by Teneale | Nov 16, 2021 | Blog
In South Africa, being nominated as a trustee or a corporation director includes a slew of fiduciary duties and legalities. Failure to follow the rules governing directorship and trustee can lead to you being held personally liable – and punished.
The fiduciary duties, responsibilities, and liabilities of directors and trustees in South Africa are discussed in this article. It is by no means comprehensive; we strongly advise you to become acquainted with the Acts that set forth the rules for either position.
What are fiduciary duties?
Fiduciary duties, often known as fiduciary relationships, refer to a trust, assurance, or confidence connection between two or more people.
Although there is no innate restriction to the relationships that can be interpreted as fiduciary under common law, some are automatically fiduciary, such as those between a trustee and a benefactor, a lawyer and a client, an owner and an agent, a business associate and co-partners, and a mortgagor and a mortgagee.
What are the obligations and fiduciary duties of a director?
The Companies Act No. 71 of 2008, referred to as “the Companies Act,” outlines the laws relating to a director of a company in South Africa.
Except where the Companies Act or the company’s Memorandum of Incorporation (MOI) delivers alternatively, Section 66 of the Act states that the company’s business and relationships must be handled or guided by its board of directors, who are authorized to practice all of the company’s abilities and undertake all of its operations.
The Companies Act places a strong focus on the responsibility and accountability of directors, even prescribing a codified code of conduct. Directors have fiduciary duties under Section 76 of the Companies Act to act in the best interests of the firm (as a legal entity).
Their decisions—and the use of their authority—must always be in the best interests of the organization. They are not allowed to utilise their authority or influence judgments to benefit any person or group of shareholders, irrespective of ownership.
Directors’ liabilities under the Companies Act
The judgments of the board of directors bind the firm. Any breach of their legal requirements under the Companies Act can result in financial loss, as well as physical and reputational harm. As a result, if proven to violate their fiduciary duties to act with care, competence, and attention, a director may be held personally accountable for these repercussions.
Under the Companies Act of South Africa, a director’s liability is insured. Unless a director is convicted of a crime, a firm may purchase indemnity insurance to protect the director. In addition, under Section 78 of the Companies Act, the business may insure itself against expenditures advanced to a director under such indemnification. The businesses act, on the other hand, specifies the circumstances in which identification is prohibited.
Fiduciary duties and responsibilities of a trustee?
The Trust Property Control Act (TPCA) No. 57 of 1988 is the main statute that controls South African trust law. Trustees’ responsibilities are governed by the TPCA, common law, and the trust deed.
A trustee, like a corporation director, has a fiduciary obligation to act “with the care, diligence, and competence that might fairly be anticipated of someone who controls another’s affairs.”
Trustees act in the best interests of all stakeholders for and on account of the trust and its resources. This is, of course, per the Trust Deed’s and the TPCA’s regulations.
As a result, trustees should be well-versed in the contents of the trust deed, which typically specifies the trustees’ responsibilities and the purpose for the trust’s and its assets’ governance.
Asset Management for Trusts
When a trustee accepts the position of trustee, he or she must assume control of the trust’s assets. Immovable property must be registered in the name of the trust trustees as part of the fiduciary duties in the case of an ownership trust. Immovable properties are registered in the beneficiaries’ names (but under the trustees’ authority) in ‘bewind’ trusts.
An important element is that movable property must be securely secured and insured. In the case of testimonial trusts, investments and private company shares are also included.
Inventory and managerial accounts must be meticulously recorded. Trustees are required to open a bank account in the trust’s name and maintain statutory accounting track of all transactions.
Is it possible for a trustee to be held personally and financially liable?
Yes. Trustee personal culpability is, in fact, more severe than that of directors.
Any attempt to shield a Trustee from accountability for carelessness is void, even if a company may protect a director from personal culpability. A trust deed clause like this will not be enforced.
A trustee who violates their fiduciary duties may be held accountable for the trust’s financial losses.
The best part is that you aren’t alone
Recognizing and following the complexities of trust rules can be difficult. Most trust documents, fortunately, allow trustees to consult with expert accountants and attorneys. When it comes to making decisions, such advice is vital. Tax and business law are well-understood by qualified tax practitioners and accountants, whereas conveyancing and legal agreements are handled by lawyers. As a director or trustee, you have a lot on your plate; let Blue Evolution help you carry it. Speak with one of our knowledgeable consultants today.
by RMCTEAM | Oct 22, 2021 | Blog
No one can predict how their life will turn out. You could win the jackpot tomorrow, or you could get the job offer you’ve been hoping for for years. You may want to start your own business or ensure that your children never have to struggle to realize their ambitions. One way to help you achieve your financial goals is to invest in life insurance.
So, why is it so important to have life insurance? In the event of an unforeseen event, life insurance policies can provide financial security to your spouse, parents, and children. Being uninsured puts your family’s financial future in jeopardy. If you are the sole breadwinner in your household, it is critical that your family be financially secure even if you are not present.
So, if you’re still on the fence about whether or not you should acquire life insurance, here are three convincing reasons to do so:
1. Provides financial stability for your family
Life insurance plans provide not only financial stability but also assistance to your family in times of need. It can cover your children’s education as well as your spouse’s and parents’ health needs. Life insurance can even cover your marriage and your family’s day-to-day financial needs. Financial troubles can be avoided when they are most needed. Purchasing a life insurance premium is a little price to pay for your family’s future benefits.
To support the dependents, most households only have one breadwinner. It is therefore critical to plan for the future in a financially prudent manner. Life is full of surprises, and it either leaves us with good or unpleasant experiences now and again despite the fact that you and your spouse both work in the household. It is important to protect your partner from life’s uncertainties by purchasing a life insurance policy. When you die unexpectedly, your beneficiaries can use the sum assured to stabilize their financial situation.
