Miss the Deadline in Your Property Deal by One Day and the Sale Is Gone

 

Written by Roy Bregman, admitted attorney with over 51 years' experience.

Last updated: 6 November 2026

Key Takeaways ●       A suspensive condition that is not fulfilled, or validly waived, by the agreed date makes the sale lapse automatically. No notice or cancellation is needed. ●       A lapsed sale cannot be revived by an addendum that "extends" the deadline. The Supreme Court of Appeal confirmed this in 2024. ●       Extensions and waivers work only if they are in writing and completed before the deadline. To go ahead after a lapse, the parties must sign a new deed of sale. ●       Until a new agreement is signed, the seller is free to sell to someone else, and the original buyer has no claim to the property.

 

A buyer signs an agreement to purchase a commercial or residential property, subject to bond approval within 30 days. The bank approves the loan on day 32. Relieved that finance is in place, the buyer and seller exchange friendly emails, s

Whake hands and carry on as if nothing has happened.

In South African law, that assumption is often fatal. There may be no contract left to enforce, and the problem usually surfaces only when one party changes its mind or a better offer arrives.

This article explains how suspensive conditions work, what the courts have said recently, and the steps buyers, sellers and practitioners should follow.

What is a suspensive condition?

A suspensive condition suspends the operation of the core obligations of a contract, such as delivering the property and paying the price, until a future, uncertain event occurs. Typical examples are bond approval, the sale of the buyer's existing property, or a regulatory consent (Design and Planning Service v Kruger 1974 (1) SA 689 (T) at 695C; Corondimas v Badat 1946 AD 548).

What happens while the condition is pending?

The parties are already bound to each other. Neither may withdraw unilaterally, and each must refrain from preventing the condition from being fulfilled. If the condition is fulfilled on time, the agreement becomes unconditional and fully enforceable. If it is not, the agreement falls away.

What happens if the deadline is missed?

The agreement lapses automatically, by operation of law (Fairoaks Investment Holdings (Pty) Ltd v Oliver [2008] ZASCA 41).

No breach, no notice

A failed condition is not a breach of contract. No letter of demand, notice placing a party in mora (in default), or notice of cancellation is needed. The parties are restored to their positions before the agreement, and any deposit must be repaid in accordance with the agreement, usually with the interest earned on it while it was held in trust.

No date in the agreement?

Where the agreement does not fix a date for fulfilment, the condition must be fulfilled within a reasonable time. A clear date, and preferably a time, avoids that uncertainty.

Can the parties extend the deadline after it has passed?

No. The most common and costly mistake is to sign an addendum extending the deadline after it has already passed. An agreement that no longer exists cannot be amended, so there is nothing for the addendum to attach to.

Why the law requires a new agreement

Section 2(1) of the Alienation of Land Act 68 of 1981 provides:

"No alienation of land after the commencement of this section shall, subject to the provisions of section 28, be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority."

Once the original agreement has lapsed, any agreement to go ahead is a new alienation of land. It must be a written deed of alienation, signed by both parties, that contains all the material terms, including the description of the property, the price and the payment terms (Fairoaks). A handshake, an exchange of emails, or a short addendum stating that "the bond approval date is extended" does not meet that standard.

The parties may sign a new agreement on the same terms. If they do, it must contain a fresh, future date for each condition. A new agreement that simply repeats the old, expired date is subject to a condition that can no longer be fulfilled.

Can a buyer waive the condition instead?

Yes, but only within strict limits. A condition inserted solely for one party's benefit, such as a bond clause protecting the buyer, may be waived by that party:

●       before the deadline expires, and in the manner the agreement requires (often written notice to the seller);

●       only by the party it benefits, because a condition that protects both parties cannot be waived by one of them alone.

A buyer cannot "waive" the bond condition on day 31 or day 32 and so revive the sale.

What works before and after the deadline?

