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NOMINATION AGREEMENTS
 
NOMINATION AGREEMENTS

As a result of recommendations by the Minister of Finance that the right to nominate is being abused, the Receiver has now decided to apply Section 16 of the Transfer Duty Act No 40 of 1949 strictly.

It reads as follows:

"16 (i) where property is sold to a person who is acting for some other person, the person so acting shall disclose to the seller or his agent the name and address of the principal for whom he acts

(ii) if the sale is by auction, immediately upon acceptance by the auctioneer of his offer;

or

(iii) if the sale is otherwise than by auction immediately upon conclusion of the agreement of sale"

The Receiver has now ruled that a nomination made in terms of a transaction in terms of which transfer duty is applicable, must be made on the same day of acceptance in the case of an auction or in any other case on the same day that the deed of sale is concluded. i.e. by midnight of that day.

If this is not done double transfer duty will be levied on the transaction.

The ruling will apply to all transactions concluded on or after 1 September 2003.

What are the implications for a purchaser who wishes to nominate a company or close corporation as purchaser in his place? The following is the position:

(i) the company or close corporation will have to be in existence in order for it to be able to accept the nomination

(ii) if for some reason, the company or close corporation is not in existence and a shelf company or close corporation is not available the purchaser can still use the provisions of Section 35 of the Companies Act or Section 53 of the Close Corporations Act and sign the deed of sale as "John Smith in my capacity as a trustee for a Company or Close Corporation to be formed".

Then once the company or close corporation has been formed it adopts or ratifies the deed of sale and becomes fully bound under it.

The following are suitable clauses which may be included in a deed of sale, one being for a company to be formed and the other for a close corporation to be formed.

FORMATION OF A COMPANY

1. It is recorded that the purchaser is acting as trustee for a company to be formed. The purchaser:

1.1 undertakes to effect registration of a company on the basis that section 35 of the companies act 1973 is fully complied with;

1.2 undertakes to obtain adoption or ratification of this agreement by the company within seven (7) days after it has obtained a certificate to commence business;

1.3 undertakes to procure the necessary bank or financial institution guarantee for payment of the balance of the purchase price complying with the terms of clause * within seven (7) days of the company adopting or ratifying this agreement, should the institution which issued the guarantee in terms of clause * require a new guarantee to be issued as a result of the adoption or ratification of this agreement by the company;

1.4 in the event of the adoption and ratification referred to above binds himself as surety and co-principal debtor with the company for the due and faithful observance by the company of all the terms, conditions and stipulations of this agreement;

1.5 undertakes that in the event of registration of the company and the obtaining of its certificate to commence business not being effected within forty five (45) days of the date of signature of this agreement by the purchaser or within such extended period as may be allowed in writing by the seller, or should the company, when registered and entitled to commence business, fail to adopt and ratify the terms of this agreement within the period provided for herein, he in his personal capacity will accept transfer of the property and take over the purchase of the said property and pay the purchase price as if this agreement had been made in his personal capacity.


FORMATION OF A CLOSE CORPORATION

1. It is recorded that the purchaser is acting as a trustee for a close corporation to be formed. The purchaser accordingly:-

1.1 undertakes to effect the registration of a close corporation on the basis that section 53 of the close corporations act no. 69 of 1984 is fully complied with;

1.2 undertakes to obtain the ratification or adoption of this agreement by the close corporation within 7 (seven) days after its corporation;

1.3 undertakes to procure the necessary bank or financial institution guarantee for payment of the balance of the purchase price complying with the terms of clause * within seven (7) days of the close corporation adopting or ratifying this agreement, should the institution which issued the guarantee in terms of clause * require a new guarantee to be issued as a result of the adoption or ratification of this agreement by the close corporation;

1.4 in the event of the adoption and ratification referred to above binds himself as surety and co-principal debtor with the close corporation for the due and faithful observance by the close corporation of all the terms, conditions and stipulations of this agreement;

1.5 undertakes that in the event of the registration of the close corporation not being effected within 45 days of the date of signature of this agreement by the purchaser, or within such extended period as may be allowed in writing by the seller, or should the close corporation when registered fail to adopt and ratify the terms of this agreement within the period provided for herein, he, in his personal capacity will accept transfer of the property and take over the purchase of the property and pay the purchase price as if this agreement had been made by him in his personal capacity.

* The clause reference here will be to the guarantee clause in your Deed of Sale


 

 

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