– Must inform the Centre accordingly
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Property associated with terrorist and
related activities • An accountable institution which has in its possession or under its control
property owned or controlled by or on behalf of, or at the direction of:
– Any entity which has committed, or attempted to commit, or facilitatedthe commission of a specified offence as defined in the Protection ofConstitutional Democracy against Terrorist and Related Activities Act,2004;
– A specific entity identified in a notice issued by the President, undersection 25 of the Protection of Constitutional Democracy against Terroristand Related Activities Act, 2004; or
– A person or an entity identified pursuant to a resolution of the SecurityCouncil of the United Nations
• Must within the prescribed period report that fact and the prescribedparticulars to the Centre
• An accountable institution must scrutinise its information concerning clientswith whom the accountable institution has business relationships in order todetermine whether any such client is a person or entity mentioned in theproclamation by the President or the notice by the Director
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Inspections• An inspector may enter the premises, excluding a private residence, of an
accountable institution or reporting institution which is registered or
otherwise licensed or authorised by the supervisory body for the purposes
of determining compliance with this Act or any order, determination or
directive made in terms of this Act
• An inspector appointed may, for the purposes of determining compliance
with this Act or any order, determination or directive made in terms of this
Act, and on the authority of a warrant issued, enter:
– A private residence; or
– Any other premises when the supervisory body, as the case may be,
reasonably believes that the residence or premises are used for a
business to which the provisions of this Act apply
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Non-compliance and penalties
• Non-compliance amended, distinction between non-compliance and
offence.
• A non-compliance will be subjected to administrative sanctions
• An offence will be subjected to penalties
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Non-compliance and penalties (cont.)
• Administrative sanctions:
– Caution
– Reprimand
– Directive
– Suspension of business activities
– Penalty not exceeding R 10 Million (natural) or R 50 Million (Legal)
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Non-compliance and penalties (cont.)
• Penalties for offences:
– R 100 Million or 15 years
– R 10 Million or 5 years if:
• Fail to send report
• Offences relating to inspections
• Hindering appeal board
• Fail to attend when summoned
• Failure to answer fully or truthfully
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PRECCA
• SAPS Amendment Act 2012
• Duty to report corrupt transactions
• Report a corrupt transaction to the police official in the Directorate for
Priority Crime
• The offence of theft, fraud, extortion, forgery or uttering a forged
document, involving an amount of R 100 000 or more
Who must comply with this duty?• Manager, secretary or a director of a company
• A member of a CC
• Executive manager of any bank or other financial institution
• Any other person who is responsible for the overall management and
control
• CEO or an equivalent officer
• The Director-General or head, or equivalent officer, of a national or
provincial department
• A municipal manager
• Any public officer in the senior management service of a public body
• Any head, rector or principal of a tertiary institution
• Any partner in a partnership
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POCA – Schedule 1 amendment• The Criminal Matters Amendment Act 18 of 2015 is effective from 1 June
2016 and one of the amendments deals with inserting a new offence intoSchedule 1 of Prevention of Organised Crime Act
• Any offence referred to in section 3 of the Criminal Matters AmendmentAct, 2015
• Offence relating to essential infrastructure
• Any person who unlawfully and intentionally:
– Tampers with, damages or destroys essential infrastructure; or
– Colludes with or assists another person in the commission,performance or carrying out of an activity referred to above
• And who knows or ought reasonably to have known or suspected that it isessential infrastructure, is guilty of an offence and liable on conviction to aperiod of imprisonment not exceeding 30 years or, in the case of acorporate body a fine not exceeding R100 million
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POCA – Schedule 1 amendment
• ‘‘Basic service’’ means a service, provided by the public or private sector,
relating to energy, transport, water, sanitation and communication, the
interference with which may prejudice the livelihood, well-being, daily
operations or economic activity of the public
• ‘‘Essential infrastructure’’ means any installation, structure, facility or
system, whether publicly or privately owned, the loss or damage of, or the
tampering with, which may interfere with the provision or distribution of a
basic service to the public
• ‘‘Tamper’’ includes to alter, cut, disturb, interfere with, interrupt,
manipulate, obstruct, remove or uproot by any means, method or device,
and ‘‘tampering’’ shall be construed accordingly
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Statistics 2014/15• Number of accountable and reporting institutions registered with the FIC
increased from 26 316 to 30 461 in the 12 months ending 31 March 2015
• 7 million reports (2013/14: 6.5 million) were submitted to the FIC
• 6.7 million cash threshold reports (CTRs) on cash transactions of R 25 000
or more
• 267 398 suspicious transaction reports (STRs)
• Preservation, forfeiture or confiscation of assets to the value of about
R 2.3 billion: (2013/14: R412 million)
• Supervisory bodies and the FIC conducted 740 inspections
• R 140 million in financial sanctions by the FIC
Investigation requests
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National Credit Act, 2005
Amended by the National Credit Amendment Act 2014 on 13 March 2015
Affordability assessment regulations applicable from 13 March 2015
Scope of the Act• Credit providers
– Banks
– Micro lenders
– Retailers such as clothing and furniture stores
– All businesses, companies, close corporations and individuals who dobusiness on credit, provide loans, or charge interest on overdueaccounts
• Credit agreements
– Mortgage bonds
– Credit facilities like store cards, bank overdrafts, credit cards, garagecards, personal loans, instalment sales, leases, pawn and discounttransactions
– Developmental credit
– Incidental credit
– Credit guarantees
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Incidental Credit Agreement• An agreement, irrespective of its form, in terms of which an account was
tendered for goods or services that have been provided to the consumer,or goods or services that are to be provided to a consumer over a periodof time and either or both of the following conditions apply:
• A fee, charge or interest became payable when payment of anamount charged in terms of that account was not made on orbefore a determined period or date; or
• Two prices were quoted for settlement of the account, the lowerprice being applicable if the account is paid on or before adetermined date, and the higher price being applicable due to theaccount not having been paid by that date
• Only specific portions of the Act are applicable to incidental creditagreements
• The provisions dealing with the registration criteria are not applicable toincidental credit agreements
• If a Credit Provider only supplies incidental credit, they do not need toregister
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Excluded transactions
• Agreements which are not covered by the Act:
– Juristic persons whose asset value or turnover > R 1 000 000
– Small business that enters into a large agreement
– Agreements where the credit provider and the consumer are related,
for example where a husband lends money to his wife (Careful
employees)
– Member of a stokvel borrows money from the stokvel
– Director of a company lends money to his company
– Government institution lends or borrows money from any source. For
example if a bank borrows money from the South African Reserve
Bank
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Types of agreements• Small:
– Pawn transaction
– Up to R 15 000
– Excluding a mortgage
• Intermediate:
– Between R 15 001 and R 250 000
– Excluding a pawn transaction and mortgage
• Large:
– More than R 250 000
