Finance - Zuydam Konsult

9 Mar

It’s not to say you spend finances irresponsibly, but having a reputable financial advisor comes in handy. Depending on your financial needs, your advisor may be a financial or retirement planner, money manager or a wealth manager. Either way, getting assistance from those who specialise will help you get greater returns for the bucks you spend on their services.

They’ll help you strategise

Whether your financial objective is to donate to charity, leave a financial legacy for your offsprings, or minimise your tax burden and debt, financial advisors strategise and keep you informed on methods that will benefit you.

They’ll assess risks

Putting all your eggs in one basket? Risky. Each portfolio has expectations and having clarity on emotional and behavioural risks of these investments will help you plan ahead for tough times. Advisors will assess where investment risks lie and help you diversify your investments accordingly.

They can do more

If you get yourself an advisor who specialises in more than just financial opportunities, they will provide a scope of the whole financial market by taking a big-picture approach. Because your needs differ from the next person, your financial advisor will structure your financial priorities to suit you. They also search for opportunities across other areas that concern you, such as your estate, and plan your finances in a way that will give a greater positive impact on your portfolio.

If you’re interested in generating financial security and not sure how to go about it, start with contacting a financial firm. In the long run, the money you spend for advisory assistance will be far less than the money you could lose in a faulty investment due to having little information.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

4 Feb

When should financial statements be audited, reviewed or compiled?

Kirsten van Tonder

Auditing Accountant, Assurances, Audits, Finance, Statements

The Companies Act of South Africa (the Act) requires all companies to prepare financial statements within 6 months after the end of its financial year. A very popular question among business owners with regards to financial statements is whether the statements should be independently audited, reviewed or compiled. In determining the engagement type, the Act prescribes the following criteria to be applied:

Audited financial statements

Any profit or non-profit company that, in the ordinary course of its primary activities, holds assets in a fiduciary capacity for persons who are not related to the company, and the aggregate value of such assets held at any time during the financial year exceeds R5 million;
Any non-profit company, if it was incorporated:
- directly or indirectly by the state, a state-owned company, an international entity or a company; or
- primarily to perform a statutory or regulatory function in terms of any legislation, a state-owned company, an international entity, or a foreign state entity, or for a purpose ancillary to any such function;
Any other company whose public interest score in that financial year is:
- 350 or more; or
- at least 100, but less than 350, if its annual financial statements for that year were internally compiled.

How to calculate your public interest score, to determine if you exceed 350 points or not:

a number of points equal to the average number of employees of the company during the financial year;
one point for every R1 million (or portion thereof) in third-party liabilities of the company, at the financial year end;
one point for every R1 million (or portion thereof) in turnover during the financial year; and
one point for every individual who, at the end of the financial year, is a member of the company, or a member of an association that is a member of the company.

Independent review of financial statements

The Act prescribes that an independent review of a company’s annual financial statements must be performed if the following apply and the company does not select to be voluntarily audited:

If, with respect to a company, every person who is a holder of, or has a beneficial interest in, any securities issued by that company is not a director of the company, that financial statements should be independently reviewed.

A company and its directors may choose to be voluntarily audited or reviewed if they wish to engage in an assurance engagement, although it has not been prescribed by the Act.

Compiled financial statements:

If none of the above-mentioned requirements has been met, the financial statements may be compiled.

With compilations, or compiled financial statements, the outside accountant converts the data provided by the client into financial statements without providing any assurances or auditing services.

If you need any assistance with your engagement in financial statements, do not hesitate to contact our friendly staff.

11 Oct

Can I obtain financing if I don’t own immovable property as security?

Kirsten van Tonder

Finance News Debt, Finance, Notarial bond

The article gives a brief overview of what a notarial bond is, the requirements that need to be complied with to register a notarial bond and give tips regarding clauses that will prove to be useful in a notarial bond. It also deals with the situation where a debtor disposes of an asset listed in a notarial bond, contrary to the provisions thereof.

A very useful way of obtaining financing to start a new business, is to register a notarial bond over the movable property belonging to the business. For instance, notarial bonds are regularly utilised in transport companies – a notarial bond is registered over the vehicles forming the core of the business, but the vehicles do not need to be in the physical possession of the creditor, thus the business can fully operate.

What is a notarial bond?

A notarial bond is a general or special bond where the movable assets of a debtor are used as security for a debt. In terms of the notarial bond, the debtor undertakes to pay his debt towards the creditor, failing which the creditor will be entitled to sell these movable assets and to utilise the proceeds thereof to satisfy his claim against the debtor. There are 2 types of notarial bonds:

General notarial bond: all the movable assets on the debtor’s property serves as security for the debtor’s debt.
Special notarial bond: specific movable assets identified in the bond will serve as security for the debt.

How does a notarial bond differ from a pledge?

A pledge requires the delivery of the movable asset pledged. A notarial bond does not require the delivery of the movable assets identified in the bond, but in terms of section 1(1) of the Security by Means of Movable Property Act 57 of 1993, the movable property listed in the notarial bond will be deemed to have been pledged to the creditor as effectually as if it had been delivered to the creditor. The fact that the creditor is deemed to be in possession of the property thus places him on equal footing with that of a pledgee. The creditor, upon registration of the notarial bond in the deeds registry, acquires a real right of security in the movable property specified in the bond.

Requirements:

Existence of a principal debt;
Assets which serve as security must be movable, including corporeal and incorporeal assets.

Corporeal assets include furniture, vehicles, the goods of a business, animals and the future offspring of animals and stock in trade.

Incorporeal assets include an unregistered long-term lease of immovable property, a short-term lease of immovable property, a liquor license, a water use license, site permit, shares in a company, goodwill of a business, book debts etc.

What if more than one creditor uses the same asset as security for their debt?

A bond which was registered first enjoys priority over a bond registered thereafter.

Important clause to insert in the bond:

To prevent the debtor from disposing of assets which serve as security in terms of the notarial bond, a clause should be inserted disallowing the debtor to sell, alienate, dispose of, transfer or permit the removal of the asset from the debtor’s place of residence or place where he carries on business, without the prior written consent of the creditor.

What happens if a debtor disposes of the asset identified in the notarial bond, contrary to the stipulations in the notarial bond?

The creditor will be able to apply for provisional sentence summons against the debtor, provided that the notarial deed meets the requirement of being a liquid document. A liquid document is a document which indicates, without having to consult extrinsic evidence, an acknowledgement of debt, of which the amount is easily determinable. A notarial bond will in general qualify as being a liquid document.

A creditor will also be able to claim back an asset which has been sold, contrary to the provisions of the notarial bond, to a bona fide third party, from such third party. The reason for that is the fact that a notarial bond, which has been registered in the Deeds Registry, creates a real right, which is a right that attaches to property, rather than a person.

It is not easy to obtain credit in the economic environment in which our country currently finds itself. However, there are ways to get your business off the ground and registering a notarial bond over the property of your business is a recognised method of securing your business’ debt. If notarial bonds can be utilised more frequently, it can help a lot of new businesses get the financing they need to buy equipment, vehicles and machinery necessary for the operation of the business.

Reference List:

Explanatory Notes Part 1: Course in Notarial Practice, compiled by Gawie Le Roux, Erinda Frantzen and Ilse Pretorius
The South African Notary, sixth edition, M J Lowe, M O Dale, A De Kock, S L Froneman, A J G Lang