Step	Before the deadline	After the deadline
Extend the date by written addendum signed by both parties	Valid	Ineffective: nothing is left to extend
Waive a condition inserted for your sole benefit	Valid, if notice is given as the agreement requires	Ineffective
Rely on emails, WhatsApp or a handshake	Risky: may not satisfy the non-variation clause or s 2(1)	Ineffective
Sign a new, complete deed of sale	Not needed	The only way to proceed

 

Do emails and electronic signatures count?

Most deeds of sale contain a non-variation clause requiring any amendment to be in writing and signed by both parties, and our courts enforce these clauses (SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren 1964 (4) SA 760 (A); Brisley v Drotsky 2002 (4) SA 1 (SCA)). Informal assurances by telephone, WhatsApp or email will not alter a contractual deadline.

The Electronic Communications and Transactions Act 25 of 2002 excludes agreements for the sale of immovable property from its general recognition of electronic signatures. In Borcherds v Duxbury [2020] ZAECPEHC 37 the court accepted an image of a handwritten signature applied through DocuSign, but the judgment has been criticised for not engaging with that exclusion. Until the position is settled, any extension, waiver notice or new deed of sale should be signed in wet ink.

Is there any way to save a lapsed sale?

Fictional fulfilment

Where a party deliberately prevents a condition from being fulfilled to escape the contract, the law treats the condition as fulfilled (MacDuff & Co Ltd v Johannesburg Consolidated Investment Co Ltd 1924 AD 573; Scott v Poupard 1971 (2) SA 373 (A)). A buyer who never applies for a bond, or who withdraws an application, cannot rely on the failed condition to walk away.

The doctrine requires deliberate conduct by the party concerned. Where a bank or authority is simply slow, it does not apply and the agreement lapses in the ordinary way.

What have the courts said recently?

Three judgments show how strictly the courts apply these rules.

Palma Codevilla v Kennedy-Smith NO (Supreme Court of Appeal, 2024)

The facts: The buyer's bond condition had already been extended once and was not met by the new deadline of 19 February 2020. The parties signed a second addendum the following day to extend it again.

The decision: The majority held that the second addendum could not revive the lapsed agreement, even though the parties clearly wanted to proceed. Two judges dissented, but the majority view is binding ([2024] ZASCA 136).

Africast (Pty) Ltd v Pangbourne Properties Ltd (Supreme Court of Appeal, 2014)

The facts: The agreement allowed the condition to be waived only by written notice on or before the fulfilment date. No such notice was given, and the condition was not fulfilled in time.

The decision: The court held that the agreement never came into operation ([2014] ZASCA 33). Waiver must follow the method and timing the agreement prescribes.

Abrinah 7804 (Pty) Ltd v Kapa Koni Investments CC (Northern Cape, 2017)

The facts: After a suspensive condition failed, a party sought to waive it and hold the other to the sale.

The decision: The court held that a lapsed agreement cannot be revived by waiving the condition after the event (2018 (3) SA 108 (NCK)).

What does a lapse cost the parties?

●       A better offer: If property values have risen or a better offer arrives, the seller may accept it. The original buyer has no claim for transfer.

●       Transfer: A conveyancer cannot lodge transfer on a lapsed agreement. If the lapse is discovered during the transfer process, the transaction must be restarted with a new deed of sale.

●       Commission: A property practitioner's commission usually depends on a valid, unconditional sale. A lapse may defeat the claim unless the mandate provides otherwise. Practitioners are regulated by the Property Practitioners Act 22 of 2019, in force since 1 February 2022.

How do you protect the sale, step by step?

1.      Identify every suspensive condition and record exactly what event fulfils it, such as written approval of a loan of a stated amount.

2.      Fix a specific date, and preferably a time, for fulfilment of each condition.

3.      State whose benefit each condition is for, and how it may be waived: in writing, to whom and by when.

4.      Include a mechanism for extending the date by written agreement signed by both parties before it expires.

5.      Diarise every deadline for the buyer, seller, conveyancer, property practitioner and bond originator, with reminders well before each date.