– Mortgage
Registration requirements
• The NCA only required credit providers with at least 100 creditagreements or a total principal debt of R 500 000 to be registered creditproviders
• The Amendment Act removed both requirements
• New: On 11 May 2016, the Department of Trade and Industry announcedin Government Gazette 39981 that the new credit provider registrationthreshold will be Nil (R0)
• The essence of the newly set threshold is that any person who grantscredit within the ambit of the National Credit Act (NCA), irrespective ofthe principal debt, must apply to be a registered credit provider with theNational Credit Regulator (NCR) before giving a loan or granting credit
• Warning: The Act applies to ALL credit providers – whether they arerequired to be registered or not
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Effect of new registration threshold • Any person providing more than one loan bearing interest at commercial
rates must register as a credit provider
• The person must follow the registration process
– Providing the NCR with CIPC documents, auditor details, details of the
total value (principal debt) of all credit agreements entered into during
the most recent financial year, and signed resolutions and criminal
name clearance certificates for all directors
• Pay an application fee of R 550, an initial registration fee, branch fee of
R 250 and annual renewal fee
• Possible administrative fines may be handed down by the National
Consumer Tribunal for a failure to register as a credit provider
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Late payment of renewal fees
• Pay a registration renewal fee on or before the anniversary registrationdate
• Further thirty (30) days grace period subject to a penalty fee
• Failure to make a payment within the grace period, the NCR will after theexpiry of the thirty (30) days automatically lapse the registration
• Prohibited from offering or engaging in activities that require registrationin terms of the Act
• Subsequent payments after the automatic lapse will not be acceptableand where applicable will be refunded
• All credit agreements concluded after the lapsing of registration will beconsidered unlawful and of no force or effect
• Consumers under a Debt Counsellor profile will automatically betransferred by the NCR without any further notice
• A new application and all supporting registration documents must besubmitted
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Impact on employers • Interest free salary advances which must be repaid within a specified
period of time
– Because no compensatory interest is levied the transaction fallsoutside the ambit of the Act
• Provision of loans to employees where there is a maximum amount oftime prescribed for repayment and where interest is charged at a nominalrate or linked to prime
– Loans carry some level of commercial significance and/or advantage tothe company
– Transaction indeed concluded at arm’s length
– View of the NCR that any interest (even a nominal rate) applied to atransaction will render that transaction liable to the effects andprotections of the Act
• Provision of share schemes where interest-bearing loans are madeavailable to employees
– Regardless of the intention and purpose the transaction is regarded ascredit agreement
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Unlawful agreements
• Unlawful:
– Minors
– Mentally unfit
– Under administration
– Negative option marketing
– Unregistered providers
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Reckless credit (cont.)• Agreement is reckless if, at the time the agreement was made:
– Credit provider failed to take reasonable steps to assess:
• General understanding/appreciation of risks and costs of creditand his rights and obligations
• Debt re-payment history under credit agreements
• Existing financial means, prospects and obligations
• Whether there is a reasonable basis to conclude that anycommercial purpose may be successful, if the consumer has such apurpose for applying for credit
– Or credit provider made such assessment and entered into agreement,despite the fact that:
• Consumer did not understand/appreciate the risks, costs orobligations
Reckless credit
• New: Debt counsellors are bound by the Act to investigate whether an
over indebted consumer is the victim of reckless lending and to report it
to the NCR
• In the past only a court could declare a credit agreement reckless
• New: Amendments to the Act now empower the National Consumer
tribunal to make findings of reckless lending. This will result in swifter
action against errant lenders
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Pre-agreement statements• New: Credit cost multiple: The ratio of the total cost of credit to the
advanced principal debt, that is, the total cost of credit divided by theadvanced principal debt expressed as a number to two decimal places
• Disclose the credit cost multiple and total cost of credit in the pre-agreement statement and quotation
• Ensure that the attention of the prospective consumer is drawn to thecredit cost multiple
• Ensure that the cost of credit is understood by the prospective consumer
• Disclose a total cost of credit that includes the following items:
– The principal debt
– Interest
– Initiation fee, if any
– Service fee aggregated to the life of a loan
– Credit insurance aggregated to the life of a loan
Fees and interest rates• New: On 6 May 2016, the Limitations on Fees and Interest Rates
Regulations (Final Regulations) in terms of the National Credit Act, 2005(NCA) came into effect
• The maximum interest rates based on the current repo rate of 7%, whichmay be levied by credit providers in respect of:
– Home loans will be 19% (18,75%) per year;
– Credit cards and store cards will be 21% (21,48%) per year; and
– Unsecured credit transactions will be 28% (26,48%) per year.
– Incidental credit will be 2% (2%) per year.
• The maximum initiation fees which credit providers may levy on in respectof:
– Home loans are R 5 250
– Credit cards and store cards are R 1 050
– Unsecured credit transactions, short term credit transactions andother credit agreements are R 1 050
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In duplum rule• Means “double the amount”
• Common law rule
– Provides that interest on a debt will cease to run where the totalamount of arrear interest has accrued to an amount equal to theoutstanding principal debt
• Statutory in duplum rule: Section 103(5)
– Refer to amounts contemplated in section 101(1)(b) to (g)
• Initiation fees
• Service fees
• Interest
• Insurance
• Default administration charges
• Collection costs
Credit insurance• Credit insurance:
– May not exceed the outstanding obligation
– Reduce cover as the outstanding balance reduces
– Home loan: May not exceed the value of the property
– May not be forced to take insurance offered by the credit provider
– Premiums may not be capitalised upfront
– May require credit life insurance
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Debt enforcement• Debt enforcement
– Not allowed to retain:
• ID
• Debit or credit card
• ATM card
• PIN number
• Notify in writing (Section 129 letter by registered post)
• Options:
• Consult a debt counsellor
• Contact credit provider for alternative payment arrangements
within 10 days
• A section 129 notice does not constitute legal action against a consumer
• Serves as notice of impending legal action should a consumer ignore the
letter and the remedies it offers
• A section 129 letter notifies a consumer that he/she is in default and
offers a consumer several ways to remedy the default
• One such remedy is to apply for debt review
• A credit provider must deliver the notice to the consumer by registered
mail or personal service on the consumer
• Proof of delivery will be evidenced by written confirmation from the
postal service or the signature of the consumer
Section 129 notice
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• No source of information may submit adverse or other information to a
credit bureau:
– In respect of a debt that has prescribed
– Unless the required minimum monthly or such other installment
payment has not been paid for a minimum period of at least three
months consecutive billing cycles
– Without first giving the consumer notice
– If any arrears owing on an account are settled within the period of the
notice or if the consumer has disputed liability for the outstanding
amounts
• Upon settlement of the amount in arrears the source of the data must, in
its next data submission to the credit bureaus, advise the credit bureaus
that the arrear amounts have been settled
Debt enforcement (cont.)
