SOUTH AFRICA Trends and Developments Contributed by: Ezra Davids, Tholinhlanhla Gcabashe, Nanga Kwinana and Cathy Truter, Bowmans
substantial unallocated capital through continuation vehicles and structured solutions. Employment South Africa’s employment and labour regime is pri - marily regulated by a network of legislation provid - ing minimum protection for employees. The Labour Relations Act regulates collective bargaining, unfair dismissal and unfair labour practices, and business transfers, while the Basic Conditions of Employment Act sets minimum standards for working conditions, leave and working hours. The Employment Equity Act prohibits unfair discrimination and promotes work - place diversity through affirmative action measures. Of particular relevance to M&A, Section 197 of the Labour Relations Act provides that transfers of busi - nesses as going concerns trigger automatic employee transfers, with continuity of employment. The new employer must employ transferring employees on terms and conditions that are on the whole not less favourable than those previously enjoyed with the old employer. South African law affords employees signifi - cant protection against unfair dismissal, and dismiss - als linked to the transfer of a business are deemed automatically unfair. Merger-related retrenchment moratoria are commonly imposed as competition conditions. Tax South Africa operates a residence-based tax system, taxing residents on worldwide income and non-resi - dents on South African-sourced income. The standard corporate income tax rate is 27%. Dividends declared by resident companies are subject to dividends tax at 20%, although this rate may be reduced under appli - cable double taxation agreements. South Africa has an extensive treaty network that may reduce withhold - ing rates on dividends, interest and royalties. New global minimum tax requirements, also known as Pillar Two, ensure that large multinational enterprises with revenue over EUR750 million pay a minimum 15% effective tax rate on income in every jurisdiction where they operate. Transaction structuring must consider capital gains tax, transfer duty (on immovable property), securi - ties transfer tax (at 0.25% on share transfers), value-
added tax and withholding taxes. Group restructuring relief is available under defined circumstances, and early-stage tax structuring is critical to ensure optimal application of deferral rules and avoid unintended tax
consequences. Data Protection
The primary data protection legislation in South Africa is the Protection of Personal Information Act (POPIA), which regulates the processing of personal informa - tion of both natural persons and juristic persons. POP - IA applies where the responsible party is domiciled in South Africa, or where a non-domiciled party uses automated or non-automated means to process per - sonal information in South Africa. Enforcement has strengthened in recent years, with the Information Regulator conducting assessments and issuing enforcement notices. Administrative fines for non-compliance have ranged up to ZAR5 million, with potential imprisonment of up to ten years for seri - ous offences. Data protection compliance, including cross-border transfer considerations, is now a stand - ard due diligence workstream and a material consid - eration in post-acquisition integration. Intellectual Property South Africa’s intellectual property framework is over - seen by the CIPC, managing the registration and regu - lation of IP rights, including trade marks, designs and patents. The legal framework provides clear mecha - nisms for the protection and transfer of IP. Copyright assignments must be in writing and signed by or on behalf of the assignor to be valid. Transfers of reg - istered IP rights require an assignment agreement (typically required to be in writing), which is recorded by formal filing with the CIPC, while unregistered IP is typically transferred by way of assignment agree - ments. Cross-border transfers of IP are subject to exchange control approval, which may result in timing delays of approximately three to six weeks. IP is a key focus area in M&A due diligence, typically assessed alongside data protection, cybersecurity and broader regulatory compliance considerations.
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