6.      Make sure the buyer applies for finance promptly and keeps the application alive.

7.      Send written proof of fulfilment, such as the bank's grant letter, to the other party and the conveyancer before the deadline.

8.      If a deadline is at risk, sign an extension or deliver a waiver notice in wet ink before it expires, not after.

What should you do if the deadline has already passed?

Treat the agreement as lapsed and do not sign an addendum that "extends" the expired date. If both parties still want to proceed, sign a new, complete deed of sale with fresh, future dates for every condition, and tell the conveyancer, bond originator and property practitioner. If the other party refuses, take advice immediately on whether fictional fulfilment or a waiver given in time may apply.

What is the bottom line?

A suspensive condition deadline is absolute. Fulfil the condition, extend the date or waive it in writing before the deadline expires. After that, the only way forward is a new agreement, and the other party is free to refuse.

Frequently asked questions

Can a suspensive condition be extended after the deadline has passed?

No. Once the deadline passes without fulfilment or a valid waiver, the agreement lapses automatically and there is nothing left to extend. The Supreme Court of Appeal confirmed this in Palma Codevilla v Kennedy-Smith NO [2024] ZASCA 136. The parties must sign a new deed of sale that complies with section 2(1) of the Alienation of Land Act.

Does the seller have to cancel the agreement if the bond is not approved in time?

No. A failed suspensive condition is not a breach of contract, so no notice of cancellation or letter of demand is needed. The agreement falls away by operation of law on the deadline.

Can the buyer waive the bond condition?

Yes, if the condition was inserted solely for the buyer's benefit and the waiver is given before the deadline, in the manner the agreement requires. A waiver after the deadline cannot revive the sale.

What happens to the deposit if the sale lapses?

The parties are restored to their positions before the agreement, so the deposit must be repaid in accordance with the agreement, usually together with the interest it earned while held in trust.

Can we sign an extension or a new deed of sale electronically?

The law is unsettled. The Electronic Communications and Transactions Act excludes sales of immovable property from its general recognition of electronic signatures, and the one judgment that accepted a DocuSign signature has been criticised. Sign in wet ink to be safe.

Need help with a property sale that is running out of time? Whether you are a buyer waiting on the bank, a seller weighing a better offer, or a practitioner who has just spotted a missed date, the days before a deadline matter most. Speak to us before you sign an addendum, send a waiver or walk away. We will tell you plainly where you stand and what to do next. Call: +27 (0)11 646 0335   Email: roy@bmalaw.co.za   Website: bregmans.co.za Bregman Moodley Attorneys Inc. Taking the Sting Out of Legal Problems Since 1974.

 

How do you lawfully remove an executive from the board in South Africa?

 

Written by Roy Bregman, admitted attorney with over 51 years' experience in employment law and company law.

Last updated: 29 October 2026

Key Takeaways •       An executive director holds two positions, a seat on the board and a job. Removing one does not automatically end the other. •       Shareholders can remove a director by majority vote without a specific reason, but only after proper notice and a chance to be heard. The board can do so only on limited grounds set out in the Companies Act. •       "Loss of confidence" is not a reason for dismissal on its own. It must be linked to conduct, capacity or operational requirements and backed by evidence. •       Getting it wrong can lead to reinstatement, compensation of up to 12 months' pay, and public damage to the company's reputation.

 

You cannot lawfully remove an executive simply because the board has lost confidence in them. South African law treats an executive director as holding two separate positions, a seat on the board and a job, and each has its own rules for bringing it to an end.

Boards often get this wrong. They pass a resolution behind closed doors, send a short letter, and announce a resignation that never happened. That approach can lead to a court order reinstating the director, a claim at the CCMA (the Commission for Conciliation, Mediation and Arbitration), and an expensive public dispute.

This article explains how the law works, what the courts have said recently, and the steps a company should follow.