Automatic removal of adverse consumer
credit information• The credit provider must submit to all registered credit bureaus within
seven days after settlement by a consumer of any information regarding
such settlement where an obligation under such credit agreement was the
subject of:
– An adverse classification of consumer behaviour
– An adverse classification enforcement action against a consumer
– An adverse listing recorded in the payment profile of the consumer; or
– A judgement debt
• The credit bureau must remove any adverse listing within seven days after
receipt of such information
• If the credit provider fails to submit information regarding a settlement a
consumer may lodge a complaint against such credit provider with the
National Credit Regulator
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New Child Maintenance Bill
• Parents who default on child maintenance:
– Be prevented from accessing more credit
– Details will be handed to the credit bureau
• If a defaulter cannot be traced, the court will now be able to give an order
to cellphone service providers to give the contact details of the defaulter
to the courts
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Debt enforcement (cont.)
• New: A consumer credit record may not be accessed by an employment
agency, recruitment consultant, staffing company or employer unless they
certify that any and all requests for consumer credit records relate to
positions requiring honesty in dealing with cash or finances and the job
descriptions of such positions are clearly outlined
• New: A credit provider must submit credit information to the credit
bureaus in the manner and form prescribed by the National Credit
Regulator
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Debt counselling• Process intended to help restructure the debt obligations of consumers who
cannot pay their debts
• New: reckless lending is now tested by debt counselor. Must investigatewhether an over indebted consumer is the victim of reckless lending andreport it to the NCR
• Debt counselor will make a proposal to all credit providers
• Credit providers may not take any legal action during the debt review period
• The consumer is not allowed to apply for or receive more credit
• Once all debt settled: Must receive a “Clearance Certificate” (Only shortterm debt)
• A debt counselor must not collect and distribute any monies on behalf ofcustomers
• New: A debt can be excluded from debt review if the credit providercommenced legal proceedings before the entering of the debt counsellingprocess
• New: As long as a debt review or debt counselling matter is before a courtor the NCT, a credit provider may not “terminate” debt review – meaning itmay not remove or exclude the credit agreement form the debt review
Clearance certificate• A consumer can only apply for a clearance certificate if the consumer has
settled all short and long term debts
• Since a long-term debt such as a mortgage takes longer to settle (i.e. 15 to
20 years) this means that the consumer would have to wait 15 to 20 years
to obtain a clearance certificate and to be rehabilitated
• Consumers must be issued with a clearance certificate if the consumer has
paid up all other debt and the only outstanding debt is a mortgage
agreement
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Payment Distribution Agent• Definition
– Any person who on behalf of a consumer that has applied for a debt
review, distributes payments to credit providers
– Consumer not obliged to use services of PDA
• Registration
– Must apply to NCR
– Satisfy prescribed education, experience or competency requirements
– No credit provider may have interest in or take part in management or
control of business operations of PDA
• PDA must:
– Maintain fidelity insurance and trust account
– Submit financials to NCR for purposes of audit
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Affordability assessment
• New: Non-standardised affordability assessments, amongst other things,
have led to an increase in the extension of reckless credit
• The Amendment Act aims to standardise affordability assessments with
the introduction of Affordability Assessment Regulations
• Although credit providers may determine the evaluative measures and
procedures to be used in determining whether or not to extend credit to
consumers, those measures and procedures must not be inconsistent with
the Affordability Assessment Regulations
• Warning to consumers: Consumers must be honest in providing
information for the purposes of affordability assessments
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• When conducting the affordability assessment a credit provider must:
– Calculate allocable and discretionary income
– Take into account all debts, including monthly debit repaymentobligations
– Take into account maintenance obligations
– Use table of necessary expense norms
• Discretionary income:
– Gross Income less statutory deductions such as income tax,unemployment insurance fund, maintenance payments and lessnecessary expenses (at a minimum as defined herein); less all othercommitted payment obligations including such as may appear from thecredit applicant's credit records as held by any Credit Bureau whichincome is the amount available to fund the proposed credit installment
• Credit bureau enquiry:
– Performed within 7 business days prior to approving credit or increasingthe existing credit limit, or within 14 business days for mortgages
Affordability assessment (cont.)
Declaration of expenses
• What about lower expenses?
– In exceptional circumstances the credit provider will be allowed toaccept lower declared expenses, provided that the consumercompletes a questionnaire
• Annexure A sets out the declaration that must be completed where livingexpenses less than the defined minimum per income band are declared,together with the reasons for this (a consumer is obliged to declare themonthly amount spent, per expense type, and provide an explanation forthis, for example, monthly accommodation expenses are low because aconsumer resides with family members, and the details for these familymembers must also be provided)
• Credit providers must be able to prove that, in every instance where lessthan minimum monthly expense norms as per the table have beendeclared, the reasons for this are fully documented
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Necessary Expenses table
Minimum Maximum Minimum monthly
Fixed Factor
Monthly Fixed Factor
= % of Income Above
Band minimum
R 0,00 R 800,00 R 0,00 100%
R 800,01 R 6 250,00 R 800,00 6,75%
R 6 250,01 R 25 000,00 R 1 167,88 9,00%
R 25 000,01 R 50 000,00 R 2 855,38 8,20%
R 50 000,01 Unlimited R 4 905,38 6,75%
Affordability assessment (cont.)