2. Getting a head start on your insurance premiums saves you money
The best time to acquire life insurance is different for everyone, based on their family and financial situation. If you already have debts that will persist after your death or if other people rely on your income, you should seek additional life insurance. After all, you don’t want to leave your family in a financial bind or be responsible for your credit card debt.
It’s crucial to remember that life insurance premiums are proportional to your age. The younger you are, the lesser the risk of payment by the insurance provider, leading to lower premiums for your purchase. Furthermore, once you’ve decided on a premium, it won’t change as you get older. As a result, buying a life insurance policy at a young age allows you to pay lesser premiums for a larger life insurance policy. If you have dependents, such as children or elderly parents, it is even more critical that you purchase a life insurance policy to ensure their financial security. It’s worth remembering that the insurance costs are much lower when you’re young and single. So, because your insurability is at its pinnacle, acquire life insurance at a suitable age to lock in a low price.
Term life insurance, for example, covers you for the duration of the policy. Younger is indeed better, however, the appropriate age for when to begin that period will depend on when other people expect to depend on you financially. You’ll want the policy’s term to be as long as your dependents require your income. For parents, this usually means waiting until their children are adults. Couples who jointly own property may want to be insured until their mortgage is paid off. When either person in a couple earns an income crucial to the family, both should be insured.
A permanent life insurance policy’s net value grows tax-free. Because the cost of insurance is constant for the entire length of the policy, premium contributions to whole life policies purchased at a young age can amass significant value over time.
3. Tax savings
One of the most important reasons to buy a life insurance policy is to save money on taxes. There are two tax incentives to owning a life insurance policy. Life insurance products allow you to arrange your taxes and save your financial resources for the sake of your family’s financial stability.
You can earn tax benefits on the payment of a life insurance policy in addition to tax deductions on the premiums. The benefits of a life insurance policy are not taxable. The amount of premiums paid that are eligible for tax deductions is determined by the amount paid and the date the insurance was purchased.
The value of life insurance is not in the tax advantages it provides, but in the financial security it provides. In the absence of insurance, its importance increases exponentially. Both the provider and the product should be chosen with the utmost care, considering their credibility and suitability.
Individuals who pay premiums on life insurance policies are eligible for a variety of tax benefits. Tax advantages are one of the main reasons why life insurance is a good financial tool, both while the policyholder is living and after they pass away. A life insurance policy is a financial planning instrument that encourages regular savings. Consider life insurance and plan for your family’s future. Above all, insurance provides you with complete peace of mind. Ensuring your family gives you peace of mind that you have done everything available to protect their financial future.
Blue Evolution’s life insurance plan offers adequate life protection at a reasonable price. These plans include death and terminal illness coverage, as well as the option to add accidental death and disability coverage. To learn more about different insurance plans, visit our website and look at the various term plans available.
by Teneale | Aug 6, 2021 | Blog
Have you ever wished there was something to help protect you when the unexpected happens? Something that could lessen the worry in your life? There are many strong reasons that you need to have reliable insurance and an estate plan. It is the only way that your family can keep their lives intact if something were to happen to you. Life insurance is also one of the few ways that your family will be able to live comfortably even if you are gone. You may be wondering why it matters now? Well, COVID-19 brought many surprises to our worlds, and not in a good way. With the many lives lost, hospital and healthcare bills, many were and still are drowning in despair.
COVID-19 has swept the globe like wildfire. In the past few months, COVID-19 has already affected more than 6 million people across the globe and the numbers continue to grow. We cannot predict when we might catch the virus. And when facing such unforeseen circumstances, it is important to examine reliable insurance coverage, estate planning, and other factors that influence you and your family’s financial standing and future.
Working hard to get ahead, only to lose everything in an accident or medical emergency can be overwhelming and an invitation of major financial stress. No one wants to think about the uncertainties of life and the need for a will, a living trust or a public health emergency plan. We all know that life insurance is important, but there are always reasons to put it off. But after major loss and financial burdens, the need for reliable insurance and a good estate plan has become of high priority.
Reliable insurance plans and cover as well as good estate plans have benefitted many throughout the unforeseen circumstances that the pandemic raised. These unforeseen circumstances included the loss of jobs, income, healthcare bills, family members, and more.
Benefits of reliable insurance:
Your family can be taken care of with life insurance if something happens to you, but that’s only one of the benefits.
- Replacing months/years of lost income due to job loss
- Paying off your home mortgage
- Having other debts paid off, such as car loans, credit cards, and student loans
- Help fund your kids’ college education
- Assist with other obligations, such as caring for ageing parents
Typically, reliable insurance policy covers include enough of a death benefit to cover the lost salary and key expenses – like a mortgage – that their family will face, especially while their children are still at home.
Benefits of a good estate plan:
A simple estate plan can protect your assets and loved ones in the event that you are no longer able to do it.
- Planning your estate is crucial if you want to choose who will inherit your valuables and assets.
- In the event of your premature death, estate planning allows you to name a guardian for your children.
- A common estate planning goal is to reduce your taxes.
- An estate plan reduces the likelihood of family issues and legal squabbles.
- It protects beneficiaries.
- It protects young children in case of unforeseen death.
Don’t let a battle over the details of your estate break out in court. Get your legal affairs in order now and save your loved ones the trouble.
That’s where Blue Evolution comes in. The time and stress relatives go through to settle a loved one’s estate after his or her death can be considerable. It is our goal to make this process easier for you and your family. Our reliable insurance policies protect you and your loved ones from poor medical decisions, while our integrated estate plans save you time and money while also making sure important decisions are taken by people worthy of their trust. Get in touch today.
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