Is removing an executive from the board the same as dismissing them?

No. Removing someone as a director ends their seat on the board, but it does not automatically end their employment contract.

Two roles, two sets of rules

The board seat is governed by the Companies Act 71 of 2008. The job is governed by the employment contract and the Labour Relations Act 66 of 1995, known as the LRA.

Section 71(9) of the Companies Act confirms that a director who is removed keeps any right to claim damages or compensation for losing the office of director, or any other office lost as a result. A company that deals with only one of the two roles leaves itself exposed on the other.

Who can remove a director from the board?

Under section 71 of the Companies Act, the shareholders can remove a director, and in limited cases so can the board or the Companies Tribunal.

Removal by the shareholders

Shareholders can remove a director by ordinary resolution, meaning a simple majority vote at a shareholders' meeting. They do not need a specific reason. The director must, however, receive proper notice of the meeting and the proposed resolution, and must have a reasonable opportunity to address the meeting before the vote.

Removal by the board

The board can remove a director only on specific grounds: the director has become ineligible or disqualified, is incapacitated, or has neglected or been derelict in (seriously failed to perform) their duties. This route is available only where the company has more than two directors.

The director must receive the proposed resolution with written reasons specific enough to prepare a reply, and a chance to respond before the vote. A director removed this way can ask a court to review the decision within 20 business days.

Companies with only one or two directors

Where there are two or fewer directors, a director or shareholder can ask the Companies Tribunal to decide whether a director should be removed on the same grounds.

Comparison: the four ways an executive can lose their position

Route	Who decides	Is a reason needed?	Key safeguard
Shareholder removal, s 71(1) Companies Act	Shareholders, by majority vote	No specific reason	Notice and a chance to address the meeting
Board removal, s 71(3) Companies Act	The board, without the director concerned	Yes: ineligible, incapacitated, negligent or derelict	Written reasons, a chance to respond, court review within 20 business days
Companies Tribunal, s 71(8) Companies Act	Companies Tribunal	Same grounds as board removal	Independent decision where there are two or fewer directors
Dismissal from employment, LRA	The employer	Yes: conduct, capacity or operational requirements	Fair procedure, with a challenge at the CCMA or Labour Court

 

Is "loss of confidence" a fair reason to dismiss an executive?

Not on its own. Section 188 of the LRA allows only three fair reasons for dismissal: the employee's conduct, the employee's capacity, or the employer's operational requirements, meaning genuine business needs such as a restructuring.

Turning a breakdown of trust into a lawful reason

A breakdown of trust must be tied to one of those three reasons and supported by evidence. Proven dishonesty may justify dismissal for misconduct. A persistent failure to meet clear targets may justify dismissal for poor performance. A general feeling around the boardroom table that the chief executive is "not the right fit" is not enough.

What changed in 2025?

A new Code of Good Practice: Dismissal took effect on 4 September 2025, replacing the old Schedule 8 guidelines. It now formally recognises incompatibility, an inability to work in harmony with colleagues or the company culture, as a form of incapacity. The employer must still show that the problem exists, that the executive contributed to it, and that reasonable steps were taken to fix it first.

Do senior executives get less protection?

They get different protection, not less. The 2025 Code accepts that senior employees can judge their own performance and may not need the coaching or repeated warnings a junior employee would receive.

They are still entitled to know what the concerns are and to be heard before a decision is made. Lawyers call this audi alteram partem, Latin for "hear the other side".

What have the courts said recently?

Three recent judgments show how courts approach removals, from the board seat to the job itself.

Golden v Quantum Foods Holdings Ltd (2024)

The facts: Ms Golden, a non-executive director of a JSE-listed poultry group, pressed the board to disclose a legal opinion. Days later, most of her fellow directors signed a notice requiring her to resign, relying on a clause in the company's Memorandum of Incorporation (MOI), its founding rules. The company told the market she had resigned. She had not.

