KHL NEWS

BUSINESS INTERRUPTION

CLAIMS UNDER COVID-19:

THE FIRST CASE

by Morgan Riley

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Nicholas Taitz

de Beer v The Minister

SEPARATION OF POWERS

by Nicholas Taitz

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Nicholas Taitz

COVID-19

AND

THE ROLE OF COIDA

by Grant Nirenstein

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Grant Nirenstein
Grant Nirenstein

THE IMPACT OF COVID-19

ON RESIDENTIAL LEASE AGREEMENTS

by Grant Nirenstein and Morgan Riley

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Morgan Riley

THE DISAPPEARING

DEBTOR HAS BEEN FOUND:

WHAT NEXT?

by Terence Matzdorff

ttm@khl.co.za

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Terence Matzdorff

DEMYSTIFYING “NO WORK, NO

PAY” AND THE IMPLEMENTATION

OF SHORT-TIME AND SALARY

REDUCTIONS

by Grant Nirenstein

gmn@khl.co.za

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Grant Nirenstein

Under the stewardship of its Secretary General, Irvin Jim, the National Union of Metal Workers South Africa (NUMSA) has long been on a concerted drive to recruit more members, at times at the expense, and to the annoyance, of its then COSATU affiliate, the National Union of Mineworkers (NUM). COSATU had a long-standing policy of one trade union per sector and, according to NUMSA’s constitution, it was limited in its scope to the metal industry. That notwithstanding, NUMSA began recruiting members in other sectors. In the end, NUMSA left COSATU and was one of the founding unions of a new federation being the South African Federation of Trade Unions (SAFTU). NUMSA continued to recruit in other sectors despite being constitutionally limited in its scope to the metal industry.

In the course of its recruitment drive, NUMSA approached Lufil Packaging (an employer who manufactures printed and plain paper bags and associated paper-derivative based packaging) requesting Lufil Packaging to grant it organisational rights in the workplace. Lufil Packaging refused to grant NUMSA organisational rights on the grounds that Lufil Packaging’s employees fell outside the defined scope of NUMSA’s constitution. The Constitutional Court was ultimately called upon to decide the question whether a trade union can admit as members, and receive organisational rights for, employees who do not fall within the scope of that trade union’s constitution. Lufil Packaging contended that NUMSA is bound by its constitution and may not recruit and/or admit employees that fall outside the scope of its constitution. On the other hand, NUMSA argued that the interpretation of the law as proposed by Lufil Packaging would unjustifiably and unreasonably infringe on the workers’ constitutional rights to freedom of association and right to fair labour practices.

The Court noted that the right to associate is not a unilateral right and that NUMSA’s decision to admit as members employees falling outside its scope, in violation of its constitution, may violate existing members’ rights to associate and disassociate. It is noteworthy that employers have the same right too.

In reaching its decision, the Court took into account inter alia the following factors:

The LRA makes it peremptory for unions, at their formation, to have a constitution to qualify for registration;

The union’s constitution constitutes the agreement which is entered into by its members and is legally binding on them; and

The qualification for, and admission to, membership is subject to the union’s constitution as defined in section 95(5)(b) of the Labour Relations Act, 1996 (LRA).

In the final analysis, the Court found that NUMSA is bound by its own constitution and that it has no powers beyond what its constitution provides. It therefore refused NUMSA’s claim for organizational rights.

This judgment emphasises the binding nature of constitutions of trade unions. Trade unions are bound by their own constitutions and may not act outside their provisions. Unions recruiting and admitting employees as members in breach of its constitution cannot rely on such members when establishing representativeness to demand organisational rights from employers. It is important therefore that, before conceding to a claim for organizational rights, employers should ensure that trade unions are permitted by their constitution to recruit and admit members in their workplace.

Trade unions are also not without a remedy, should they wish to recruit and admit members outside of their constitutionally defined scope. In terms of section 101(1) of the LRA, a union may amend its constitution in order to widen its scope.

Prepared by Chantelle Ngwenya and supervised by Pumezo David

THE MOVEMENT OF CHILDREN BETWEEN SEPARATED

PARENTS DURING THE COVID-19 LOCKDOWN:

AN UNDERSTANDING OF THE REGULATIONS AND

THEIR NUMEROUS AMENDMENTS

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THE COVID 19 EFFECT:

ONE DAY THE BUSINESS WAS

THERE – THE NEXT DAY IT WAS

GONE!

