An example of a value-shifting arrangement may be where a parent (i.e. Mr. X) who owns all the shares in a company issues additional shares to his son at a discount, thereby reducing the value of his own shares. Mr. X effectively shifted value from himself to his son.
In terms of Section 26(1) of the Companies Act, a person who holds or has a beneficial interest in any securities issued by a profit company or who is a member of a non – profit company has the right to inspect the following records of the company.
On 31 March 2017 the B-BEE Commission (“the Commission”) released a Practice Guide (“the Practice Guide”) on the enhanced recognition of Exempted Micro-Enterprises (“EMEs”) and Qualified Small Enterprises (“QSEs”) when applying the Modified Flow Through Principle (“the MFTP”).
The legislature’s feud with schemes circumventing the anti-avoidance rules dealing with share buy-backs and dividend stripping continues.
Capital Gains Tax (“CGT”) is a form of income tax that is levied at a fixed rate when an asset is disposed of for an amount exceeding its base costs. Since its introduction, taxpayers have fathomed ways to avoid the payment of CGT. Usually a disposal of shares will be subject to CGT, unless such a disposal was structured as an issue of shares by the target company to the “purchaser”, followed by a corresponding buyback of shares by the target company from the “seller”.
The Tax Administration Act (“the Act”) allows SARS the right to impose tax penalties on taxpayers who fail to pay their taxes, or submit returns as and when required. The Act distinguishes mainly between two types of penalties:
Small- and medium-sized businesses customarily struggled to access venture finance, which is essential for its development and growth. In an attempt to assist small- and medium-sized business (and specifically junior mining companies) in attaining access to venture finance, the legislature included a tax incentive associated with such investments (per section 12J of the Income Tax Act).
A partnership is a legal relationship brought about by a contract between two or more persons, creating a concept of participation amongst the partners. Each partner will contribute to the business, with the object of making and sharing profits. For the duration of an ordinary partnership all the partners will be deemed to be joint co-creditors and joint co-debtors towards third parties.
According to the Income Tax Act (the ‘‘Act’’), a ‘disposal’ of assets includes the forfeiture, termination, redemption, cancellation, surrender, discharge, relinquishment, release, waiver, renunciation, expiry or abandonment of an asset.
Various remedies for the protection of minority shareholders exist under the Companies Act. One of which is a shareholder’s appraisal right that allows a shareholder to demand the company to buy-back his / her shares at fair value.
Section 42 of the Income Tax Act makes no provision for the automatic exemption from transfer duty where fixed property is acquired as a result of an asset-for-share transaction.
A Company’s shares may be for the benefit of one person (“Beneficial Shareholder”) and be registered in the name of another person (“Registered Shareholder”), except to the extent that a company’s Memorandum of Incorporation provides otherwise. As such, the rights depicted in the share register is independent of the ownership of the shares.