Page 21 - Robin Twaddle PTG 2017 Digital

PURCHASING VIA LEGAL ENTITIES – PRO’S & CON’S

COMPANY

ADVANTAGES 6. Shareholders agreement can neatly regulate
1. CC, trust, company can be shareholders the relationship between the shareholders
2. Strictly controlled by legislation Companies (subject to the MOI and Act)

Act (71 of 2008) as amended 7. A bond may be registered subject to the
3. Can have more than 10 shareholders solvency and liquidity requirements of Section
4. Has greater image value than a CC or a 44 having been met

trust as a business vehicle DISADVANTAGES
5. Relatively easy sale of interest through a 1. The costs of annual audit (where applicable)
2. Complex legislation to comply with
sale of shares

CLOSE CORPORATION

ADVANTAGES DISADVANTAGES
1. Management is also represented by 1. Membership limited to 10
2. From 1 May 2011, no new CC’s may be
members who hold interest in the CC
registered
TRUST

ADVANTAGES 6. Trust deed can be set up so as to determine
1. The trust is treated as an entity separate the manner in which Trustee administers the
fixed property and the Trustee is dutybound to
from the individuals obey these wishes
2. Assets don’t form part of the insolvent
DISADVANTAGES
estate in the event of sequestration 1. Cannot be sold as an entity
3. Strict controls – Trustees accountable to 2. The beneficiaries normally have discretionary

Master of the High Court rights which are not assets that can be sold
4. Special trusts formed for mentally ill or such as shares
3. Trustees cannot act until Letters of Authority
seriously disabled, will be allowed CGT have been issued
exemption if primary residence (and
meets other requirements to qualify)
5. Special trusts – taxed at individual rates

APPLICABLE TO ALL ENTITIES

ADVANTAGES DISADVANTAGES
1. Separate legal personality (CC’s and 1. CGT – where property is held in Company/CC,

Companies) ordinary trust, and special testamentary trust,
2. If shares held in trust, may protect the no primary residence exemption allowed
2. From 1 March 2017 dividends tax levied
shares as long as not offered as security on the shareholder at a rate of 20% on the
against a loan amount of any dividend paid by a company
3. Shares/Members interests can be sold (subject to certain exemptions). The tax is to
4. Continues to exist as an entity even in be withheld by the company paying the taxable
event of death or resignation of member/ dividends and paid across to SARS
shareholder/director/trustee 3. Transfer of members interest, shares – subject
5. Need not be in existence at time of signing to Securities Transfer Tax at a rate of 0.25% on
agreement (CC’s and Companies) the transfer of listed or unlisted securities