WHAT CAN I DO?

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Terence Matzdorff

The COVID-19 virus:

Retrenchments and employees on fixed-term contracts

by Pumezo David

Tel: 011 669 6108

pd@khl.co.za

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Pumezo David

The COVID-19 virus:

Government measures and their effect on the workplace

by Pumezo David

Tel: 011 669 6108

pd@khl.co.za

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Pumezo David

COMPANIES, BUSINESS RESCUE MAY NOW BE YOUR ONLY CHANCE AT SURVIVING THE COVID-19 STORM


Gavin Schar

South Africa’s economic woes were brought sharply into focus on 26 February 2020 when South Africa’s Minister of Finance, the Hon. Mboweni, delivered his budget speech. Whilst there was much speculation and debate beforehand about what the Minister was going to say, I don’t think ordinary South Africans harboured any real hope that their financial lots were about to improve consequent upon Mr Mboweni’s speech. Although it was a welcomed reprieve to South Africans that income taxes were not increased, the general economic sentiment after the speech was not really any better than before it - most everyone remained acutely aware that economic growth and tax revenues were down, unemployment and national debt was up, state-owned enterprises were seemingly beyond repair and in dire need of vast sums of money if they are to survive. South Africa was (and is) in a recession and facing a likely downgrade by Moody’s of Government bonds to “junk” status - something that will worsen our economic woes if it happens.

As if South Africans and South African businesses were not already finding it difficult to make ends-meet at the beginning of 2020, in early March we fell victim to the SARS-CoV-2 outbreak, also known as Covid-19. As each day passes I, like most people around the globe, become increasingly aware of the devastation, both to our people and economy, that Covid-19 will leave in its wake. Even at this relatively early stage in the global shutdown there can be no doubt that the economic consequences of Covid-19 will be beyond comprehension and assuredly be felt long after Covid-19 has gone. With this in mind, over the past few days I have read with interest a number of articles about “force majeure” (a contractual legal remedy that protects a contracting party who is unable to perform under a contract due to some unforeseen intervening event commonly referred to as an “act of God”) and whether Covid-19 constitutes such an event. Make no mistake it is a worthy and valid legal question, although in some cases I suspect that our courts will hold that Covid-19 did not constitute a force majeure. Be that as it may, in South Africa there is another legal remedy - business rescue - that may be available to companies and which, in my view, they ought seriously to consider if they are to weather the Covid-19 storm.

Business rescue is a legal process that is available to companies that are “financially distressed”. It is different to liquidation and indeed ought to be invoked long before there is talk of liquidation. The purpose of business rescue is to try and rehabilitate a company that is “financially distressed” by providing it, and the management, with the temporary supervision of its affairs, business and property by a business rescue practitioner; a temporary moratorium on the rights of claimants against the company or in respect of property in its possession; and the development and implementation of an approved business rescue plan. Such a plan aims to rescue the company by restructuring its affairs, business, property, debt and other liabilities, and equity in a manner that maximizes the likelihood of the company continuing in existence on a solvent basis or, if it is not possible for the company to so continue in existence, results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of the company. The Companies Act defines a “financially distressed” company as a company that appears to be reasonably unlikely to be able to pay all of its debts as they fall due and payable within the immediately ensuing six months; or it appears to be reasonably likely that the company will become insolvent within the immediately ensuing six months. These are the very circumstances that many companies in South Africa will be faced with consequent upon the economic effects of Covid-19. Absent drastic intervention by the public and private sector to alleviate the devastating economic consequences that Covid-19 will have on, amongst others, companies in South Africa, it will soon be impossible for many South African companies to keep their doors open. In such circumstances, perhaps the only way that these companies will have a fighting chance at surviving the effects of the Covid-19 pandemic, is if they are afforded temporary financial reprieve under business rescue until it passes.

