Reinstatement of a deregistered company in the context of an amalgamation transaction

The South African Revenue Service recently released Binding Private Ruling No 237 (Ruling), which dealt with the reinstatement of a deregistered company in the context of the transfer of immovable properties in terms of an amalgamation transaction. A company (Company) had previously sold its business as a going concern to another company (Applicant) in terms of an “amalgamation transaction” as defined in s44 of the Income Tax Act, No 58 of 1962 (Act). The assets of the business included certain immovable properties.

All in one: another ruling regarding an amalgamation transaction

Author: Dries Hoek and Louis Botha (Cleffe Dekker Hofmeyr). In our Tax and Exchange Control Alert of 20 May 2016, we discussed Binding Private Ruling 231 (Overruled: SARS expresses an interesting view on be an amalgamation transaction), in which the South African Revenue Service (SARS) ruled on whether the roll-over relief provisions in s44 of the Income Tax Act, No 58 of 1962 (Act) could be applied. In this article, we discuss Binding Private Ruling 232 (Ruling),

Overruled: SARS expresses an interesting view on an amalgamation transaction

The South African Revenue Service (SARS) has traditionally adopted a conservative approach in issuing rulings which approve a tenuous interpretation of provisions of the Income Tax Act, No 58 of 1962 (Act), in favour of the taxpayer. However, in Binding Private Ruling 231 (Ruling), which was issued by SARS on 10 May 2016, SARS adopted an interesting interpretation of the corporate roll-over relief provisions in s44 of the Act, which raises a number of questions. The Ruling is quite long and therefore we will only discuss the manner in which SARS applied the provisions of s44, relating to corporate roll-over relief in the case of so-called amalgamation transactions (s44 transaction).

Merger of controlled foreign companies

Author: Heinrich Louw A South African incorporated and resident company (Applicant) had two subsidiaries that were incorporated and resident in foreign countries, and were CFCs. The first subsidiary (CFC 1) was a listed passive holding company. The second subsidiary (CFC 2) was a privately held intermediate holding company. In order to consolidate some of the group’s investments, it was proposed that all the assets and liabilities of CFC 1 be transferred to CFC 2 by way of a merger. As a result of the merger, the assets and liabilities of CFC 1 would become that of CFC 2 by operation of law, and CFC 1 would automatically cease to exist.

Sale of business agreements: the implied restraint on canvassing customers

A recent decision of the Western Cape High Court has highlighted some critical considerations to be borne in mind when dealing with restraint of trade and non-solicitation clauses contained in, for example, sale of business agreements, if such sales include the goodwill of the business (Grainco (Pty) Ltd v Van Der Merwe and Another 2014 (5) SA 444 (WCC) (11 July 2014)).

Big decisions: Executives rely more on experience and advice than data to make business-defining choices: EIU/PwC report finds

· Highly data-driven companies are three times more likely to report significant improvement in making big decisions, but only 1 in 3 executives say their organisation is highly data-driven · Many executives sceptical or frustrated by the practical application of data and analytics for big decisions, especially in emerging markets

SARS takes another stab at interpreting the ‘group of companies’ definition

Author: Lisa Brunton (DLA Cliffe Dekker Hofmeyr) In our Tax Alert of 15 March 2013 we reported on the South African Revenue Services’ (SARS’) draft Interpretation Note on the interaction between the definition of a ‘group of companies’ as it appears in s1 and s41(1) of the Income Tax Act, No 58 of 1962 (Act). SARS embellished the draft Interpretation Note somewhat with the release on 24 October 2013 of Interpretation Note No 75 (IN 75) dealing with the exclusion of certain companies and shares from a ‘group of companies’ as defined in s41(1) of the Act. IN 75 has now been superseded by the release of Issue 2 of IN 75 on 22 September 2014.

Proposed simplification of foreign business establishment exemption for controlled foreign companies

Author: Heinrich Louw of Cliffe Dekker Hofmeyer In terms of s9D of the Income Tax Act, No 58 of 1962 (Act), a South African tax resident can be taxed on the ‘net income’ of its controlled foreign companies (CFC). However, various exemptions exist in this regard. For example, in terms of the second proviso to the definition of ‘net income’ in s9D(2A) of the Act, the net income of a CFC will be deemed to be nil if the taxes payable by that CFC in foreign jurisdictions are at least equal to 75% of the tax that the CFC would have paid had it been a South African tax resident. This is often referred to as the high-tax exemption. In performing the calculation regard must be had to any international treaties for the avoidance of double taxation, and tax credits or rebates.

Merger and takeover law – impact on private companies

By Basil Mashabane Impact on private companies  This is a follow-up to the article ‘Mergers and takeovers under the new Companies Act’ (2011 (Sept) DR 30) where I discussed the fact that South African mergers and acquisitions are experiencing a paradigm shift following the enactment and implementation of the new Companies Act 71 of 2008 (the Act) on 1 May 2011, replacing the old order.

The impact of statutory mergers on current tax legislation (part 2)

by Robert Gad and Janel Strauss We have previously written on the mismatch between the statutory merger provisions in section 113-116 of the new Companies Act 71 of 2008 (“Companies Act”) and the current tax legislation. In part 1 of this article we considered the interplay between statutory merger provisions and the tax rollover relief provisions contained in sections 41 to 47 of the Income Tax Act 58 of 1962 (“ITA”) and explained how a statutory merger transaction may not necessarily qualify for the tax rollover relief. We also considered the implications that the transfer of administrative tax obligations from a target company or companies (“TargetCo”) to the acquiring company or companies (“AcquireCo”) may have on parties entering into an “amalgamation or merger,” as this term is defined in the Companies Act.