eCommerce under lockdown explained

eCommerce under lockdown explained

From the commencement of the national lockdown, no meaningful distinction was made between online shopping and physical retailers in terms of purchasing options. If you couldn’t buy a new pair of headphones from your local mall to thoroughly enjoy the morning exercise window to the fullest, you wouldn’t have had the option to get access to your jogging tunes via online sales either.

Retailers were prohibited from selling goods under Alert Level 4 unless such goods qualified as permitted goods.  A list of such permitted goods is laid out in section E of Table 1 of the Regulations published on 29 April 2020, prescribing what may and may not be sold under Alert Level 4. However, this list is still fairly limited with various goods still not being available for sale to the general public.

Since the middle of May however, this position has changed. Drastically.

Directions allowing for e-Commerce sales during Alert Level 4 of the COVID-19 National State of Disaster were published on 14 May 2020. Loosely speaking these Directions allow for the sale of all goods through e-Commerce channels (with the exception of the sale of liquor and cigarettes).

So, what does this mean for your business?

Except for liquor and cigarettes, even if you were not allowed to trade under Level 4, you may now commence trade of all products if you can operate under the e-Commerce Directions.

Changing your business model to an e-Commerce business may not be something you anticipated as a short term goal. But with these e-Commerce Directions offering you lemons, it might just be the right time to recalibrate those short term goals and make lemonade (and then sell that lemonade online).

In essence it comes down to the following:
  • You need an e-Commerce process to sell your goods; and
  • You need to get your good delivered.

It is important to note that delivery does not necessarily mean appointing a courier – delivery may also mean that your employees deliver goods to local customers.

We are fully geared to assist clients with the set up of a legitimate e-Commerce process complying with the Directions. This includes advice on the process to be followed to qualify as an “e-Commerce process” under the new Directions and preparing the necessary terms and conditions and contracts with customers and third party service providers. Furthermore, we also assist with advice on the internal requirements to operate safely and in compliance with the Directions as it is of paramount importance that your internal policies ensure compliance at all times.

Contact us if you need to get ready for e-Commerce under lockdown!

Disaster Management Tax Relief is coming!

Disaster Management Tax Relief is coming!

Public comments for the Draft Disaster Management Tax Relief Bill and the Draft Disaster Management Tax Relief Administration Bill are now open. These two tax relief bills, aimed at combating the negative economic effects the spread of COVID-19 holds, were published on 1 April 2020 for public comment. These bills include provision for –

  • Amendments to the Employment Tax Incentive Act by expanding the employment tax incentive age eligibility criteria, as well as the amounts that can be claimed and changing the payment of employer tax incentive reimbursements from occurring twice a year to occurring on a monthly basis;
  • COVID-19 disaster relief trusts to be set up: Donations to these trusts are to fall within the ambit of section 18A of the Income tax Act and the provisions relating to how amounts received from these trusts should be treated; and
  • Deferrals for employees’ tax and provisional tax for certain businesses.

Aptly named, these tax relief bills aim at employing measures that include assistance to over 4 million workers and 75 000 small and medium term enterprises.

You can access these bills and the explanatory memorandum for a more thorough read at the following links:

Public comments are open until the 15th of April 2020 and can be submitted to 2020AnnexCProp@treasury.gov.za.

If you require any assistance in making such a submission, please feel free to get in contact with us. As you may be aware, we have already started providing our legal services from home  prior to the national lockdown in an effort to help flatten the curve. Our office number is being forwarded to our executive assistant, who will happily place you in contact with the relevant practitioner – or you can email your queries directly to us at info@dommisseattorneys.co.za.

Dommisse Attorneys helping to flatten the curve

Dommisse Attorneys helping to flatten the curve

Levels of concern around COVID-19 have certainly ramped up in the last week, and as many of you are aware, on 15 March 2020 President Cyril Ramaphosa declared the spread of the virus a “national disaster” in terms of the Disaster Management Act 57 of 2002.

This Act governs the regulatory effects of a national disaster and allows for extra measures to be taken in addition to existing legislation and contingency arrangements where special circumstances warrant it.  Interestingly, in terms of the Act any national state of disaster automatically lapses three months after it has been declared but can be terminated earlier or extended by a notice in the Government Gazette.