Experts on Covid-19 agree that the pandemic is temporary. One can debate how long it will hold South Africa hostage, but taking what has happened in China into account, and hoping that the responsible and necessary measures put in place by our Government are effective, there is every reason to hope that within the space of a few months we too will have Covid-19 under control and will then be able to begin rebuilding our economy and businesses. If this is the case then there is all the more reason for companies faced with financial ruin because of Covid-19 to act sooner rather than later. As each day passes and as the economic shutdowns around the world intensify, companies will inevitably move closer and closer to breaking point - the point at which they are no longer able to be rehabilitated and when the only objective avenue available to them is liquidation. For most companies that presently qualify for business rescue, the main form of relief will be (barring certain exceptional cases) the temporary moratorium on legal proceedings against them - in short your debts will be held in abeyance and your property will be off-limits to creditors and protected pending the approval and implementation of a business rescue plan. Employing this remedy may well be your best chance at survival. I strongly recommend that you consider it and possibly take advantage of it.

I have significant experience in the field of business rescue. Should you wish to canvas the topic, or even a related topic, please don’t hesitate to get in contact with me.

Click here to view Gavin Schar's profile
Knowles Husain Lindsay Inc.
grs@khl.co.za
011 669 6065

BEST LAWYERS: JOHANNESBURG’S LITIGATION LAWYER OF THE YEAR

BEST LAWYERS: JOHANNESBURG’S LITIGATION LAWYER OF THE YEAR

REGENESYS BUSINESS SCHOOL: "DOING BUSINESS IN CHINA"

Doing Business In China

On 25 June 2019 the Regenesys Business School held a “Doing Business in China” conference. The conference was aimed primarily at South African businesspersons who want to trade with or in the People’s Republic of China (“PRC”). KHL director Francois Terblanche was invited to provide high level insight on the legal requirements for doing business in the PRC.

The PRC is often criticised as being foreign investor unfriendly and as maintaining barriers to foreign investment. However, the independent data tells a different story: According to the World Bank’s “ease of doing business” surveys the PRC had jumped from number 78 in the world in 2017 to number 46 in 2018. That is a remarkable jump. It must be indicative of real commitment on the part of the Chinese government to “open up” the PRC’s economy.

In his presentation Francois emphasised that if you do business in the PRC, you are a guest of the PRC and it is important to play by your host’s rules. He also spoke on the following topics:

  • The challenges (perceived or real) of doing business as a foreign investor in the PRC;
  • The difference between trading with the PRC China and doing business and establishing operations in the PRC;
  • The categories into which the PRC’s economy is divided (“encouraged”, “permitted”, “restricted” and “prohibited”) and how that determines the rules for foreign investment into the PRC;
  • Popular investment structures used by foreign investors in the PRC; and
  • The PRC’s new “Foreign Investment Law” that is scheduled to take effect in 2020. That Law should open up the PRC’s economy event more.

Francois emphasised that the bottom line about investing into the PRC is that you must first do proper (in fact, extensive) market research, conduct proper due diligence (commercially, financially, regulatory, legal and culturally) and learn, and respect, the Chinese culture. Most importantly, you must get specialist and competent local advice and support in the PRC – do not try to do this alone.


LAND EXPROPRIATION DEBATE

Lawyer of the Year

On 10 October 2018, the Regenesys Business School convened a round table discussion to discuss the expropriation of land without compensation and its impact on the economy. A panel of eight speakers led the discussion.

Mohamed Husain was one of the panellists, and as the evening turned out; he was the only panellist who was not from a political party or interest group. Mohamed had been invited as a legal expert to contribute insights on the legal position pertaining to expropriation of land with or without compensation.

In his presentation Mohamed gave a clear and careful exposition of section 25 of the Constitution; which in contemporary discourse has been the subject of much debate on whether it permits land expropriation without compensation; whether it should be amended in certain respects; or whether it adequately protects competing rights. His main submission was that the Constitution need not be amended as it adequately provides for expropriation with or without compensation. He pointed out that the construction of the Constitution permits a scenario where compensation is actually nominal to nil. He also submitted that the State has not done enough with its existing powers to achieve adequate land reform. He did however, caution against careless expropriations that have no regard for the economy as he warned that this would lead to inevitable downgrades of the economy. His presentation laid the foundation for the speakers from the various political parties and interest groups.

The land question has proven to be an extremely emotive one which leaves South Africa a sharply divided nation. This was evident in the submissions that followed.

Democratic Alliance (DA) Shadow Deputy Minister of Rural Development and Land Reform Ken Robertson called on government to release land in its hand, revise its national budget and stamp out corruption to help fast-track land reform.