• A credit provider must take practicable steps to assess the consumer or
joint consumers allocatable income as well as their discretionary income
to determine whether the consumer has the financial means and
prospects to pay the proposed credit installments
• Credit provider is required to take practicable steps to validate gross
income by referring to:
– Recent three (3) months consumer's pay slips
– Recent three (3) months bank statements; or
– Any other similar credible confirmation
• Where the consumer's monthly gross income shows material variance, the
average gross income over the period of not less than three months
preceding the credit application must be utilised
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• Debt prescribed if:
• No knowledge for > 3 years (verbally or in writing)
• Not acknowledged to pay
• No promises to pay
• No summons issued
• Onus was always on consumer to claim prescription
• Types of debts that can prescribe after 3 years:
• Retail accounts
• Credit card accounts
• Telkom accounts
• Personal loans
• Gym membership
• Cellphone accounts
• Monies owed on vehicle finance
Prescription
Prescription (cont.)• Debt that only prescribes after 30 years
– Mortgage
– Tax (now 15)
– Municipality debt e.g. rates
– TV License
• New: It is now unlawful for a credit provider to attempt to collect a debt
that has prescribed or to sell debt that has prescribed
• New: No more selling of book debts
• New: Consumer don’t have to raise prescription
• Credit providers are also urged to notify consumers when they decide to
sell their debt to another company
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Consumer Protection Act
Consumer Goods and Services
OMBUD
Application of the Consumer
Protection Act• A supplier is any person who markets goods and services in the ordinary
course of their business
• This includes government and large municipalities, businesses (company,
CC, sole proprietors etc.), clubs, trade unions, associations and societies
• It does not apply to private sellers of homes and motor vehicles but may
apply to a landlord even if it is not their full time occupation
• One of the central features of the CPA is that it requires suppliers to
provide information fully, honestly and in an understandable format in
order to enable consumers to make informed choices
• So long as the suppliers have done what they are supposed to do,
consumers will generally be bound by agreements that they enter into
with the suppliers
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• Launched on 1 March 2015
• Official dispute resolution scheme for the Consumer Goods and Services
industry
• Requires businesses within the industry to register with CGSO or face
consequences
• Claims to be resolved within 60 (sixty) business days of receipt
Consumer Goods and Services OMBUD
Who must register?• ‘‘Supply chain’’, with respect to any particular goods or services, means
the collectivity of all suppliers who directly or indirectly contribute in turnto the ultimate supply of those goods or services to a consumer, whetheras a producer, importer, distributor or retailer of goods, or as a serviceprovider
• The Code applies to all Participants, unless they are regulated elsewhereby other public regulation, a Code prescribed by the Minister in terms ofsection 82 of the CPA and/or where a complaint falls within thejurisdiction of an Ombud with Jurisdiction, or an Industry Ombudaccredited in terms of section 82 (6)
• The following entities need not register:
• Transactions that are not covered by the CPA and/or that are governedby other public regulation; the automotive industry, ElectronicCommunication Service as defined in section 1 of the ElectronicCommunications Act, 2005 (Act No. 36 of 2005) and transactions withorgans of state or financial institutions
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Registration fees
• Participants in the industry shall contribute to the funding of the running
of the CGSO by means of the payment of a joining fee and an annual levy
and (if necessary) a special levy, as shall be determined from time to time
by the Board of the CGSO
• A special levy may be raised when deemed necessary by the Board to
provide for un-anticipated expenditure incurred by the CGSO due to the
increased caseloads or any other reason acceptable to the Board
• The CGSO may be entitled to take legal action to recover any outstanding
fees or levies owed by a Participant
Registration fees
CGSO Group Turnover Range Annual Fee
Group 1 R 3 bil + R 250 000
Group 2 Above R 1 bil to R 3 bil R 150 000
Group 3 Above R 500 mil to R 1 bil R 50 000
Group 4 Above R 5 mil to R 500 mil R 3 000
Group 5 Above R 1 mil to R 5 mil R 1 500
Group 6 R 1 to R 1 mil no cost
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Who can complain?
• The CGSO may consider a complaint brought by or on behalf of the
consumer who is:
– A private individual; or
– A juristic person (company, trust or partnership)
– Small business whose asset value or annual turnover is below the
threshold amount determined from time to time by the Minister in
terms of section 6 (1) of the Act (Presently R 2 million)
How to lodge a complaint?• The consumer must first refer the matter to the organisation the
complaint is being laid against by the following means:
– Contacting the suppliers’ customer care line / department directly
– Calling the CGSO call centre (0860 000 272) which will capture the
complaint and refer it to the subscriber, or
– Completing and submitting the complaint form
• Should the consumer go to the CGSO first, the Ombud will refer the
consumer back to the supplier
• Within 3 years of the consumer becoming aware of event resulting in the
complaint
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Complaint resolution by the participant• If a complainant is referred to a participant by the CGSO, the participant shall:
– Contact the complainant to clarify any issue, to ascertain the essence of
the complaint and to attempt to settle the complaint to the reasonable
satisfaction of the complainant
– If able to resolve the Complaint, provide CGSO with reasonable proof that
the complaint has been settled and that any undertaking made by the
Participant has been complied with
– Undertake any investigation that is necessary
– If the participant is unable to resolve the complaint referred to it by the
CGSO, provide the CGSO with a report outlining the investigation that it
undertook and the reasons that the matter was not resolved and its
reasons for repudiating the complaint
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What can a consumer complain about?• Delivery, defects and exchanges
– The product has a defect or does not do what it was supposed to do in
the first 6 months after you bought it
– The product you ordered was not delivered when agreed in a
reasonable time
– The product that was delivered less than 10 business days ago and is
not what you ordered/it was damaged
– The product was sold past its sell by date and its quality or appearance
was not as expected
– A defect in the product caused you some damage/harm
– A defect in the product caused you some injury/illness
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What can a consumer complain about? • Unsatisfactory service
– Services include repairs, construction, painting, gardening,
dressmaking, hair cutting, the provision of any education, information,
advice or consultation, transportation of an individual or any goods,
the provision of any accommodation or sustenance, any
entertainment or access thereto and the right of access, to an event or
to any premises, activity or facility
• You cancel an advance reservation, booking, order or a contract
– (There may be a cancellation penalty)
• Display Price
– The price was not displayed on the goods
– The price advertised/ displayed was incorrect
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What can a consumer complain about?• Stock
– The item was advertised but there is no stock
• Shocking, rude or discriminatory treatment
– This includes the use of physical force against a consumer, coercion,
undue influence, pressure, duress or harassment, unfair tactics etc. at
any stage of the interaction or where a supplier takes advantage of a
consumer’s inability to protect their own interests owing to physical or
mental disability, illiteracy, ignorance, inability to understand the
language of an agreement etc.; or
– Unfairly discriminating on the grounds of the Constitution (race,
gender, sex, pregnancy, marital status, ethnic or social origin, colour,
sexual orientation, age, disability, religion, conscience, belief, culture,
language and birth) or Chapter 2 of the Promotion of Equality and
Prevention of Unfair Discrimination Act
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Consequences of failure to cooperate
with the Ombudsman• The CGSO has named and shamed businesses who failed to follow its
recommendations
• The ombudsman’s rulings are not binding and he cannot impose sanctions
on businesses but those who refuse to cooperate with the process or
follow recommendations may be referred to the National Consumer
Commission for action to be taken against them
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Protection of Personal Information Act
President Jacob Zuma signed the Protection of Personal
Information Act (“POPI”) into law on 27th November 2013
The actual commencement date of the Act is still to be
determined by the President in the Government Gazette.