What measures are Dommisse Attorneys taking during this time?

  • Our team will be working from home for the foreseeable future
  • We will limit face to face meetings and meet through online channels only, unless absolutely impossible for a client
  • You will be able to contact us on our numbers and email as usual
  • If you call the office number it will be forwarded to our friendly assistant Gerry who will get the relevant attorney to return your call
  • We will continue “business as usual” as far as possible!

Why do we do this?

  • Although we have not been affected directly – meaning that none of our team has shown any symptoms or tested positive for the Coronavirus – we want to be pro-active in support of the national approach to do whatever we can to limit the virus from spreading as much as possible.
  • We also do this, because we can! As a law firm that embraces technology and the advantages it offers, we are able to do this without too much of a direct effect – except of course that we will miss the face time with fellow team members and clients!

All the best to all our clients during this challenging time. And remember that we are continuing business as usual – remotely!

Save time and get quicker financial support with a term sheet

Save time and get quicker financial support with a term sheet

Prince Mathibela

A well-known method for financing a company is to issue equity shares for a capital contribution. There is often much deliberation around the essential terms which regulate this transaction, before it’s recorded in binding transactional documents.

It is standard practice for a potential investor to withhold investment proceeds until transactional documents have been finalized. This results in the investee company having to bootstrap for another month or two to carry out operational activities while drafting and implementing documents.

The likelihood of a longer waiting period can be increased if parties fail to use a term sheet that sets out the salient terms of the investment. This instrument will assist a commercial attorney to glean insight and draft the investment documents quicker and prevent endless back and forth between a potential investor and an investee company.

The value is that the transaction parties state their intent on the most essential elements of the transaction upfront. This removes a lot of the friction out of the process of reaching consensus in the transaction documents.

Term sheet

A term sheet, also called a letter of intent or a memorandum of understanding in some circles, is a document outlining the material terms and conditions of a proposed transaction.

Unlike binding contracts such as a subscription agreement, term sheets are generally not binding. However, parties may elect to adopt a wholly or partially binding term sheet.

In most cases, only the confidentiality undertakings and provisions that bind the parties to exclusive negotiations will be binding. The remaining terms can only be enforced against a defaulting party if expressly accepted as having immediate force and effect.

In a term sheet, investors focus largely on terms that bestow economic advantages and controlling power in an investee company. As such, a representative of any investee company must have a firm grasp of the materiality of each provision on a term sheet before investment discussions. In this way, the representative’s focus is not misdirected to immaterial provisions of no value to existing shareholders in the long term.

Ideally, each provision must be negotiated separately, and the outcome thereon accurately recorded. For example, if a potential investor wishes to secure voting rights on board level, part of the completed term sheet must state that the potential investor will have the right to appoint a director to the investee company’s board of directors and that on some matters that require the affirmative approval of the investor representative, a board resolution passed without the appointee will be void.

Always remember that most signed term sheets merely demonstrate the intent to invest. Investors usually refrain from disbursing funds until the date when a subscription agreement or other transactional documents come into full force and effect.

The benefit of using a term sheet is to facilitate investment discussions, ascertain outcomes and speed up the process involved in drafting final transactional documents. The investment funds are then disbursed more quickly resulting in the investee company reverting their focus to the main business of the company and generating their next revenue.

We have also seen that in practice a potential investor is more likely to conclude an investment transaction once a term sheet has been signed than after a verbal discussion and a handshake.

Subscription agreement

A subscription agreement is a document in which at least, a subscriber, being a potential investor, is bound to advance a subscription consideration in return for a specific number of equity shares in an investee company.

Ideally, the terms and conditions surrounding the amount of capital to be invested together with the disbursement terms and the purview of privileges and limitations of the equity shares has already been settled through a term sheet and then detailed to a subscription agreement.

The real value of using a term sheet is the ease with which a subscription agreement is finalised as most of the hard work would have been completed and discussed during the negotiation stage and the outcome already accurately recorded therein.

Lastly, seek assistance from your trusted legal practitioner to create a legally sound subscription agreement. The binding effect of this agreement and its enforceability is dependent on the extent to which it is consistent with the Companies Act, 71 of 2008 and the following constitutional documents of the investee company:

  • memorandum of incorporation;
  • shareholders’ agreement; and
  • the company rules (if any).

