Dommisse has a clear understanding of the challenges that startups face. They provided legal guidance and documentation for a round of funding, providing practical advice throughout the process drawn from their own experience. They were efficient, thorough, stuck to their deadlines and were readily available throughout the process. We would highly recommend partnering with them when building a business.
We sincerely enjoyed our interaction with Dommisse Attorneys, negotiating the legals around a VC investment. Their approach was pragmatic, value adding and at all times did we feel that interactions were aimed to provide a “win-win” result for all parties involved. A very refreshing approach in an often confrontation-driven industry. Highly recommended.
Corporate mergers and acquisitions play a significant role in many companies’ growth strategies. They are among the most effective tools utilised by forward thinking boards to scale and grow a business.
With the fast-paced society that we live in today and access to information being so readily available, businesses are scurrying to build shareholder value, taking advantage of potential complimentary industries and making the necessary corporate decisions to gain a bigger share of the markets they operate in.
Since the Companies Act, 71 of 2008 (as amended) (“the Companies Act“) came into effect on 1 May 2011, there has been a paradigm shift in the regulation of South African mergers and amalgamations.
The Companies Act introduced a new form of statutory merger which exists in addition to, and not in substitution of, the pre-existing methods used by companies wanting to effect business combinations, i.e. a sale of shares or a sale of business as a going concern.
The statutory merger is governed in terms of section 113 and section 116 of the Companies Act and the merger agreement is a mandatory requirement in terms of section 113(2).
In addition to each amalgamated or merged company passing the solvency and liquidity test in terms of section 113(1), section 113(2) provides further mandatory terms and conditions that must be addressed in the merger agreement, namely:
- the proposed Memorandum of Incorporation of any new company to be formed by the amalgamation or merger, must be included in the merger agreement;
- the name and identity number of each proposed director of any proposed amalgamated or merged company must be included;
- the manner in which the securities of each amalgamating or merging company are to be converted into securities of any proposed amalgamated or merged company, or exchanged for other property, needs to be detailed;
- if any securities of any of the amalgamating or merging companies are not to be converted into securities of any proposed amalgamated or merged company, the consideration that the holders of those securities are to receive in addition to or instead of securities of any proposed amalgamated or merged company;
- the manner of payment of any consideration instead of the issue of fractional securities of an amalgamated or merged company or of any other juristic person the securities of which are to be received in the amalgamation or merger;
- details of the proposed allocation of the assets and liabilities of the amalgamating or merging companies among the companies that will be formed or continue to exist when the merger agreement has been implemented;
- details of any arrangement or strategy necessary to complete the amalgamation or merger, and to provide for the subsequent management and operation of the proposed amalgamated or merged company or companies; and
- the estimated cost of the proposed amalgamation or merger.
Further to the above, a thorough regulatory investigation is required to ensure compliance with the relevant regulatory bodies and to ensure that the necessary consents and/or approvals are obtained (i.e. Takeover Regulation Panel approval or exemption, Competition Commission approval, etc.).
A compliant merger agreement, addressing all the requirements in terms of the Companies Act, is imperative for a successful merger. Should you need assistance perfecting a merger, don’t hesitate to give one of our lawyers a call.
Disclaimer. The articles on our website are provided for general information purposes only. We have taken care to ensure accuracy, however the content is not intended as legal advice. Always consult an attorney on your specific legal problems.
This year we’ll be participating in National Wills Week from 17 – 21 September 2018.
For anyone who wishes to have a basic will drafted at no charge, all they’ll need to do is contact email@example.com to schedule an appointment.
The attending practitioner will send a short questionnaire that each person is required to complete and return prior to any consultation.
Please note that this is a free service and is offered on a first come first serve basis.
About the Position
Description of Work: A senior associate who has a strong commercial background, can work independently and who will be responsible for their own client portfolio, developing client relationships and building a team.
- 3/4 years post article experience in commercial law at a reputable firm.
- Good understanding of commercial and legal aspects of transactional work.
- Working experience in private equity, venture capital, mergers & acquisitions and generally the legal aspects of corporate finance is essential. Drive to be market-leading attorney is these fields.
- Advanced computer knowledge with emphasis in MS Word, MS Excel and MS PowerPoint.