From this date, organisations will have one year to
demonstrate compliance with the legislation
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Effective date• The President signed a proclamation which was gazetted on 11 April 2014
• The following sections are in effect from 11 April 2014:
– Section 1 which deals with the definitions in the Act
– Part A of Chapter 5 which deals with the establishment of the
Information Regulator, the powers, duties and functions of the
Regulator, appointment and terms of office of members of the
Regulator, appointment of staff and the chief executive officer
– Section 112 dealing with the fact that the Minister may make
Regulations relating to the establishment of the Regulator and that the
Regulator may make Regulations in terms of certain areas; and
– Section 113 dealing with the procedures for making Regulations by the
Minister and the Regulator
Implementation Process• 13 April 2016 the Portfolio Committee on Justice and Correctional Services
shortlisted candidates for vacancies on the Information Regulator
• 17 May 2016, former IEC chairperson Pansy Tlakula has been
recommended as the chairperson of the newly-formed information
regulator. The recommendation now needs to be approved by the
National Assembly
• Regulator must still appoint staff and draft Regulations and allow for
public comment
• Effective date ???????
• Once the Act is made effective, companies will be given a year’s grace
period to comply with the Act, unless this grace period is extended as
updating, modification, retrieval, alteration, use, dissemination and
merging, erase or destruction
• Personal information:
– Race, gender, sex, pregnancy, marital status, national, ethnic or social
origin, colour, sexual orientation, age, physical or mental health, well-
being, disability, religion, conscience, belief, culture, language and
birth of the person
– Education, medical, financial, criminal or employment history
– ID number, symbol, e-mail address, physical address, telephone
number, online identifier
– Blood type or biometric information
– Personal opinions, views or preferences of the person
– Correspondence sent by the person that is implicitly or explicitly of a
private or confidential nature, or further correspondence that would
reveal the contents of the original correspondence
– The views or opinions of another individual about the person
• Special personal information:
– Child who is subject to parental control (any information relating to
any natural person under the age of 18 years)
– Religious, philosophical beliefs, race or ethnic origin, trade union
membership, political opinions, health, sexual life, or criminal
behaviour
Processing of personal information (cont.)
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Examples
• An employer recruiting employees
– The employer who receives CVs of candidates is the responsible party
– The candidate is the data subject
– A third party service provider that processes the information on behalf ofthe responsible party, is the operator
– The operator cannot take those CVs and do with it whatever it wants to
– It may only process it on behalf of the employer
• A retailer sending marketing material to its customers
– The retailer will be the responsible party (deciding to process itscustomers’ details for marketing purposes)
– The customer will be the data subject
– If a third party sends the actual sms messages or emails to the customerson behalf of the retailer, the third party would be the operator
– The third party cannot take the customers’ details and use it for any otherpurposes
Processing limitation
• Lawfulness of processing
– Stealing another's database or information is unlawful
• Minimality
– Only collect and/or process as little PI as is necessary to achieve thebusiness
• Consent, justification and objection
– In accordance with the law: Reporting behaviour to authorities
– To protect the legitimate interests: Trace a person to collectoutstanding money
– Justification: RP will bear the burden of proof
• Objection: Request direct marketer to stop
• Directly from the data subject unless:
– Deliberately public by the data subject e.g. facebook
– For marketing purposes
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Purpose specification• Personal information must be collected for a specific, explicitly defined and
lawful purpose related to a function or activity of the responsible party
• Define the different reasons for which personal information will beprocessed
• Must tie in with the responsible party’s general business activities
• The information may only be used for the purpose for which it was collected
• Only process the relevant information fields, as required for theparticular business operation
• Also apply when the responsible party shares information with thirdparties e.g. send out your bulk marketing messages
• Do not share all the information fields if the third party only needs cellphone numbers or email addresses
• Reasonable steps must be taken to ensure that the data subject is aware of thepurpose
• If I provide my information to your company, I should know for whichpurposes you are going to use my information. (And if you plan to use itfor purposes that I don’t like, and you don’t have a right in law to processit for those reasons, I may object to the processing for that purpose!)