Good luck fund raising!

Job offer: Senior Associate

Job offer: Senior Associate

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.

Requirements:

  • 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.

Competencies:
Primary competencies

  • 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.

Secondary competencies

  • 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.

Qualification:

  • LLB
  • LLM in commercial law and business courses will be advantageous but not a requirement.

Remuneration:

  • Market related

Desired Skills

  • Commercial Law
  • Mergers & acquisitions
  • Drafting legal documents
  • Staff management
  • Cross border transactions

Desired Qualification Accreditation

  • Degree

Kindly send your motivation and CV to: info@dommisseattorneys.co.za

Arbitration: Is it a good idea?

Arbitration: Is it a good idea?

You may have seen an arbitration clause come up in one of your agreements and just thought that it fills the legal jargon section at the end of your contract. These are typically standard “boilerplate” clauses that have been developed over many years of contracting –these clauses are important and there is good reason for them being relatively standardised. However, missing or misusing one of them could land you in a bit of hot water. An arbitration clause is one that flirts with being a “boilerplate” clause but should be used with caution.

Arbitration is a private dispute settlement arrangement agreed to between people entering into a contract. The beauty of it is that the process can be, to a degree, managed by the people who choose arbitration as a means of dispute resolution. This means that arbitration can take a fairly broad variety of forms, although, most people prefer for it to take the form of a more traditional court. You can also choose for the arbitration to be final and binding on you, meaning that it cannot be appealed. This helps speed up the dispute resolution process, but it also exposes you to the risk that your arbitrator makes a bad decision, which you are stuck with.

A big question that should be asked when seeing this clause pop up is: “Is it worth it for me to use arbitration?” This article will spell out some of the pros and cons to arbitration versus the normal court process.

Cost complication

Arbitration is far more costly than a typical court process, as the people who want the arbitration must pay the costs of the arbitrator, and if that person is a highly skilled individual (which they tend to be) they don’t come cheap. If you go through the courts, however, this is a free public service, so you do not pay for the cost of the magistrate or judge to have your process heard.

Unless you expect your claim to be in the hundreds of thousands of Rands, it may be better to exclude an arbitration clause as it may not be worth the expense.

Time implication

Whilst the court process is cheaper, in the South African context, it is very slow as the courts are inundated with commercial matters. It can take in excess of 3 years from the date that a claim is lodged to the date that your matter is heard by a court and, even then, it can be delayed further. When it comes to arbitration, you are not relying on anyone else to get the matter moving and you can agree to expedited rules to govern the arbitration (meaning they are designed in such a way that the dispute is moved forward quickly). All in all, arbitration tends to be much faster than going to court.

Expertise

When it comes to our courts, magistrates and judges are distributed on a rotational basis and, whilst they are very skilled, they do not specialise in one area of commerce per se, but rather deal broadly with commercial disputes. With arbitration, however, you can pick an expert in a particular field as the arbitrator, which then ensures that there is less room for a decision that may not necessarily consider all the aspects of a particular field. So, if your matter is in, for example, international shipping, you can then elect a maritime lawyer with significant experience to be the arbitrator which should give you comfort that your matter will be decided fairly.

Whilst arbitration can be useful, it can also be an unnecessary burden. Consider this carefully when you see this clause in the next contract you sign.

Yossi Hasson | Managing Director of Onchain Capital and Techstars SA

Dommisse Attorneys took the time to understand our business need first and then came back with really well thought out and structured legal opinion that allowed us to launch our business in a way that no other legal firm was able to. They were able to turn their work around extremely quickly. I would strongly recommend Dommisse if you’re looking for a legal firm that seeks to understand your business needs first.

Andrew Burdock | CEO of Aerobotics

Dommisse advised Aerobotics through our two funding rounds, notoriously stressful and complex times for startups. They worked with us very much as a partner, available whenever required as they understood the urgency. I have not come across a more appropriate legal firm for startups in South Africa and they have really built up a broad range of knowledge in the startup space over the past few years.

Frans Cronje | Managing Director of DataProphet

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.