Deputy CEO of Afri-Forum Ernest Roets supports land reform; he however insists that expropriation without compensation is not the solution.

Youth League President of the Congress of the People (COPE) took a view substantially similar to Afri-Forum and the DA.

African National Congress (ANC) NEC member Ronald Lamola, vowed that the ANC will introduce the Expropriation Bill in Parliament in the next few months to fast-track the expropriation of land without compensation, and confirmed the ruling party’s view that expropriation without compensation is seen as a valuable tool in achieving land reform.

Deputy President of the Black First – Land First Zanele Lwana was relentless in her call for a direct reversal of the violent land dispossessions.

Louis Meintjies, the president of the Transvaal Agricultural Union (TAU), sought to dispel the narrative that Black people were displaced. His argument was that a holistic view of the nation’s history reveals that land dispossessions occurred to people of all races and cultures and further that not all White ownership of land arose through violent means but rather by treaties and agreements with indigenous peoples.

Motsepe Matlala, the President of the National Union of Farmers South Africa, argued that land reform is an urgent national demand that can only be relieved by amending the Constitution so as to avail resources and means of production to the Black majority.

The discussion was opened up to the floor for questions and comments before being closed. It provided all in attendance an opportunity to debate differing views on the land question as well as an opportunity to network over some choice refreshments.


KHL PARTICIPATES IN THE BRICS LEGAL FORUM 2018

Lawyer of the Year

Following the BRICS Heads of State summit in Johannesburg earlier this year, the fifth BRICS Legal Forum was held in Cape Town at the end of August 2018.

The Forum was attended by representatives of:

  • The China Law Society
  • The Bar Association of India
  • The Brazilian Bar Association
  • The Association of Lawyers of Russia
  • The Law Society of South Africa
  • The General Council of the (South African) Bar
  • The Chief Justice of South Africa (in part)
  • The Minister of Justice and Correctional Services of South Africa (in part)
  • Some South African attorney firms
  • The National Treasury of South Africa (in part)
  • Other interested parties since as development banks, chambers of commerce and academics.

KHL was represented at the Forum by Francois Terblanche (director – corporate and commercial) and Kai-Lie Chen (consultant – Chinese legal affairs).
The Forum’s main focus was on the development and improvement of multilateral legal structures between the BRICS countries in order to facilitate more and easier trade between the BRICS countries.
The Forum identified multilateral arbitration structures as the preferred dispute resolution mechanism to deal with intra-BRICS trade related disputes. Both China and India have already established highly functional arbitration centres in this regard. The expectation is that South Africa should do similarly soon.
Delegates also overwhelmingly supported future intra-BRICS co-operation on anti-corruption measures.
An interesting initiative that was proposed at the Forum is the creation of a standardised, uniform agreement for use by parties in different BRICS countries when they contract with one another in sale of goods or provision of services transactions.
The representatives of the legal professions of the BRICS member states adopted various declarations on BRICS related socio-economic activities, trade and dispute resolution at the Forum.

These include declarations that:

  • Multilateral commercial and investment dispute resolution mechanisms and institutions must be created to cater for the needs of the BRICS countries, emerging markets and developing economies.
  • Capacity and expertise in commercial dispute resolution must be developed in the BRICS countries, emerging markets and developing economies.
  • Annual legal talent development programmes must be conducted for young lawyers in the BRICS countries.
  • The exchange of law students and legal experts between the BRICS member states must be promoted.
  • The taking of appropriate measures against corruption related crimes (such as corruption, tax evasion, money laundering and drug trafficking) must be supported.
Click here for the full text of the declarations that were adopted at the Forum

The 2019 BRICS Legal Forum will be held in Brazil. Technical committees were tasked at the 2018 Forum with giving effect to the declarations that were adopted at that Forum. These committees will report back on their progress periodically before the 2019 Brazil forum, and then in greater detail at that forum.

