Business Law Focus

Business Law Focus host Evan Pickworth interviews Ziyaad Moosa, an expert in business advisory and support at PKF, about the challenges businesses without sophisticated compliance departments face, particularly the risk of deregistration.

Mandatory beneficial ownership reporting is a good example of heightened compliance standards: it is no longer simply a Companies Act technicality, but part of the basic governance hygiene of running a South African business, big or small.

At its simplest, a beneficial owner is the natural person who ultimately owns or exercises effective control over a company, whether directly or indirectly. That sounds straightforward when one person owns 100% of a small business. It becomes more complicated when shares are held through other companies, trusts or more complex structures, or when effective control does not necessarily align with the obvious shareholding.

The important point for entrepreneurs is that this is not just a requirement for large corporates with legal and compliance departments.

Companies and close corporations must keep their beneficial ownership information up to date with CIPC. Beneficial ownership declarations are now part of the annual compliance cycle, and since July 2024, CIPC's system has prevented the completion of an annual return if the beneficial ownership information is not up to date. You must also generally report changes to beneficial ownership information within 10 business days.

For a busy entrepreneur, this can easily fall between the cracks. You register a company, focus on customers, cash flow, employees and tax, and assume that because SARS returns and CIPC annual returns are handled, the company is compliant. That assumption can now be costly.

CIPC has stepped up enforcement against entities that have failed to comply with beneficial ownership requirements. Consequences may include compliance notices and, potentially, court-sanctioned administrative fines. Because beneficial ownership compliance is also linked to the annual-return process, ongoing non-compliance can ultimately put the company on the path to deregistration.

Deregistration is much more than an administrative inconvenience. CIPC has warned that the consequences can include frozen company bank accounts, disruption to suppliers and creditors, and potential personal exposure for directors in certain circumstances.

In many cases, by the time business rescue is considered, the business can no longer be rescued. In this edition of Business Law Focus, host Evan Pickworth interviews Dr Eric Levenstein, Director and Head of Insolvency & Business Rescue at Werksmans, about the misuse of the process and practical steps to ensure it is used more appropriately as a mechanism for intervention rather than reaction.

For South African technology businesses, entrepreneurs and companies looking to expand internationally, moving intellectual property (IP) into an offshore structure can seem an obvious next step. Software, platforms, patents, trade marks and other IP can become highly valuable assets, and housing them offshore may be attractive for international expansion, investment or broader corporate structuring. But there is an important catch: South African exchange-control rules regard IP as capital, and capital cannot be moved offshore without regulatory approval.

In this edition of Business Law Focus, Sara-Jane Pluke, Head of Intellectual Property at Eversheds-Sutherland, explains to host Evan Pickworth that if the offshore entity IP is being moved into is in any way related to the SA business - same shareholders, common control, part of the same group - the deal is in related-party territory, and that's where the SARB gets genuinely strict.

“If the offshore entity you are moving IP into is in any way related to your SA business - same shareholders, common control, part of the same group - you are in related-party territory,” says Pluke. In practice, very few related-party IP transfers are approved.

Here's the regulator's concern in a nutshell - if a business sells IP offshore and then licenses it back to use in SA, they are effectively getting the asset out of the country while continuing to pay royalties on it from SA. That's revenue leaving the country twice over: once when the IP itself goes offshore and again every time a royalty payment follows it out.

The SARB regards this as “double-dipping,” and it's a hard no. Sale and lease-back arrangements are prohibited even between unrelated parties.

Importantly, Pluke also explains in the interview what can be done to achieve approval when there is no related party.

While many have welcomed the Constitutional Court's long-awaited judgment on the Copyright Amendment Bill (CAB) and the Performers' Protection Amendment Bill (PPAB), South Africa's copyright reform journey is far from over.

In this edition of Business Law Focus, host Evan Pickworth speaks to Chola Makgamathe, General Manager: Legal at the Southern African Music Rights Organisation (SAMRO), about what the landmark ruling really means for creators, businesses and the future of intellectual property law.

In a world where each regional competition regulator has distinct merger control triggers and thresholds, assessment frameworks, regulatory powers, policy prerogatives and stakeholders to appease, it may become a case of too many cooks spoiling the broth unless a solution is found.

In this edition of Business Law Focus, host Evan Pickworth interviews Lesetja Morapi from Herbert Smith Freehills Kramer on the pressing need for the various regional competition regulators to co-ordinate and agree a framework that ensures that transactions with regional effects do not need to be filed with multiple regional regulators with overlapping jurisdiction.