Purpose specification• Personal information may not be retained for longer than necessary for
achieving the purpose for which it was collected or processed unless:
– The retention of the record is required or authorised by law
– Develop retention policies
• The responsible party reasonably requires the record for lawful purposes
relating to its functions
– Where another piece of legislation, like the National Credit Act, or
FICA, or Companies Act, or tax or labour legislation for example specify
a minimum period, the specified period will need to be applied in the
retention policy
• The retention is required by a contract between the parties
• The data subject has consented to the retention
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Further processing limitation• Where personal information is received from a third party and passed on
to the responsible party for further processing, the further processing
must be compatible with the purpose for which it was initially collected
• Will be allowed in following circumstances:
– Derived from a public record OR has deliberately been made public by
the data subject e.g. facebook
– Maintenance of the law or to comply with legislation e.g. FICA
– Prevent or mitigate a threat to public health or safety or the life/health
of the data subject or another individual e.g. person needed urgent
medical treatment
– Historical statistical and research purposes not in identifiable form
– In accordance with an exemption that was granted by the Information
Regulator
Quality of information
• Take reasonable, practical steps to ensure that the information is
complete, accurate, not misleading and remains updated where necessary
• Systems must be updated to record when information was captured, when
it was last updated and when last it was confirmed by the owner
• Keep track of the primary record (source) of all personal information as
well as any copies and/or secondary storage locations
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• If personal information is collected, the responsible party must take
reasonably practicable steps to ensure that the data subject is aware of:
– The information being collected and where the information is not collected
from the data subject, the source from which it is collected
– The name and address of the responsible party
– The purpose for which the information is being collected
– Whether or not the supply of the information by that data subject is
voluntary or mandatory
– The consequences of failure to provide the information
– Any particular law authorising or requiring the collection of the information
– If the responsible party intends to transfer the information to a third
country or international organisation and the level of protection afforded to
the information by that third country or international organisation
Openness
Openness (cont.)• Maintain the documentation of all processing operations: Update PAIA
manual
• Reasons for including this section are the following:
– Currently information flows between companies without data subjectsever realising what is happening with their information
– Data subjects provide their personal information to companies forspecific reasons, but companies often take the information and dowith it whatever they want to, including to use it for reasons thatwould never have been intended by the data subject
– Data subjects do not know which companies hold their personalinformation
• POPI does not provide exact details on how this notification needs to takeplace
• Waiting for the regulations
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Openness (cont.)• Biggest challenge will come in where information is not collected directly
from the data subject
• This happens on a daily basis and a few examples include:
– Collecting information about a relative / friend of your customer
– Collecting information from the credit bureau
– Collecting information from third party data suppliers
– Collecting information from fraud data bases
– Collecting information from other companies within your group of
companies
– Collecting information from business partners
• Appropriate and reasonable security measures must be taken, for
example against the loss of, damage to or unauthorised destruction of
personal information, and any unlawful access to or processing of such
information
• The integrity and confidentiality of the personal information must be
secured
• The responsible party must take reasonable measures to:
– Identify all reasonably foreseeable internal and external risks to
personal information in its possession or under its control
– Establish and maintain appropriate safeguards against the risks
identified
– Regularly verify that the safeguards are effectively implemented, and
– Ensure that the safeguards are continually updated in response to new
risks
Security Safeguards
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• Practical controls or processes in response to risks identified, could include
the following:
– Review of access rights on an ongoing basis
– Ownership for PI
– Physical access controls
– Computer/device passwords
– Firewalls
– Encryption
– Remote destruction
– Anti-virus programs
– Exit process
Security Safeguards (cont.)
Security Safeguards (cont.)• Where there are reasonable grounds to believe that the personal
information of a data subject has been accessed or acquired by anyunauthorised person, the responsible party must notify:
– The Regulator; and
– The data subject, unless the identity of such data subject cannot beestablished
• The notification to the data subject must be in writing and communicatedin one of the following ways:
– Mailed to the data subject’s last known physical or postal address
– Sent by e-mail to the data subject’s last known e-mail address
– Placed in a prominent position on the website of the responsible party
– Published in the news media
– As may be directed by the Regulator
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Data subject participation
• A data subject has the right to request a responsible party to confirm, free
of charge, whether or not the responsible party holds personal
information about the data subject and request from a responsible party
the record or a description of the personal information held, including
information about the identity of all third parties, who have had, access to
the information
• A data subject may request a responsible party to:
• Correct or delete personal information that is inaccurate,
irrelevant, excessive, misleading or obtained unlawfully
• Destroy or delete a record of personal information about the data
subject that the responsible party is no longer authorised to retain
Accountability• Up to R10 million in fines or 10 years in jail!
• Serious implications for representatives such as company directors as well
as compliance and information officers
• The Act requires the reporting of any breaches of personal information
• Such violations could cause considerable reputational harm to a business
and even result in legal action which can include damage claims
• Ignoring POPI and/or not taking immediate action to address its
requirements is therefore not an option
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Employment Law
Employment Services Act 4 of 2014
• Came into effect on 9 August 2015
• Excludes section 13 from coming into operation dealing with theregistration of private employment agencies
• The purpose is to establish productivity within South Africa, decreaselevels of unemployment, and provide for the training of unskilled workers
• Provides for the creation of a Public Employment Service, which will beestablished and managed by the state
• To provide state assistance to unemployed job seekers
• Will register job seekers and placement opportunities
• Provide training for unskilled job seekers and give the unemployed accessto career information
• Employers in certain industries may be required to register vacancies andspecific categories of work
• Employers may also be required to interview individuals recommended bythe PES and pay license fees to assist in funding the PES
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Company Secretarial
Removal of directors
• Removed by an ordinary resolution
• Adopted at a shareholders meeting
• Supporting documents
– Proof that a notice was sent to the director concerned
– Attendance register
– Certified copy of the share register
• Removed by the Board on the grounds of being ineligible or disqualified,incapacity, neglect or derelict, the company must have more than 2directors with the following additional supporting documents:
– Proof of notice was sent to the director(s) concerned with detailedinformation stated in section 71(4)(a)
– Attendance register
• When a director is disqualified an order of court confirming suchdisqualification is required and when the director is rehabilitated a courtorder is also required with the stamp of the Registrar of Court
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Rotation of auditors (section 92)
• An individual may not serve as an auditor or designated auditor of acompany for more than 5 consecutive financial years
• Applies to all companies and close corporations that are mandated tohave an audit
• Does not apply to trusts, partnerships, sole proprietorships
• Effective from 1 May 2011
• Does not apply retrospectively
• Applies to individual auditors only and not to firms
• With the extension of the monitoring of section 90 from 1 May 2011 to1 January 2016, the counting of the five-year period has also beenpostponed and commenced on 1 January 2016
• Consequences of non-compliance: Relevant professional bodies toinvestigate the breach in terms of their respective Codes of ProfessionalConduct and institute the necessary disciplinary proceedings
Disclosure of directors’ / prescribed
officers’ remuneration • The annual financial statements of each company that is required to have
its annual financial statements audited must disclose the prescribedremuneration
• Companies that are audited voluntarily i.e. where the requirement arisesin terms of the company’s MOI, a shareholders’ resolution, or a decision ofthe Board of directors, are not required to disclose remuneration in theirannual financial statements
• The remuneration and benefits received by each director or individualthat holds any prescribed office in the company must be disclosed
• The name of each director or prescribed officer must be disclosed
• Disclosure is on an individual basis per director or prescribed officer andnot in aggregate
• Includes any directors or prescribed officer who had been in office duringthe course of the year
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Disclosure of directors’ / prescribed
officers’ remuneration (cont.)• The information to be disclosed must show the amount of any
remuneration or benefits paid to or receivable by persons in respect of:
– Services rendered as directors or prescribed officers of the company
– Services rendered while being directors or prescribed officers of thecompany:
• As directors or prescribed officers of any other company within thesame group of companies
• Otherwise in connection with the carrying on of the affairs of thecompany or any other company within the same group ofcompanies
– If a person serves as director and/or prescribed officer of more thanone company in a group of companies, that person’s totalremuneration would be disclosed in the annual financial statements ofall the companies in the group that are required to discloseremuneration
– The detail of the person’s total remuneration, i.e. the split betweenthe disclosure would however differ in the various sets of annualfinancial statements
• The source of payment does not determine the disclosure
• There will be circumstances where the amount recognised as an expensein a company’s Statement of Comprehensive Income does not agree withthe amounts disclosed in its annual financial statements
• “Carrying on of the affairs” extends to services provided in thedirector/prescribed officer’s capacity as an employee. If a person is adirector in a group of companies and the same person is also an employeeof another company in the group, the company where the person is adirector will have to disclose in its annual financial statements theperson’s remuneration received as director and the salary earned as anemployee
• Any amounts paid in respect of services rendered to a trust or a foreigncompany within the group would not be disclosed, since trusts and
foreign companies are not “companies”
Disclosure of directors’ / prescribed
officers’ remuneration (cont.)