The decision: The Western Cape High Court held that a clause allowing removal without reasons and without a hearing is against public policy and void. It found the removal oppressive and unfairly prejudicial under section 163 of the Companies Act, set it aside, reinstated her, and ordered a corrective market announcement. This is a High Court decision, and the company indicated it would seek leave to appeal.

Mawerco (Pty) Ltd v Sithole (Supreme Court of Appeal, 2024)

The facts: A 51% shareholder appointed two directors under a shareholders' agreement and later removed them. The directors asked the High Court for orders restoring them but never asked the court to review and set aside the decision that removed them. The High Court found in their favour.

The decision: The Supreme Court of Appeal overturned that order. Because the removal decision itself had not been challenged and set aside, the application had to fail. The lesson for removed directors is to bring the right application, and to do so promptly.

Maleka v Boyce N.O. (Constitutional Court, 2026)

The facts: Mr Maleka, an IT director, resigned after a restructuring changed who he reported to. He kept his title, duties and pay, and did not use the company's grievance procedure. He then claimed constructive dismissal, meaning that the employer had made his job so intolerable that he had no real choice but to resign.

The decision: The majority refused condonation (permission to proceed despite lateness) because his claim had poor prospects. The test is objective, and fears about future treatment are not enough. The warning for boards runs the other way too: quietly stripping an executive of status or duties to force a resignation invites exactly this kind of claim.

What could an unfair dismissal cost the company?

Compensation for an ordinary unfair dismissal can reach 12 months' remuneration under section 194(1) of the LRA, and 24 months' where the dismissal is automatically unfair, for example because it is discriminatory. For an executive, remuneration can include allowances and benefits, so the figure is often large.

On top of that come possible contract claims, such as pay for the rest of a fixed term contract, legal costs, and reputational harm when the dispute becomes public.

How should a company remove an executive lawfully, step by step?

Follow a structured process that deals with the board seat and the job separately.

1.     Take legal advice before anyone speaks to the executive, and read the MOI, any shareholders' agreement and the employment contract together.

2.     Identify the true reason, and decide whether it is conduct, capacity (including poor performance or incompatibility) or operational requirements.

3.     Gather objective evidence, such as minutes, targets, correspondence and performance reviews.

4.     Choose the correct route for the board seat: a shareholder resolution, a board resolution on the statutory grounds, or the Companies Tribunal.

5.     Give proper notice, written reasons where required, and a real opportunity to respond. Record the response and genuinely consider it.

6.     Run a fair employment process for the job itself, alongside or after the board process.

7.     Consider a negotiated separation agreement covering pay, restraint of trade, confidentiality and a full and final settlement.

8.     Communicate accurately. Never announce a resignation that did not happen, and update the company's records with the Companies and Intellectual Property Commission (CIPC).

What should an executive do if they are removed?

Act quickly. A removal by the board can be taken on review within 20 business days, and an unfair dismissal dispute must generally be referred to the CCMA within 30 days of the dismissal.

Keep every notice, set of minutes and message, and do not resign in protest before taking advice.

What is the bottom line?

Removing an executive involves two legal processes, not one. The board seat and the job each need a valid reason, a fair process and accurate records.

Boards that follow the rules can act decisively and with confidence. Boards that take shortcuts may watch a court reverse their decision in public.

Frequently asked questions

Can shareholders remove a director without giving a reason?

Yes. Under section 71(1) of the Companies Act, shareholders may remove a director by ordinary resolution without stating a specific reason. However, the director must receive notice of the meeting and the proposed resolution and must be given a reasonable opportunity to address the meeting before the vote. Skipping these steps can make the removal invalid.

Does removing a director from the board end their employment?

No. Removal from the board ends the directorship only. An executive's employment contract continues until it is lawfully ended under the contract and the Labour Relations Act. The employer needs a fair reason, such as misconduct, poor performance or restructuring, and must follow a fair procedure, or it risks an unfair dismissal claim.

