Journal for Juridical Science

The forein business establishment exemption is not for outsourced services

Thabo Legwaila — Fri, 07 Jun 2024 00:00:00 +0200

Controlled foreign company (CFC) provisions in the Income Tax Act provide for the imputation of the net income of a foreign company to its resident participants in proportion to their participation in the foreign company. However, income that is attributed to a foreign business establishment of the CFC is exempted from the imputation. In Commissioner for the South African Revenue Service v Coronation Investment Management SA (Pty) Ltd [2023] ZASCA 10, a South African tax resident had a CFC in Ireland that outsourced some of its operations to third parties outside of Ireland. The resident sought to claim the foreign business establishment exemption in respect of all its CFC income. The South African Revenue Service disallowed the exemption in respect of all CFC income. The Tax Court allowed the exemption, and the Supreme Court of Appeal disallowed the exemption on the basis that the CFC outsourced its primary operations as contained in the CFC’s operating license. This note concludes that the Supreme Court of Appeal erred in focusing on the operations that the CFC was licensed to conduct, as opposed to what it actually conducted. It also finds that the outsourcing of some of the operations should not disqualify the entire operations of the CFC from the exemption. It further canvasses the future of the exemption in light of the introduction of the global minimum tax.

The role of expert evidence in civil matters

Thino Bekker — Mon, 20 May 2024 00:00:00 +0200

In the first part of this article, the author analysed the development and role of expert evidence in civil matters in the South African law (Bekker 2023:160-178). In the second part of this article, the author conducts an in-depth discussion of the position in England, Wales, andAustralia in relation to the application of expert witness testimony in civil matters. It is argued that, although there has been considerable progress in terms of the presentation of expert evidence in civil litigation in the South African law, a number of problematic aspects still need to be addressed. It is recommended that the Rules Board should intervene and that the rules relating to the presentation of expert evidence in civil matters should be amended in its entirety. In this regard, valuable insight can be gained from the English and Australian experiences.

An evaluation of mediation in high-conflict situations

Monique Carels — Mon, 20 May 2024 00:00:00 +0200

An evaluation of mediation in high-conflict situations

Fiduciary law in South Africa

Eben Nel — Mon, 20 May 2024 00:00:00 +0200

Fiduciary law as a separate legal discipline has not been under the spotlight within a South African context. As it is often limited to its association with trustees and company directors, fiduciary law has been under-analysed and not recognized as a distinctive body of law. In this article, the position of fiduciary law is regarded as within the broader context of the private-law landscape, considering both contractual and relationship theories. Its application in a trust-law context is used to illustrate the practical value of fiduciary law. The potential role of public policy as well as the impact of the mixed-law tradition are discussed, emphasizing the importance of the responsible development of fiduciary law. This development relies on a sound theoretical understanding of its objectives and intended results. Additionally, it necessitates the identification and application of an officially recognized normative assessment for determining the parameters of the fiduciary relationship. A few potential common factors for determining the nature, origin, and reach, of fiduciary law are identified, with the intention of stimulating the debate and further research. These factors include the purpose of the fiduciary concept, the undertaking by the functionary, the legal source of the individual’s appointment, and aspects such as independence, discretion, duties, capacity, and assessment.

An appraisal of the application and soundness of the solvency and liquidity test in the implementation of statutory mergers

Justice Mudzamiri, Tebello Thabane — Thu, 16 May 2024 00:00:00 +0200

The integration of the solvency and liquidity test into the South African company law has the effect of, among others, rendering the capital maintenance principle obsolete. The pertinent statutory provisions of statutory mergers require that both limbs of the test must be satisfied: solvency in the form of a forecast that the merging companies’ assets are equal to and/or exceed their liabilities and liquidity in the form of a forecast that the merging companies’ debts would be paid when due. The solvency and liquidity test is valid within 12 months after the test was considered,a set period which, we argue, is inadequate to protect the interests of long-term creditors and shareholders. According to reports, the largest leveraged buyout (LBO) in South Africa, the acquisition of Edcon by Bain in 2007, resulted in post-merger trade losses and high borrowing rates for Edcon. The post-mortem of the Edcon LBO reveals that the merged entity failed to honour creditors’ repayment obligations, resulting in the shareholders losing proprietary interests to the creditors, heightening the need for having effective solvency and liquidity test. In addition, most of the recent corporate scandals emanating from deceptive accounting practices have exposed the inadequacy of the solvency and liquidity test, considering the heavy reliance on the solvency and liquidity test on financial records. To bolster creditor and shareholder protection, the article makes some suggestions that include making it mandatory that financial statements used in the forecasting be independently audited by external auditors and that the merging companies can only pass the solvency and liquidity test when their assets are greater than their liabilities, rather than simply being equal to the liabilities, as is currently the case. The suggested yardstick for assing the solvency and liquidity test only when their assets are greater than their liabilities must be adopted in all capital reduction/altering transactions, including statutory mergers, and during the pay-outs of fair value to dissenting shareholders in the context of appraisal remedy.

The admissibility of foreign convictions in bail applications in South Africa

Jamil Ddamulira Mujuzi — Mon, 20 May 2024 00:00:00 +0200

A comment on Lewis-Springfield v s (CA&R40/2022) [2022] ZANCHC 54 (4 October 2022)

The The balancing act

ANZANILUFUNO MUNYAI — Thu, 06 Jun 2024 00:00:00 +0200

The essence of democracy enables citizens to exercise their freedoms and affords protection of rights and equal opportunities for all. Democracy is a complex system of government and various states exercise it differently. Despite the differences, there are universal features of a democratic system. The emergence of the Fourth Industrial Revolution (4IR) has transformed democratic societies and economies. Since its inception in the 18th century, the hallmark of the 4IR encompasses increasing technological capabilities, artificial intelligence, increased production, and portable technology. Undoubtedly, the 4IR will enhance people’s quality of life and subsequently afford democratic governments opportunities and challenges. This article argues that, despite the benefits 4IR may yield, there are challenges, which if not addressed will undermine the essence of African democracies. The article concludes by urging African democracies to take part in the technological change, in order to maximise the unparalleled benefits of 4IR to strengthen democratic principles.