DFFE PUBLICATION OF FIRST 3 SOCIO ECONOMIC ASSESSMENT SYSTEMS (SEIAS)


Dear Clients

On Friday 14 May 2021 the Department of Forestry, Fisheries and Environment (DFFE) circulated the initial phase of the Socio-Economic Impact Assessment Systems (SEIAS) for three sectors coming up for reallocation in FRAP 2021. The three sectors were:

  1. Demersal Shark;
  2. Hake Longline: and
  3. Hake Deep sea Trawl.

The SEIAS are a legal requirement mandated by Parliament and must be undertaken before the rights allocation process can take place. They are developed in order to assist the delegated authorities in making their decisions, providing guidance towards the intended outcomes. Allocations made in FRAP 2021 that do not align with the SEIAS may well be open to challenge. The SEIAS are, therefore, very important documents that should be scrutinized by all parties with an interest in the industry and FRAP 2021.

Along with the SEIAS was an invitation to all stakeholders to provide any written comments they may have on the documents by 16H00 Thursday 24 May 2021. Clients are strongly advised to consider the SEIAS and, if necessary, submit comments.

Should you require copies of SEIAS please contact rafeeka@dawsons.co.za and should you require any assistance in considering the SEIAS or in submitting comments please contact any director at Dawsons or email info@dawsons.co.za .

Yours faithfully

Grant Clark

Director



AMENDMENTS TO EXEMPTION CONDITIONS


Dear Clients

Please see the link below to public notice published by the Department of Forestry, Fisheries and the Environment (“DFFE”) this morning. The attached notice effectively amends the conditions under which Exemption Holders are permitted to operate (“exemption conditions”), particularly as they relate to the transfers of shares / members interest in Exemption Holders. In summary the amendment to the exemption conditions effectively reiterate what was stated in the public notice published on 20 April 2021 and in fact have gone further and stated categorically that no shares / members interest may be transferred within exemption holders during the exemption period except under two very limited circumstances and subject to compliance with the Policy for the Transfer of Commercial Fishing Rights 2009:

  1. The conversion of CC’s to private companies but only where such conversion is not accompanied by a change in shareholding / members interest;
  2. The death of a member / shareholder and subsequent transfer of the deceased estate’s members interest / shareholding. A notification / section 21 application submitted pursuant to a transfer of shares / members interest from a deceased estate will however not be considered if submitted within 3 months of the due date for submission of long-term rights applications as part of the Fishing Rights Allocation Process 2021 (a date which has yet to be confirmed).

Unfortunately the attached notice still leaves critical questions unanswered particularly as they relate to the transfer of shares / members interest within entities that are both exemption holders and the holders of commercial fishing rights that have not yet expired. As such we would advise any entity currently operating under an exemption to contact us for advice before concluding any transaction relating to the transfer of shares / members during the period of validity of the said exemption.

If you have any questions or queries in relation to the above please don’t hesitate to contact us.
https://mcusercontent.com/d9a16200101e0d8e94629d980/files/0c2afe66-4dab-8985-27af-0bc60bc61777/10may2021mlra_commercialfishingrights_exemptions.pdf

Kind regards

 

Nicholas Britz

Director



SHAREHOLDERS RIGHTS OF PRE-EMPTION – MAKE SURE THERE IS CLARITY


Dear Clients

A shareholder’s rights of pre-emption, or pre-emptive rights as they are more commonly referred, in essence refers to a shareholders right of first refusal to be offered another shareholders shares in the event that such shareholder should wish to dispose of his / her shares. By way of example, if a shareholder should wish to sell his / her shares, the remaining shareholders would have a pre-emptive right to be offered the selling shareholders shares pro rata to their shareholding in the company. If none of the shareholders follow their pre-emptive rights and accept the offer to purchase the selling shareholders shares, the selling shareholder shall then have the right to sell their shares to a third party at a price and on terms no more favorable than those offered to the remaining shareholders.

Following the enactment of the Companies Act 71 of 2008 many private companies adopted new Memorandums of Incorporation (MOI) and shareholders agreements so as to ensure that their MOI’s and / or shareholders agreements were not in conflict with the provisions of Companies Act 71 of 2008. In this regard companies either adopted the CIPC standard form MOI’s or alternatively companies adopted customized MOI’s. One of the many deficiencies of not only the CIPC standard form MOI but also many customized MOI’s and accompanying shareholders agreements is that they do not adequately deal with the pre-emptive rights of shareholders, that being the shareholders pre-emptive right to be offered a shareholders shares should they wish to dispose of their shareholding for any reason. This issue is further compounded by the fact that unlike the now repealed Companies Act of 1976, the new Companies Act 71 of 2008 only deals with the pre-emptive rights of shareholders when the Company issues new shares, there are no provisions in the Companies Act 71 of 2008 governing the pre-emptive rights of shareholders in respect of the disposal of a shareholders shares. The result is that many private companies either have no provisions in their MOI’s and / or shareholders agreements dealing with pre-emptive rights or have very basic pre-emptive rights provisions in their MOI’s or shareholders agreements which are wholly inadequate in a number of respects, including:

  • Insufficient detail with regard to the procedure that should be followed in respect of the offer of shares to existing shareholders should a shareholder wish to sell their shares;
  • No mechanism to determine the purchase price for the shares;
  • No provisions dealing with the death or insolvency of a shareholder and the pre-emptive rights of shareholders to be offered their shares:
  • No provisions dealing with the change of control of a shareholder and whether this should trigger an offer of their shares to the remaining shareholders.

With inadequate provision in a company’s MOI or shareholders agreement dealing with the above matters it is not difficult to imagine how this could lead to shareholder disputes and ultimately litigation.

In light of the above it is essential that private companies review their MOI’s and shareholders agreements to ensure that the pre-emptive rights of shareholders are clearly and comprehensively dealt with. For a review and assessment of your company MOI or shareholders agreement please don’t hesitate to contact nicholas@dawsons.co.za .

Kind regards
Nicholas Britz
Director