Is loss of confidence a valid reason to dismiss an employee in South Africa?

Not on its own. The Labour Relations Act recognises only three fair reasons for dismissal: conduct, capacity and operational requirements. A breakdown in trust can support a dismissal only where it flows from proven misconduct, poor performance, genuine incompatibility or real business needs, supported by evidence and a fair process.

How long does a director have to challenge removal by the board?

A director removed by the board under section 71(3) of the Companies Act may apply to court to review the decision within 20 business days. Separately, an executive who is also dismissed from employment generally has 30 days to refer an unfair dismissal dispute to the CCMA. Early legal advice protects both rights.

How much compensation can an executive get for unfair dismissal?

For an ordinary unfair dismissal, the CCMA or Labour Court may award compensation of up to 12 months' remuneration, calculated at the rate on the date of dismissal. For an automatically unfair dismissal, such as one based on discrimination, the limit is 24 months. Separate contractual claims may also be available.

Need help removing an executive, or have you been removed?

Whether you sit on a board that needs to act, or you are an executive who has just received a notice, the first few days matter most. Speak to us before you sign, vote or resign. We will tell you plainly where you stand and what to do next.

•       Call: +27 (0)11 646 0335

•       Email: roy@bmalaw.co.za

•       Website: www.bregmans.co.za

Bregman Moodley Attorneys Inc. Taking the Sting Out of Legal Problems Since 1974.

 

Will my estate have to sell my business to pay estate duty?

 

Written by Roy Bregman, admitted attorney with over 51 years' experience in wills, deceased estates and estate planning.

Last updated: 24 October 2026. Figures reflect the 2026 Budget, effective 1 March 2026.

Key Takeaways •       An estate can be wealthy on paper and still unable to pay its bills. Estate duty, capital gains tax, executor's fees and debts must be settled in cash before your heirs receive anything. •       Estate duty is 20% on the first R30 million of the dutiable estate and 25% above that, after a R3.5 million deduction. Since 1 March 2026 the capital gains exclusion on the deemed disposal at death is R440,000. •       If the cash is not there, your executor may have to sell your shares or your business property in a hurry, often at a poor price. •       A will that matches your shareholders' agreement, life cover earmarked for estate costs, a funded buy-and-sell agreement and, where suitable, a trust can keep your business intact.

 

A business owner dies leaving a successful company, a commercial property and very little in the bank. On paper, the family is wealthy. In practice, the estate cannot pay its bills.

Estate duty, capital gains tax on death, the bond, executor's fees and creditors all have to be settled before the heirs receive anything. If there is not enough cash, the executor has to raise it. That can mean selling shares to a co-shareholder at the wrong price or putting the property on the market in a hurry.

In 52 years of winding up estates, this is one of the most common problems I see. It is also almost always avoidable. This article explains why it happens, what the courts have said recently and what you can do about it now.

Why can a wealthy estate still run out of cash?

A wealthy estate runs out of cash because an estate pays its bills in money, not in shares or buildings. Lawyers call this a liquidity problem. Liquidity simply means having enough cash, or assets that can quickly be turned into cash, to pay what is owed.

Business owners are especially exposed. Most of their wealth sits in unlisted company shares, loan accounts owed to them by the company and business premises. None of these can be handed to SARS or to the bank. They have to be sold first.

What does an estate have to pay before the heirs inherit?

An estate must pay all debts, taxes and administration costs before anything is handed over to the heirs. The executor sets these out in a liquidation and distribution account, which is the estate's final balance sheet, and it must be approved by the Master of the High Court.

Estate duty

Estate duty is a once-off tax on what you leave behind. After debts and costs, a deduction (called an abatement) of R3.5 million is subtracted. The balance is taxed at 20% up to R30 million and 25% above that. Everything you leave to a surviving spouse is deductible, which postpones the tax until the second death rather than cancelling it. Estate duty is due within one year of death, and interest is charged after that.