- Excellent communication, reporting and interpersonal skills, verbal and written.
- Ability to work independently and be proactive.
- Ability to work within pressurized environment and adhere to tight deadlines.
- Quality of work: accuracy, attention to detail.
- Organisation: being meticulous in planning & prioritising work tasks.
- Problem solving: anticipating and identifying problems, pro-actively solving them.
- Leadership: managing, leading and building a team.
- Consistently excel in the three core deliverables for senior team members: meeting and exceeding their own budget; managing team members to do quality work and also their targets; grow the value of the firm by bringing in new clients.
- High level transactional drafting and deal management experence.
- Corporate finance transactions and specifically M&A work in mid-market environment; local and cross-border transactions
- Fund raising (debt/equity).
- Venture capital and private equity transactions – ability to negotiate and draft complex transactional documents without getting intimidated or overwhelmed.
- Corporate restructuring.
- Cross border transactions.
- Joint venture deals – and the related sale of shares, shareholders’ agreements, partnerships.
- Regulatory aspects with doing business across borders.
- International expansion.
- Ability to learn new areas of law and apply that to new jurisdictions.
- LLM in commercial law and business courses will be advantageous but not a requirement.
- Market related
- Commercial Law
- Mergers & acquisitions
- Drafting legal documents
- Staff management
- Cross border transactions
Desired Qualification Accreditation
Kindly send your motivation and CV to: firstname.lastname@example.org
Description of Work:
A commercial law associate who can think independently and who will deliver bespoke start up legal services within a team environment.
- Completed articles at a reputable firm.
- At minimum 1 year’s post article experience in commercial law.
- Comprehensive knowledge of the Companies Act and how that is applied to start up companies.
- The candidate must show specific inclination to work with start-up companies.
- A good understanding of legal issues facing start-up companies.
- Excellent drafting skills.
- Ability to work independently and be proactive.
- Good communication, reporting and interpersonal skills, verbal and written.
- Ability to work within pressurized team environment and adhere to tight deadlines.
- Advanced computer knowledge with emphasis in MS Word and MS Excel.
- Quality of work: accuracy, minimising level of review required by manager.
- Organisation: being meticulous in planning and prioritising work tasks.
- Problem solving: anticipating and identifying problems, pro-actively solving them.
- Ability to learn new areas of law
Market related – depending on skill level and experience (first year to third year post qualification)
The Candidate must have their own transport and mobile phone
Each candidate will need to motivate their application by answering the following questions:
- What is a start-up lawyer?
- What commercial, legal skills should a start-up lawyer have? Please explain how you have these skills.
- What is the unique value which a start-up lawyer should display to a client?
- What skills or qualities do start-up lawyer have that are unusual for lawyers generally?
- What should the primary goals or values of a start-up lawyer be? Motivate why you have this goal, personally.
- How should the success of a start-up lawyer be measured?
- What steps would you take to build the public profile of a start-up law practice?
- What attributes do you think start-up clients want to see in their start-up lawyer?
- What do you think is the purpose of having a start-up team in a commercial law firm?
Kindly send your motivation and CV to email@example.com
On 24 November, the Portfolio Committee on Trade and Industry published the draft National Credit Amendment Bill, 2018 and the Memorandum on the Objects of the Bill (the Bill) for public comment. The Bill establishes a procedure by which low income and over-indebted consumers under credit agreements (who may not qualify to undergo the debt review or sequestration processes) may apply for debt intervention.
The Bill provides for the National Credit Tribunal and National Credit Regulator to make a myriad of orders. Note that debt intervention orders will result in all qualifying credit agreements being suspended for an initial period of 12 months and, subject to a review of the consumer’s financial circumstances, may extend the suspension period for a further 12 months or make an order extinguishing the credit agreements, partially or in full, where the financial circumstances of the consumer have not improved. Further, where a credit agreement is subject to credit life insurance, the credit agreement may be suspended to allow for the consumer to claim from the insurance provider.
The Bill also implements criminal sanctions for certain contraventions of the National Credit Act, 2005.
The proposed amendments by the Bill will directly impact credit providers and consequences of the new provisions will need to be considered carefully.
