The application of section 197 of the Labour Relations Act in an outsourcing context
- Authors: Biggs, Lynn
- Date: 2008
- Subjects: South Africa. Labour Relations Act (1995) , Labor laws and legislation -- South Africa , Contracting out -- Law and legislation -- South Africa
- Language: English
- Type: Thesis , Masters , LLM
- Identifier: vital:10193 , http://hdl.handle.net/10948/751 , South Africa. Labour Relations Act (1995) , Labor laws and legislation -- South Africa , Contracting out -- Law and legislation -- South Africa
- Description: Section 197 of the Labour Relations Act (LRA) in both its original form and in its current form caused much confusion and debate. Originally it was interpreted that section 197 allowed for the automatic transfer of employees in cases where there was a transfer of the whole or part of a business, trade or undertaking as a going concern. That meant that the contracts of employment transfer to the new owner and that the employees could not refuse to be transferred. Various judges were tasked with interpreting this section in its original form and thus different interpretations emerged with the Labour Appeal Court ultimately deciding in the NEHAWU v University of Cape Town matter that employers involved in the transfer can decide between them, not to transfer the employees. The LAC further held that “outsourcing” does not necessarily entail a transfer of a business. Section 197 was amended in 2002 and the effect of the provisions is that the old employer is not required to seek the consent of the employees before their contracts are transferred and that the employment contracts transfer automatically. However, the current section has also raised some difficulties especially relating to: when does a transfer of a business as a going concern take place; what constitutes a “business”; when is an entity part of a business, trade, undertaking or service? A more glaring controversy relates to whether section 197 applies to “second-generation contracting out or outsourcing”. All provisions of the LRA should be interpreted in the context to advance economic development, social justice, labour peace and democratisation of the workplace. One of the primary objects of the LRA is to give effect to and to regulate the fundamental rights of the Constitution of the Republic of South Africa, 1996. Thus section 197 is to be interpreted in light of the objectives of the LRA as well as to promote the spirit, purport and objects of the Bill of Rights. The common law and international law are both important sources of comparison. The common law allows employers who transfer businesses free to decide whether or not the transfer will include the employees of the transferor. International law, particularly the European Union and the United Kingdom, favour the approach that when an entity is transferred, it retains its identity after the transfer and the safeguarding of employee rights in the context of business transfers. European and English jurisprudence have shown that almost any combination of events can constitute a transfer of a business.
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- Date Issued: 2008
The tax implications of a private equity buy-out : a case study of the Brait-Shoprite buy-out
- Authors: Mawire, Patrick N
- Date: 2008
- Subjects: South African Revenue Service , Consolidation and merger of corporations -- Finance , Taxation -- Law and legislation -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:8959 , http://hdl.handle.net/10948/803 , South African Revenue Service , Consolidation and merger of corporations -- Finance , Taxation -- Law and legislation -- South Africa
- Description: This treatise examines the history of private equity as a context in which to understand its role in the economy and specifically, the background for the high profile leveraged buy-outs that have been entered into in the past year. The treatise then focuses specifically on the Brait-Shoprite buy-out, examining its structure and the tax implications. The treatise then reviews the reaction of the South African Revenue Authority (“SARS”) to the buy-out and evaluates whether it was the best approach that could have been taken under the circumstances. As a result of the research, the following conclusions have been reached: Private equity transactions Private equity transactions have a role to play in the business world despite the apprehensions of tax authorities. The perception that these transactions are tax driven as part of an avoidance scheme is not justified. Structure of the Shoprite buy-out transaction: The Shoprite buy-out transaction was structured to obtain deduction for interest. The transaction was also structured to utilise the relief provisions of Part II of Chapter II (Special Provisions Relating to Companies) of the Income Tax Act no.58 of 1962, as amended (“the Act”). The relief was for capital gains tax (“CGT”) on disposal of the Shoprite assets. Finally, the transaction was designed to allow the existing shareholders to exit their investments free of Secondary Tax on Companies (“STC”). The reaction of SARS to the Shoprite buy-out transaction Whereas SARS may have been justified in questioning the structure and its impact on fiscal revenue, the response in the form of withdrawing STC relief from amalgamation transactions in section 44 was not in the best interest of a stable tax system and the majority of tax payers who are not misusing or abusing loopholes in the income tax legislation. It may have been possible for SARS to attack the structure based on the General Anti-Avoidance Rule (GAAR) in part IIA of the Chapter III of the Act.
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- Date Issued: 2008