Editorial

• Record Number: btclq_v9_n4_a1
• Date: 01 December 2018
• DOI: 10.10520/EJC-13483d5541
• Pages: v-vi
• Published date: 01 December 2018
• Author: Michael Rudnicki

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Editorial

MICHAEL RUDNICKI

This issue includes a few guest articles and deals with relevant commer-

cial issues and their attendant tax consequences. Some of the articles have

regard to the recent publication of the 2018 Taxation Laws Amendment

Bill.

Indeed another year-end is upon us and I wish all our readers a blessed

and well-deserved break. We look forward to many more commercially

relevant articles in the coming year.

The f‌irst article by Milton Seligson, deals with the Securities Transfer

Tax (‘STT’) exemption provisions relating to preference-share redemptions

between so-called ‘group companies’. The article explores whether the

intra-group relief provisions in section 45 of the Income Tax Act 58 of 1962

(‘the Act’) will apply in respect of a preference share redemption; a require-

ment for the STT exemption. The article concludes that in terms of section

45 of the Act, the redemption of shares constitutes a disposal of an asset

to the issuer (or transferee company in terms of section 45 of the Act). The

further requirement of section 45 vis-à-vis the ‘capital/revenue’ character

of the asset in the hands of the transferor and transferee company will

not be impacted by the non-investment motive of the issuer in accord-

ance with a redemption of preference shares. The author concludes that

the redemption of the preference shares will constitute a disposal of the

shares in terms of section 45 of the Act to the issuer company, and accord-

ingly the STT relief will apply. It is interesting that section 79 of the 2018

Taxation Laws Amendment Bill (‘TLAB’) conf‌irms the author’s conclusion,

particular to clogged related-party losses however, by amending paragraph

39 of the Eighth Schedule to the Act, so as to conf‌irm that a redemption of

shares constitutes a disposal ‘to’ the issuing company.

A similar topic is discussed by Albertus Marais in his article. The author

expresses the view that although that the Companies Act distinguishes

in process between share buy-backs and share repurchases, in effect, both

transactions will result in the issuing company not acquiring the respective

share rights. Various judicial precedents propose that the bundle of rights

contained in a share are enjoyed by the person holding those rights. The

cancellation of those rights does not result in the possessing of those rights,

even for a minor period of time, the author concludes.

There is much debate on the various tax consequences of the disposal

of shares by means of redemptions and share buy-backs. The authors and

editors of the journal recommend that careful consideration is given and

advice is taken on these matters before implementation.