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Annual returns• Companies must file within 30 business days after the anniversary date of
incorporation
• Close corporations must file within the anniversary month ofincorporation up until the month thereafter
• An annual return is not an amendment form
• The annual return must be followed by the appropriate statutory form toupdate the CIPC registers after filing if CIPC is not in possession of themost up to date information
• Annual return filings are only accepted electronically via the CIPC website
• CIPC cannot exempt companies and close corporations fromfiling/complying with the filing requirement
• The prescribed filing fees for annual returns are legislated and cannot bewaived by the CIPC
• The CIPC cannot make arrangements for payment in “installments” sincethe prescribed fee must accompany the filing
• If the prescribed fee does not accompany the filing, the filing is invalidatedand must be refiled
Annual returns (cont.)• No distinction between an active and inactive company or close
corporation
• Even if the company or close corporation was inactive, it is still legallyrequired to file and pay annual returns
• Once an annual return is filed, none of the information provided can beupdated
• Where the incorrect turnover has been provided the customer code usedfor the original filing may be issued with either a credit note or a debitnote
• In order for CIPC to credit/debit the customer code the followingdocuments are required:
– The financial statements for the annual return year in question
– The entity name, registration number and the annual return year inquestion
– Indication of the reason for the incorrect turnover being provided
– Certified ID copy of the owner of the customer code used to file theannual return, and
– A letter providing permission to the CIPC to credit/debit the difference
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Annual returns (cont.)• Only the audited financial statements must currently be filed with the CIPC
• Use the latest approved financial statements for purposes of determining
the turnover
• During the deregistration process notifications are mailed to the registered
postal address as per CIPC records, informing it of the intended
deregistration and a request to either provide confirmation that it is still
active or to file outstanding annual return
• At the time of notification, the company or close corporation’s legal
persona is not yet removed
• The notification only serves to inform the company or close corporation of
the intention to deregister it, if no objection or filing of annual returns
occurs
Non/late submission of annual financial
statements• CIPC has been empowered with investigative and enforcement powers
• To take action against companies who do not comply
• Any continued non-compliance can trigger a formal investigation by the
Commission which can lead to the issuance of a compliance notice
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Independent reviews and non-
compliance with regulation 29• An Independent Review of Annual Financial Statements (AFS) is dealt with
by Regulation 29 of the Companies Regulations, 2011
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Definition of an RI• 'Reportable Irregularity' (RI) means any act or omission committed by any
person responsible for the management of a company who:
– Unlawfully has caused or is likely to cause material financial loss to any
member, shareholder, creditor or investor of the company in respect of
his, her or its dealing with that entity, or
– Is fraudulent or amounts to theft; or
– Causes or has caused the company to trade under insolvent
circumstances
• The RI definition for Independent Reviews are more onerous than that for
audits since the existence of any insolvent circumstance would require the
Independent Reviewer to report an RI to the CIPC
• Regulation 29(1)(b)(iii) simply states insolvent circumstances which is
interpreted to mean both commercial and factual insolvency
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Information required to be contained
in a report from an IR practitioner• The RI must be set out clearly and concisely, with the relevant alleged
contravention of the Companies Act being stated; that is, the actual section of
the Act
• Proof of communication to the management must also be included with the
report
• Contact details such as a reference person (director or manager), telephone
numbers, e-mail addresses, and/or postal addresses must also be included in
the 2nd report, if a reportable irregularity is still continuing
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Process that the IR practitioner must
follow when reporting an irregularity• An independent reviewer of a company that is satisfied or has reason to
believe that a reportable irregularity has taken place or is taking place in
respect of that company must, without delay, send a written report to the
Commission
• The report must give particulars of the reportable irregularity and must
include such other information and particulars as the independent reviewer
considers appropriate
• The independent reviewer must within three business days of sending the
report to the Commission notify the members of the board of the company in
writing of the sending of the report
• A copy of the report to the Commission must accompany the Notice
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Process that the IR practitioner must
follow when reporting an irregularity• The independent reviewer must as soon as reasonably possible but not later
than 20 business days from the date on which the report was sent to theCommission:
• Take all reasonable measures to discuss the report with the members ofthe Board
• Afford the members of the Board an opportunity to make representationsin respect of the report
• Send another report to the Commission, which report must include astatement that the independent reviewer is of the opinion that:
– No reportable irregularity has taken place or is taking place; or
– The suspected reportable irregularity is no longer taking place andthat adequate steps have been taken for the prevention or recovery ofany loss as a result thereof, if relevant; or
– The reportable irregularity is continuing; and
– Detailed particulars and information supporting the statement
Services Act• The Draft Regulations were Gazetted on 2 October 2015
• A large number of commercial and private properties will be affected
• Scheme or arrangement where there is shared use of and responsibility
for parts of land and buildings (such as sectional titles, share block
companies, home owners' associations, property owners' associations,
housing schemes for retired persons, housing co-operatives etc.)
