ASSET PROTECTION DEFINITION
Asset Protection or Corporate Structuring is a legal process by which assets are bought in or moved to appropriate legal entities in which these assets enjoy protection against unforeseen occurrences such as debt, divorce, liquidation, sequestration, execution by the sheriff and other unforeseen circumstances”
IS YOUR ASSETS IN STRUCTURES THAT PROTECTS THEM?
About 80% of cases that we see aren’t
The husbands were sequestrated. The operational company was liquidated. Their houses, furniture, two commercial buildings, insurance policies and their business assets (such as machines, computers, tooling etc.) was untouched because it vested in entities which were protected against their insolvency. After sequestration of the husbands and liquidation of the operational Company I assisted them in setting up a new company wherein they started a new operational arm in the same sphere as before.
CASE STUDY – DANIE POTGIETER 1991
In 1991 my estate consisted of mainly three categories of assets – my private estate consisted of my property, motor vehicles, investments, furniture etc. I was the managing member of a close corporation in which we operated one of the largest independent insurance broking houses in South Africa
A close corporation of which I was the managing member and which operated a motor vehicle dealership. After I took a few uninformed business decisions the close corporation which operated the insurance brokers was liquidated. Because I signed surety in my personal capacity, I was sequestrated. Because the other close corporation’s members interest vested in my private name that was also liquidated. Because I was married in community of property, my wife in her capacity as an innocent bystander was also sequestrated. I lost my businesses, property, investments and vehicles. It was, as the younger generation refer to it, a “total wipe out”!
THE RIGHT PLACE TO START
The reason we do not go into the finest detail in explaining how a corporate structure is actually set up are twofold, namely; it is rather involved and secondly we will have to share a lot of trade secrets, which we don’t want to do.
FREQUENTLY ASKED QUESTIONS - ASSET PROTECTION
- Are there positive changes in the new Companies Act?Yes indeed.
- When the new Companies Act comes into effect, no new Close Corporations can be registered.
- Only companies can be registered as from that date.
- Private companies of which the shares are held “closely” in other words, by the director, his family or trust, are not required to undergo audit.
- Insolvents can now also be directors of Private Companies as long as they don’t hold money on behalf of third persons.
- What is a SME (small medium enterprise)?
If you are the owner of just one business and that business is conducted in a company of which you are the sole Director, you can register the company as a SME at SARS. The advantage is that your company is then not taxed at the normal company rate of 28%, but at a rate of 15%. This is a tremendous advantage which must be considered when you set up you corporate structure.
- What role does my auditor play in setting up my corporate structure?
If you have a small and uninvolved structure, we can set up the structure without consulting your auditor. It is more the norm than the exception that we involve the auditor in the process because asset protection and tax strategy are in many aspects at loggerheads.
- Will I still have control of my business / assets?
Yes. I firmly believe that a business man should have personal and full control over his businesses and assets. Not having full control is a sure way of parting with your assets.
- What role do trusts play in setting up corporate structures?
A huge role!!
- How do trusts work?
Click on the tab “Family Trusts”.
- Can’t my creditors set aside my corporate structure?
Part of the process of corporate structuring is to test the voidability of assets. The South African law is very clear on voidability of corporate structures and transfer of assets. We have a firm grasp on these rules and we will advise you properly.
- Should I divorce my wife and remarry out of community of property?
It is not necessary to divorce (unless you have alternative motives). We can assist you in bringing an Application to the High Court whereby your matrimonial properties system is changed from “in community of property” to “out of community of property”.
- Will a solid corporate structure result in lower taxation?
Not necessarily. Corporate structure and tax strategy is not the same thing. They are two opposite sides of the same coin. There are instances where a good corporate structure can indeed help you to save on taxes. An example of this is where your assets are held in trust and you pass away. If the beneficiaries of the trust are not changed by your demise you assets fall into a second generations hands without having undergone executor’s fees, realisation costs, transfer duty and estate duty. Another instance is where you run a few companies and a management company is set up. Such a management company will provide human resources and other services to all your companies whilst your companies that make profit contribute more to the management company than the companies that are not turning profit yet.
- Is there a “template” which I can follow to set up a proper corporate structure?
No. We have done hundreds of corporate structures and restructurings and most of them are unique.
- My business is struggling – how can I make it profitable?
Anton Rupert said that if you want to make your business profitable, you need to do seven things, the first three is homework, homework and homework. In other words: market research. Rupert said that once you have determined that you have a product that is needed by enough people and can be sold at a profit, you have a business. The fourth thing you need in a business is enough money to cross the bridge for idea to operation. This is where many business falter. If you start out and you reach the middle of the dam but you don’t have enough power to reach the other side you are worse off than when you started. Rupert says that once you reach the other side of the pond you need to do three things right in that company namely marketing, management and pricing. During many years that we have consulted with clients, it is interesting to note that many businessmen / woman have been in business for many years and they have never even attended a one day course on management, marketing or on pricing.