Counterfeit Goods Amendment Bill; Consumer Affairs (Unfair Business Practices) Bill: deliberations; Close Corporation Amendment

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE; ECONOMIC AFFAIRS SELECT COMMITTEE: JOINT MEETING
6 June 2001
COUNTERFEIT GOODS AMENDMENT BILL; CONSUMER AFFAIRS (UNFAIR BUSINESS PRACTICES) BILL: DELIBERATIONS; CLOSE CORPORATION AMENDMENT BILL: BRIEFING

Chairperson: Mr R H Davies

Documents handed out:
Counterfeit Goods Amendment Bill [B27-2001]
Consumer Affairs (Unfair Business Practices)[B28-2001]
Closed Corporations Amendment Bill [B31-2001]
[These bills may not be on the Government website yet, email [email protected] if you require them]
Closed Corporations Amendment Bill, 2001: Briefing Notes (See Appendix)

SUMMARY
The Committees discussed and debated the Counterfeit Goods Amendment Bill, the Consumer Affairs (Unfair Business Practices) Amendment Bill and the Close Corporation Amendment Bill.

MINUTES
Counterfeit Goods Amendment Bill
Mr J Strydom, Legal Officer from the Department of Trade and Industry (DTI), presented the Bill to the Committees. He noted that the Amendment Bill incorporated the amendments proposed by the Committee in previous meetings.

Clause 1
This clause addresses the issue of powers conferred on an inspector to seize goods from anybody suspected of infringing intellectual property rights, with or without a warrant. If seizure occurs without a warrant, confirmation from either a Magistrate or a Judge of the High Court must be sought to render the seizure valid. Mr Strydom explained that one view insisted that the inspector and the owner of the infringed intellectual property right should be able to apply to the court.

Clause 3
The previous formulation of the clause was unclear on the relationship between the Counterfeit Goods Amendment and the powers of the police in the Criminal Procedure Act. Mr Strydom indicated that the amendment on page 2 of the Counterfeit Goods Amendment Bill now stipulates that the Act does not in anyway preclude application of the existing laws.

The Chairperson indicated that the Bill would not be passed at the meeting because some questions remained on the scope of application of the Bill. These questions relate specifically to foreign persons and their use of intellectual property rights, such as trademarks.

Discussion
Clause 1
The Chairperson was concerned about the implications of allowing a proprietor to approach a judge in Chambers in the same manner as an Inspector. This provision has been cut out of other legislation where referred to.

A representative from the Department of Trade and Industry replied that the original provision aimed at introducing a system of checks and balances. Further, he said that opening doors for the proprietor to confirm the acts of an inspector without interacting with the inspector was against this law. The representative said that the original intention had been that confirmation by a court.

The Chairperson contended that this is a policy issue and insisted that the matter be considered in more detail.

Clause 3
Mr Fenyane asked whether the new wording of the amendment on page 2 still captured the essence of the original document.

Mr Strydom confirmed that the new wording did capture the essence of the original document.

Consumer Affairs (Unfair Business Practices) Amendment Bill
Mr Strydom highlighted the amendments as suggested in previous meetings.

Clause 1
This new clause addresses the shortfall which existed in the original clause. The original clause stated that the mandate of the person appointed by the Chairperson of the Committee for purposes of cross-examining the suspect of harmful business practice cannot go beyond cross-examination of the suspect. In effect any additional expert witnesses called forth by such a suspect cannot be cross-examined. The new clause provides the Chairperson with greater capacity for cross-examination purposes.

Further, the clause has been amended to the effect that the Minister may issue the order in the Government Gazette or he may approach a court of law and lodge an application for an interdict suspending harmful business practice, whenever he deems it appropriate to do so.

In addition, the clause as it currently stands permits the Minister to approach the court in cases where there is an ongoing investigation in terms of Section 8(1). The Committee is of the view that the Minister should be able to intervene at an earlier stage even before the drafting of the notice publishing formal investigation. Hence the Committee recommends that the Minister be able to intervene during an informal investigation stage.

Discussion
Mr Rasmeni sought clarification on the actual procedure involved up to the stage of the Minister's involvement.

Ms Van Zyl (DTI) explained that the normal procedure is that once a problem has been identified the Committee is approached and it takes a decision to proceed with the informal investigation in accordance with the provisions of Section 4(1). The concerned person is then called to the Committee and his unwillingness to co-operate with the Committee leads to a formal investigation which is then published in the Gazette. Regarding urgent matters it could be quicker for the Minister to take matters forward at an informal investigation stage as opposed to later on.

Clause 8B
Mr Fenyane asked whether the final wording of this clause will omit the words "in terms of section 8(1)."

No specific response was given in this regard.

An ANC committee member stated that regarding the issue of application for an interdict by the Minister, since everyone has a right to seek an interdict including even the Minister himself, there was no reason for the inclusion of such a provision. Alternatively he suggested that the first three words in that clause be deleted.

It was agreed that the clause be removed.

Involvement by the Committee in Cross-Examination
Mr Msomi commented that he could not think of instances which would warrant the Committtee's involvement in investigations.

Ms Van Zyl (DTI) explained that the Committee could be involved in instances where complaints are brought by consumers. Secondly, where the Committee itself discovered cases of unfair business practices. The Committee would then approach the supposed contravening party and if not co-operative, the Committee would intervene. Further, she said that frequently people do not co-operate and the Act then allows the Minister to put a stop to an infringement through application for an interdict. This interdict is usually for six months while the Committee is finalising its recommendations.

Mr Msomi added that people who would be wishing to register and protect their expertise for a new invention without involving themselves in legalities could be perceived as being guilty of an unfair practice. He felt that this needed to be looked into.

The Chairperson re-iterated that the intention of the Bill is to stop practices which are harmful to consumers. Such practices can now be halted immediately by virtue of an interdict to prevent further harm while an investigation continues. He added that originally it was felt that the Minister had unfettered powers. This led to the inclusion of a provision requiring the Minister to go to a court of law. However, this was problematic since it placed a further burden on the court without providing a quick remedy. