Businesses have faced huge challenges and have undergone an incredible amount of change over
the past few years, and this is unlikely to slow down in 2023. Global economies will still have to deal
with the aftereffects of the global pandemic, Russia’s invasion of Ukraine, economic challenges, as
well as an ever-faster development of technologies. Despite this, South Africans – especially our
business owners – are a tough and resilient group and as the country begins emerging from a
pandemic hangover and government’s Economic Reconstruction and Recovery Plan goes into
overdrive, there is much to be hopeful for in 2023.
Looking Back at 2022
There were a number of interesting legal matters in 2022 that would affect businesses’ approach to
compliance and commerce:
The ambit of company directors’ duty of disclosure under section 75 of the Companies Act 71 of
2008 was discussed in 2022 in Atlas Park Holdings (Pty) Ltd v Tailifts South Africa (Pty) Ltd 2022 (5)
SA 127. SA’s law has historically recognised the principle that a contract between a company and
one of its directors, or with an entity in which that director has an interest, is voidable at the
instance of the aggrieved company unless its shareholders approve it (as codified by s 75(3) of the
Act). The Court in this case dismissed an application for an order validating a lease agreement, taking
into account that one of the parties involved in the agreement was a director of both the Applicant
and the Respondent, his material and wilful non-disclosure of facts, his abuse of his position as
director vis-à-vis the clear interests of Tailifts, and the real and substantial direct economic benefit
he had gained.
In Commissioner of the South African Revenue Service v Louis Pasteur Investments (Pty) Ltd (in
provisional liquidation) and Others 2022 (5) SA 179 (GP) – the Court was asked to clarify who may
apply for the conversion of business rescue into liquidation? SARS had earlier obtained an order
converting LPI’s business rescue into liquidation proceedings and placing it in provisional liquidation.
The application was opposed by LPI and the business rescue practitioner, arguing that only the
business rescue practitioner – and not a creditor like SARS – could apply for the conversion. The
Court held that this argument ignored that the moratorium on legal proceedings against a company
under business rescue may be lifted, and accordingly granted the application to place LPI in final
winding-up.
In a matter involving business interruption indemnity, Ma-Afrika hotels and The Kitchen Restaurant
asked the court to decide on an insurance policy dispute with Santam, in terms of which infectious
disease indemnity cover was provided to the respondents. Santam rejected several claims on the
basis that none of the losses claimed were caused by a notifiable disease occurring within a 40km
radius of the premises, and also that the losses suffered were because of a government lockdown
and general concern or fear instead of a local outbreak of the notifiable disease. The Court granted
declaratory relief confirming Santam’s liability to indemnify the businesses. Santam’s appeal focused
only on the applicable indemnity period in relation to business interruption losses under the policies.
The SCA concluded that the indemnity period was 18 months, and not 3 months as argued by
Santam. The appeal was dismissed with costs.
Looking Ahead to 2023
If the only way you can predict the future is to build it, then businesses will surely have a
responsibility to ensure that their future is assured by adopting best practices in compliance and
reporting. It will be more important than ever to maintain a close relationship with legal experts who
can assist in defining risks and assist in planning for the challenges ahead. Some of the macro
challenges businesses can expect to encounter in 2023 include:
New Employment Regulations relating to equity.
The ending of Zimbabwe Exemption Permits.
An increase in social volatility in the run-up to the 2024 general elections.
Continued loadshedding, interest rate and fuel price challenges.
A focus on graft and financial practices considering the possible greylisting of SA’s economy.
Two major trends or items for business owners to consider are POPIA and Subscription Pricing
Models.
For the first time since the enactment of the Protection of Personal Information Act (POPI) the
Information Regulator began flexing its muscles around compliance. We have seen fines being issued
in by the Information Regulator in the insurance space and have witnessed the implementation of
the Codes of Good Practice to the Banking Industry. We expect that in 2023 the Regulator will
become more active in policing POPI compliance and dishing out hefty fines or penalties for
businesses that fail to toe the line. The aim of the POPI Act is to control and regulate the way in
which personal information is processed, to ensure it is done in a responsible way. This would
include the methods of collection, usage, storage, dissemination, alteration and destruction of any
personal data and information. Businesses that have not yet implemented POPI actions within their
operations are strongly advised to consult their legal advisor.
The new subscription model for motoring will continue to gain ground in 2023 – a concept where
car companies offer a variety of high-end features as optional extras. For example, BMW started
selling heated seat subscriptions for $18 a month in several countries including South Africa.
Microtransactions like this look set to proliferate in the automotive industry with the global
subscription market expected to increase well over $120 billion. The legal implications for resale and
down-the-line repairers and providers are yet to be fully understood, and businesses are advised to
consult commercial legal experts in relation to the effects or application of subscription sale
offerings.
By
Johan du Toit | Senior Associate
Barnard
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Legalex (Pty) Ltd, registration number 2003/003715/07, is an authorized Financial Services Provider (FSP 5277) and underwritten by Guardrisk Insurance Company Limited (FSP 26/10/75)