• Levies will be payable to the Ombud Service based on the municipal
property valuation per unit
• A community scheme pays a levy annually to the Ombud Service and
receives it from the unit owners in the scheme
• Every community scheme must pay the levy on or before 30 September of
each calendar year, with interest at above prime rate for any late or
incorrect payment
The Community Schemes Ombud
Services Act (cont.)• Waivers and exemptions
– Individual units within a community scheme with a total property
value not exceeding R 500 000 in terms of the municipal valuation roll
are entitled to a 100% percentage waiver of the levies
– Any person or category of persons whose monthly net household
(gross income less PAYE) income is below R5 500 are entitled to a
100% waiver of application and adjudication fees
– Any person of category of persons who may not qualify in terms of the
above criteria may lodge an application for discount and/or waiver for
consideration by the Chief Ombud depending on the applicant
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The Community Schemes Ombud
Services Act (cont.)• Must insure against the risk of loss of money belonging to the community
scheme
• The minimum amount of the required fidelity insurance cover is the total
value of:
– The community scheme's investments and reserves at the end of its
last financial year
– 25% of the community scheme's operational budget for its current
financial year
• A copy of the annual financial statements and any other prescribed
document or information must be filed before 31 October each year
Labour Laws Amendment Bill• As a result of appeals made to the ACDP by fathers who felt strongly that
provision should be made in law for “paternity leave”
• The BCEA provides that an employee may take four months’ maternityleave in respect of that employee’s child
• This maternity leave is paid for by the UIF
• An employee who is the father of the child may take three days’ familyresponsibility leave when that employee’s child is born
• The family responsibility leave is paid for by the employer
• There is no legal obligation on an employer to grant an adoptive parentadoption leave
• It is a matter for negotiation between individual employees and employers
• The Bill seeks to provide for parental leave, adoption leave andcommissioning parental leave
• It also provides for the payment of parental benefits as well ascommissioning parental benefits from the Unemployment Insurance Fund
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Labour Laws Amendment Bill (cont.)• The Bill provides for:
– Ten consecutive days’ parental leave when that employee’s child isborn or when an adoption order is granted
– An employee who is an adoptive parent of a child who is younger thantwo years is entitled to adoption leave of 10 weeks
– An employee who is a commissioning parent in a surrogatemotherhood agreement is entitled to commissioning parental leave of10 weeks
– In both cases if there are two parents, one of the employees is entitledto commissioning parental leave and the other employee is entitled toparental leave
• The proviso that an employee may take family responsibility leave whenthat employee’s child is born is removed
• A collective agreement concluded in a bargaining council may not reducean employee’s entitlement to parental leave, adoption leave orcommissioning parental leave
King IV
• A more practical, principle based approach
• Follows an outcome-based rather than rule-based approach
• The 75 King III principles have been consolidated into 16 principles, eachlinked to very distinct outcomes
• Each principle is supported by a limited number of recommendedpractices, and requires specific disclosures
• Aims to establish a balance between conformance and performance
• The King IV Report has been structured as a framework that can beapplied more easily across listed and unlisted companies, profit and non-profits as well as private and public entities
• The approach of “apply or explain” of King III is replaced with “apply andexplain”
• Application of all the principles is assumed and companies should explainthe practices that have been implemented to give effect to each principle
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King IV (cont.)
• Sector supplements released which had a comment deadline of 11 July
2016
– SME
– Public Sector
– Municipalities
– Pension Funds
– Non Profit Organisations
• These should not be read in isolation but together with the King IV Report
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UIF Amendment Bill version B• Employer before the seventh of a month to provide all prescribed information
for the previous month (with exceptions for domestic employers and smallbusinesses)
• Applying the Act to learnership agreements, public sector employees andpersons who enter SA to carry out a contract of service, apprenticeship orlearnership within SA
• Using the fund to finance the retention of contributors in employment and there-entry of contributors
• Amending the income replacement rate and
• Revamping benefits, for example:
– Certain loss of income included if due to reduced working time, 12 monthsto apply for general or maternity benefits (18 months for dependentsbenefits), 1 day benefit for every 5 days, maternity benefits, orcompensation for occupational injuries or diseases benefits, not to affectunemployment benefits, illness benefits limitation only if less than 7 days ill,reconsideration of maternity benefits relating to a stillbirth or miscarriage
• Any nominated beneficiary of the deceased contributor may claim dependant’sbenefits if there is no surviving spouse, life partner or dependant children of thedeceased contributor
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Other Important Notices
Estate agents – CPD update
• Some estate agents have not been able to accumulate the required fifteen
verifiable CPD points
• The EAAB implemented an appropriate ‘catch-up’ programme designed to
assist non-compliant participants to obtain any outstanding verifiable CPD
points
• CPD e-learning intervention
• Extension until 31 December 2016 to ‘catch-up’
• After studying the material the agent will be required to answer ten
randomly generated multiple-choice questions
• Participants correctly answering at least 70% of the questions will be
awarded three verifiable CPD points
• If the necessary CPD points are not accrued by the end of the CPD cycle,
participant will be disqualified as estate agent at end of cycle.
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Additional Voluntary disclosure for
foreign exchange
• Taxpayers with undisclosed assets offshore beware
• SARS and SARB will relax VDP rules to allow taxpayers to regularise their
offshore assets
• SARS and SARB will work jointly
• Window period of 6 months from 1 October 2016
• Individuals and Companies can apply
• Offshore Trusts will not qualify
• Settlors, donors, deceased estates or beneficiaries of foreign discretionary
trusts must elect to have the trusts offshore assets and income deemed to
be held by them
• No-name voluntary disclosure can be made i.t.o. S 228 of the TAA
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• Tax relief available
– If undisclosed offshore income was used to acquire offshore assets
between 1 March 2010 and 28 February 2015 then only 50% of the
assets will be included in taxable income.
– Value is market value in relevant currency translated at spot rate.
– Undeclared income giving rise to assets will be exempt
– May apply if assets were disposed before 1 March 2010
– No understatement penalty will apply
– No criminal prosecution
– No Donations tax, CGT or Estate duty will apply.
Additional Voluntary disclosure for
foreign exchange
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• Exchange Control relief available
– Available to individuals and companies
– On all excon contraventions prior to 29 February 2016
– Levy based on market value of offshore assets at 29 February 2016
• 5% if assets are repatriated to SA
• 10% if assets are kept offshore
– No reduction for any unutilised portion of the R10 million foreign
capital allowance
– Levy must be sourced from foreign funds
– If foreign funds are insufficient then additional 2% is added to extent
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