Capital gains tax on death

The law treats you as having sold everything you own at market value on the day you die. This is called a deemed disposal. The growth in value of your shares and property since you acquired them becomes a capital gain in your final tax return. The 2026 Budget raised the exclusion in the year of death from R300,000 to R440,000, but on a business built over decades the tax can still run into millions.

Executor's fees and other costs

Unless your will says otherwise, the executor is paid according to a set tariff: 3.5% of the gross value of the assets, plus VAT if the executor is VAT registered, and 6% of income earned after death. Conveyancing, bond cancellation, valuations, Master's fees and municipal rates clearance figures add to the bill.

Bonds, overdrafts and suretyships

Many owners sign suretyships, which are personal guarantees for the company's debts. On death, banks often call up these guarantees or freeze facilities. The estate may then have to pay the company's debts as well as its own.

Cost	How it is worked out	When it falls due
Estate duty	20% up to R30 million, 25% above, after a R3.5 million deduction	Within 12 months of death
Capital gains tax	40% of the net gain is taxed at your income tax rate (maximum effective rate 18%)	On assessment of the final tax return
Executor's fee	3.5% of gross assets plus VAT, and 6% of income after death	When the estate account is approved
Debts and bonds	Full amount owing, including suretyships called up	As creditors prove their claims
Transfer and admin costs	Conveyancing, valuations, rates clearance, Master's fees	Throughout the administration

 

 

A worked example

Take an owner with company shares worth R30 million, a commercial property worth R15 million, R1 million in cash, a R5 million bond and no surviving spouse. By my rough calculation, the estate would need about R19 million in cash: roughly R5.9 million in capital gains tax, R5.9 million in estate duty, R1.9 million in executor's fees, the R5 million bond and other costs. It has R1 million in the bank.

Can my executor sell my business or property without my family's agreement?

Yes, if cash is needed, the decision to sell belongs to the executor. Under section 47 of the Administration of Estates Act, the heirs approve in writing how and on what terms an asset is sold. If they cannot agree, or an heir is a minor, the Master of the High Court decides the terms instead.

Your company documents can tie the executor's hands further. A shareholders' agreement or Memorandum of Incorporation (the company's founding rules) may force the estate to offer the shares to the other shareholders first, often at a formula price. If that formula is out of date, your family may receive far less than the shares are worth, while SARS may still value them at market value for estate duty.

What have the courts said recently?

Two recent judgments of South Africa's highest courts show why the detail of your will and your structures matters.

Your will can decide what your executor is paid

Sabdia N.O. and Another v Soma and Another [2024] ZASCA 174 (Supreme Court of Appeal, 12 December 2024). "N.O." stands for nomine officii, meaning the person acts in an official capacity, here as executor.

Dr Sabdia's sons were his executors. One was an attorney whose firm defended the estate in litigation over a Pretoria property and won costs. The Taxing Master, the court official who checks legal bills, refused the firm's fees, saying an executor's tariff fee already covers all work done for the estate.

The Supreme Court of Appeal disagreed. Section 51(1)(a) of the Administration of Estates Act lets a testator, the person who makes the will, fix the executor's pay. Dr Sabdia's will clearly allowed his executors to charge professional fees, so his wishes prevailed. The lesson for business owners is that your will can shape how your estate is run and what it costs.

A trust is not a tax-free pipe

Thistle Trust v Commissioner for the South African Revenue Service [2024] ZACC 19 (Constitutional Court, 2 October 2024).

The Thistle Trust, an inter vivos trust (one set up during the founder's lifetime), received capital gains from other trusts and passed them straight on to its beneficiaries in the same year. It argued it was merely a conduit, a pipe through which the gains flowed, so only the beneficiaries should pay tax.

The majority of the Constitutional Court held that the gains were taxable in the Thistle Trust itself. It did, however, refuse to allow SARS to pursue a penalty, finding the trust had acted on reasonable legal advice. The lesson is that a trust can be a powerful planning tool, but only if it is structured and run with sound tax advice.