The public has until 15 January 2018 to submit written comments to the Portfolio Committee on Trade and Industry where after public hearings will be held to discuss same.
If you are a service provider of any kind, regulating your engagement with your customers is crucial to show potential investors how you have secured your revenue stream and managed your risk. Investors are going to be interested in how you protect your revenue stream. They will typically assess how “water-tight” your agreements are with your clients in order to determine business level risk.
A service agreement is an example of a revenue contract. This is the agreement that describes how your company generates revenue in return for delivering services and describes the fees which you charge.
Some key considerations for a service agreement are as follows:
- Description of your services:
It is important to accurately describe your services so there is clarity and certainty regarding what it is your customers are paying for. It can sometimes work well to describe the services by referring to your website which then provides for a full description of the services in greater detail. This has the advantage of allowing you to evolve your services over time, and change the specific terms and pricing on your website (on notice to the client).
- Duration of the agreement:
How long do you expect the service agreement to be in place? Depending on the nature of the services rendered, it may be for a specific period or ongoing. Whether the contract can be renewed and on what terms should also be carefully considered together with termination rights. You will want to ideally strike a balance between easily terminating the relationship when it no longer suits you while still attracting and maintaining a constant revenue stream without too much unexpected disruption.
- Risk provisions:
You should consider what warranties you are willing to make with respect to the quality or outcome of your services. This will be specific to your service offering but you should also consider the industry in which you operate and what your average client would expect. Your appetite for risk and the level of risk associated with your services should also determine what warranties will be offered. Another related consideration is what your liability to your clients should be, whether you will have any liability at all and how you manage this.
The other considerations which we discuss with our clients for the purposes of drafting their service agreements include service levels, payment terms, exclusivity, IP and license arrangements, data and privacy matters and whether there are any specific regulatory aspects applicable.
We provide a Service Agreement Package to start-ups and through this process we are able to prepare bespoke service agreements applicable and appropriate for each client. We can also assist with reviewing and updating existing service agreements, if you are not sure whether your existing contract is up to scratch.
Relaxing the South African (SA) Exchange Control Regulations, in relation to IP in particular, is crucial for many of our start up clients (especially those operating in the software development and technology space). Up to now, SA resident companies could not export their IP to a non-resident, unless the approval of the Financial Surveillance Department (FSD) of the South African Reserve Bank (SARB) was obtained. This proved to be an insurmountable hurdle for many companies trying to externalise their businesses by moving them “offshore” for any reason, including that of attracting foreign capital investments.
The Exchange Control Regulations provide that when a SA resident (natural or juristic person) enters any transaction in terms of which capital, or any right to capital, is directly or indirectly exported (i.e. transferred by way of cession, assignment, sale transfer or any other means) from South Africa to a non-resident (natural or juristic person) such transaction falls in the ambit of the Exchange Control Regulations.
The export of “capital” specifically includes any IP right (whether registered or unregistered), which means the Exchange Control Regulations must be considered when dealing with an externalisation of IP.
The reasoning behind this regulation is that the offshoring of assets / capital belonging to SA residents amounts to an exportation of assets / capital and therefore erodes the asset base of the SA resident by way of a transfer of ownership from a SA resident to a non-resident. While this reasoning may have seemed sound, the application of the Exchange Control Regulations to the export of IP has led to many negative and unintended consequences for SA companies, and start ups in particular.
In the 2017 National Budget review the Government proposed that SA residents would no longer need the SARB’s approval for “standard IP transactions”. It was also proposed that the “loop structure” restriction for all IP transactions be lifted, provided they are at arms-length and at a fair market price. “Loop structure” restrictions prevent SA residents from holding any SA asset indirectly through a non-resident entity.
The SARB has started the process of relaxing the Exchange Control Regulations by issuing two circulars relating to IP. These latest amendments to the Currency and Exchanges Manual for Authorised Dealers mean that, under certain circumstances, approval for the exportation of IP can now be sought from Authorised Dealers (banks appointed by the Minister of Finance for exchange control purposes), as opposed to the FSD. This is good news for clients looking to restructure and offshore their IP, as the approval process should now be less administratively intense, less expensive and with faster turnaround times.
