Corporate Law & Regulation

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Purpose of a loan and related interest expenditure

Interest is only deductible if incurred in the production of income and for purposes of carrying on a trade. This requires that the loan in respect of which the interest is paid and the trade/income should be closely connected. A recent case heard in the tax court illustrates that the original purpose of a loan for a specific purpose plays an important role in this regard, even in the case of a loan with flexible payment terms…

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Reinstatement triumphs acceleration clauses in credit agreements subject to the National Credit Act

Credit providers need to understand that simple reliance on acceleration clauses will not be sufficient to assist them to enforce its rights under a credit agreement – especially against consumers who regularly fail to make payments by the stipulated dates…

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Bad debts: Effect on exchange gains or losses

The tax treatment of unrealised exchange gains or losses pose certain challenging questions when a foreign denominated debt becomes irrecoverable. SARS issued a draft interpretation note that provides their views on, amongst others, the tax effect of such gains or losses when a debt goes bad or is reduced. While the effect of unrealised exchange differences appear to be neutral from a lender perspective, this is not necessarily the case for a borrower whose debts are reduced…

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King IV extends application to retirement funds and introduces sector supplements for easier application

Although King IV is not binding on South African retirement funds it is undeniably “applicable” in the sense that it can be readily applied in a practical manner to the management, oversight and governance of retirement funds…

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A need for financial services providers to reinforce monitoring mechanisms over representatives

A recent finding of the Appeal Board is a wake-up call to FSPs who do not have robust monitoring mechanisms, it is also a reminder that the old and well-established vicarious liability and ostensible authority doctrines still subsist and extend to the financial services sector…

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Heirs, immigrants, expatriates and investors take note: Period for administrative relief outside of the exchange control special voluntary disclosure programme extended

Period of administrative relief outside of exchange control special voluntary disclosure programme is extended to 31 August 2017…

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Capital gains tax: Cancellation of disposals

Capital gains tax is imposed on any amount that a taxpayer becomes entitled to as a result of a disposal of an asset, whether this amount has been received in cash or not. It was confirmed in New Adventure Shelf 122 v C:SARS that a taxpayer does not have grounds to request that the assessment where such capital gains tax was levied if the proceeds become irrecoverable…

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Further ruling issued by SARS in respect of venture capital companies

The South African Revenue Service issued an important ruling on 3 February 2017 providing direction in respect of the interpretation of the rules contained in s12J pertaining to venture capital companies as well as illustrating the practical implementation of some of the technical aspects of the rules to particular structures…

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The Financial Sector Regulation Bill, 2015 and the regulation of financial conglomerates

The Financial Sector Regulation Bill seeks to supervise “eligible financial institutions” more closely that are part of “financial conglomerates”. Thus, the purposes of the Bill include establishing a system of financial regulation by creating the Prudential Authority (as defined in the Bill); and the supervision of financial conglomerates in relation to eligible financial institutions that are part of financial conglomerates…

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SARS expands and refines its attack on low- or no-interest loans: section 7C and the “in duplum” rule

One of the major developments arising from the 2016 tax laws amendment cycle was the introduction of an anti-avoidance measure, section 7C of the Income Tax Act, which attacks tax-free transfers to trusts using low- or no-interest loans…

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