It will be interesting to follow the committees’ progress. If they successfully implement the declarations that were adopted at the 2018 Forum, trade between parties in the BRICS countries will no doubt increase and resulting trade related disputes will be resolved much more time and cost effectively than is currently the case.
If you want more information about the 2018 BRICS Legal Forum or anything dealt with in this article, please contact our Francois Terblanche at ft@khl.co.za

KHL's Kai-Lie Chen (consultant) and Francois Terblanche (director) at the BRICS Legal Forum 2018
The Honourable Advocate Tshililo Masutha, South Africa's Minister of Justice and Correctional Services, addressing the BRICS Legal Forum 2018

BEST LAWYERS - LAWYER OF THE YEAR


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Lawyer of the Year

KHL'S LATEST SKILLS TRANSFER INITIATIVE


In January 2018 KHL hosted a very successful practical skills transfer programme for some of the legal secretary students from UniCollege. Our “new” (2018 intake) candidate attorneys also participated in the programme.

The programme focused on skills that the students and candidate attorneys will find useful in the real workplace.

It also gave the students an opportunity to experience working life in an actual law firm.

From KHL’s side we were grateful for the opportunity to play a small part in the development of this highly enthusiastic group of committed young people.



Skills Transfer Initiative
Some of the trainers and students taking some well earned time out

This is what some of the participants had to say about their experiences in the programme:


  • “[Our trainer was] VERY welcoming and even [though] at times … I felt that I am lost, I was comfortable to ask her to slow down and explain again.” (Candidate Attorney participant)
  • “ … now I know the business terms that are being used and I understand them.” (Student participant)
  • “Thank you so much for the chance you gave me” (Student participant)
  • “Some of my highlights from the programme include … the warm welcome from all of the professionals at the firm … and the general advice from the directors on how to conduct myself as a candidate attorney” (Candidate attorney participant)
  • “It was the best experience ever.” (Student participant)
  • “The participants’ high level of motivation and will to succeed were truly inspiring. I am sure there are good things to come from these very committed young people.” (Francois Terblanche, participating KHL director)
  • “The trainee participants’ hunger for practical knowledge and wisdom was striking. As was the fact that their questions were aimed at obtaining practical, real life professional guidance. I will be watching their future development with much interest” (Tasneem Crawley, participating KHL director)

KHL WRITES THE GUIDE TO PRIVATE MERGERS AND ACQUISITIONS IN SOUTH AFRICA


Click here to view the Private Mergers and Acquisitions in South Africa Article

Lawyer of the Year

KNOWLES HUSAIN LINDSAY INC. BECOMES A MEMBER OF THE CHINA INITIATED “BELT AND ROAD LEGAL SERVICES COOPERATION PLATFORM”


1
Francois Terblanche, the head of our corporate and commercial department, (fifth from left) signing the platform’s constitution on behalf of Knowles Husain Lindsay Inc. in Chengdu on 28 July 2017

In 2013 the government of the People’s Republic of China, together with the governments of various other Asian and European countries, launched the “Belt and Road Initiative”. The initiative is an inclusive economic growth and infrastructural initiative encompassing large parts of Asia and Europe and parts of Africa.

The success of the Belt and Road Initiative depends, in part, on competent, high quality legal services support being available for its implementation. To facilitate this, Grandall Law Firm (one of the largest law firms in China) and a small number of other founding member law firms (such as Charltons from Hong Kong) have, with the support of the relevant authorities, created a multilateral international legal services co-operation platform, or network then.

The platform is formally known as “The Belt and Road Legal Services Cooperation Platform”.

The platform was formally launched on 28 July 2017 in Chengdu, in the Sichuan Province of China.

33 premier law firms signed up to the platform’s constitution as its initial members on 28 July 2017. The law firms are mainly from Asia and Europe. However, Knowles Husain Lindsay Inc. is very honoured and excited that it was invited to, and did, sign up the platform. We are the only firm in Africa that was invited to become a member of the platform.


1
Some of the sights in Chengdu, in the Sichuan Province of China, where the platform was formally launched on 28 July 2017

The platform will be much more than just the traditional law firm referral network. Quality assurance and good client care are obviously non-negotiable principles of the platform. But the platform also seeks to bring about on-going jurisdictionally relevant information exchanges, mutual professional development, new arbitration rules and forums, cultural exchanges and value-adding person-for-person professional exchanges.

KHL was represented at the launch of the platform by Francois Terblanche, the head of our corporate and commercial department, and by Kai-Lie Chen, our special consultant.


1
Francois Terblanche and Kai-Lie Chen

We are very excited, but also deeply honoured, to be a member of this new and dynamic platform. We look forward to playing our full part in its activities and initiatives.