Approval can now be sought through an Authorised Dealer for:
- a sale, transfer and assignment of IP;
- by a SA resident;
- to unrelated non-resident parties;
- at an arm’s length and fair and market related price.
The Authorised Dealer will need to be presented with: (i) the sale / transfer / assignment agreement; and (ii) an auditor’s letter or intellectual property valuation certificate confirming the basis for calculating the sale price ((iii) together with any additional internal requirements).
For the approval of the licensing of IP by a SA resident to non-resident parties at an arm’s length and fair and market related price, the Authorised Dealer will need to be presented with: (i) the licensing agreement in question; and (ii) an auditor’s letter confirming the basis for calculating the royalty or licence fee ((iii) together with any additional internal requirements).
The second set of amendments provide that private (unlisted) technology (among others) companies in South Africa may now establish companies offshore without the requirement to primary list offshore in order to raise foreign funding for their operations. This effectively means that “loop structures” can now be created to raise loans and capital offshore, and these companies may hold investments in South Africa. Note that there are still certain requirements that must be met, for example, registration with the FSD.
Our commercial team has experience in making the necessary applications for exchange control approval. Feel free to get in touch if this is something on the horizon for your business.
You are a supplier of goods to customers – whether through a retail outlet at your business premises or online. The customer wants to return the goods purchased. Do you have an obligation in law to always allow the customer to return goods or are there exceptions? And what about the refund – should it be in full or can you deduct a “handling fee”? For defective goods, are you allowed to rather replace the goods? Can a customer return goods several months after the purchase date? These are all frequently asked questions in the industry which every new (or established) business should consider.
The Consumer Protection Act 68 of 2008 (“CPA”) provides for a right to return goods only in specific circumstances. There is no such thing as an unlimited or “blanket” return right, even though customers often may think this is the case. Be careful though – the situation changes when it comes to online purchases.
The first thing to remember is that customers indeed have a “cooling off” right, but only in the following circumstances:
- If not an online sale, a 5 day cooling off period for sales resulting from direct marketing applies (this means that the supplier directly approached the customer to sell him/her the goods and the customer bought the goods as a result of the marketing) – cooling off right in terms of the CPA.
- If an online sale, a 7 day cooling off period applies in general (no marketing requirement as per the CPA) but note that some exceptions apply and not all goods can be returned in terms of this right – cooling off right in terms of the Electronic Communications and Transactions Act 25 of 2002 (“ECTA”).
During the cooling off period, the customer has the right to a full refund when returning the goods and does not need to give a reason why the goods have been returned. However, the customer will have to pay the costs associated with returning the goods to the supplier. With all the other return rights in terms of the CPA discussed below, the cost of the return will be on the supplier.
In addition to the cooling-off periods, customers may return defective goods in accordance with the so-called CPA implied warranty of quality (the “CPA warranty”). This means, that if there are any defects in the goods within the first 6 months after purchase or delivery (the later date), the customer can return the goods based on the CPA warranty. Whether a customer can return goods within the 6 month period or not will, however, have to be assessed on a case by case basis and there are certain exceptions that could apply. The supplier is entitled to first investigate the complaint and run tests to determine whether a defect is indeed present. If the customer caused the damage to the goods, it goes without saying that the supplier should not be liable and the customer should not be able to rely on the CPA warranty.
In the case of a return of defective goods, the CPA does not give a supplier a first right to repair or replace and provides the customer with the right to return the goods that does not meet the quality requirements for a (i) refund, (ii) replacement or (iii) repair – at the customer’s choice, not the supplier’s. However, the customer’s right to return goods in terms of the CPA warranty will not apply where the goods have been altered, contrary to the instructions of the supplier.
Customers may also return goods if the customer indicated the purpose for which it wanted to use the goods at the time of purchase and the supplier confirmed that the goods will be suitable for that purpose, but it then turns out that the goods cannot be used for the purpose initially intended.
Make sure you know your rights as a supplier and exercise all options when a customer cries “Consumer Protection Act”!
Lastly, suppliers often offer more return rights than the rights afforded to customers in terms of the law. These are regulated through “Returns Policies”. Next time we will do a post on “What should your Returns Policy look like?”.