How do I stop my estate from having to sell my business?

You stop a forced sale by planning for cash now, while you can still choose how. Each of the tools below solves a different part of the problem, and most business owners need a combination.

Tool	What it does	Watch out for
Updated will	Directs who inherits what and can fix executor's pay	Must match your shareholders' agreement and company rules
Life cover payable to the estate	Puts cash in the executor's hands for duty, tax and costs	Proceeds are usually counted for estate duty
Funded buy-and-sell agreement	Co-owners buy your shares with policy payouts, so your family gets cash	Outdated valuation formulas; you must pay none of the premiums
Trust	Moves future growth out of your estate	Loan accounts stay in your estate; the trust must be properly run
Bequest to spouse	Deductible for estate duty; capital gains can roll over	Only postpones the tax to the second death
Annual donations	R150,000 a year can be given away free of donations tax	Reduces your estate slowly, not overnight

 

What steps should I take now?

Start with a clear picture of what your estate would owe and how it would pay. Then close the gaps one by one.

1.     Draw up a liquidity statement. List your assets, debts, likely tax and costs, and the cash available on death.

2.     Read your will alongside your company documents. Your will, shareholders' agreement and Memorandum of Incorporation must point in the same direction.

3.     Fund and update your buy-and-sell agreement. Check that cover matches today's value of the business and that the premium structure keeps the payout out of your estate.

4.     Earmark life cover for estate costs. A policy payable to your estate gives the executor cash on day one.

5.     Consider a trust and annual donations. Take tax advice before moving assets.

6.     Choose an experienced executor. Consider fixing their remuneration in your will.

7.     Review every two to three years. Revisit your plan after any Budget change, sale, marriage or new business venture.

Can your estate pay its way?

The real question is not what your estate is worth. It is whether your estate can pay its way without selling what matters most. With a coordinated will, the right cover and properly drafted agreements, your family can keep the business you built, rather than watching it sold to settle a tax bill.

Bee at Ease!

Frequently asked questions

How much estate duty will my estate pay in South Africa?

Estate duty is charged at 20% on the first R30 million of the dutiable estate and 25% on anything above that. The dutiable estate is what remains after debts, costs, bequests to a surviving spouse and a R3.5 million deduction are subtracted. SARS expects payment within one year of death, after which interest runs.

Can my executor sell my business without my family's consent?

Yes, if cash is needed. The decision to sell belongs to the executor, but section 47 of the Administration of Estates Act gives the heirs a say in how and on what terms the asset is sold. If they cannot agree, or an heir is a minor, the Master of the High Court approves the terms.

Does life insurance count towards estate duty?

Usually, yes. Policies on your life are generally treated as part of your estate for estate duty, even if paid to a named beneficiary. A beneficiary-nominated policy pays out quickly but does not give your executor cash. A policy payable to your estate does, so earmark one for estate costs. Properly structured buy-and-sell policies are excluded.

What is a buy-and-sell agreement and how is it funded?

A buy-and-sell agreement is a contract between business owners: when one dies, the survivors must buy, and the estate must sell, the deceased owner's shares at an agreed price. Each owner takes out life cover on the others. If the deceased paid none of the premiums, the payout is excluded from their estate for estate duty.

Does a trust reduce estate duty in South Africa?

It can. Assets held in a properly run trust are not part of your personal estate, so future growth escapes estate duty. However, loans you make to the trust remain estate assets, interest-free loans attract a deemed donation, and the trust pays its own tax. A trust must be set up and run with professional advice.

Is your estate ready? Speak to us today

Do not leave your family to raise millions in a hurry. We will review your will, your company documents and your estate's cash position, and show you exactly where the gaps are. Bregman Moodley Attorneys Inc. has been taking the sting out of legal problems since 1974.

Call: +27 (0)11 646 0335

Email: roy@bmalaw.co.za

Website: bregmans.co.za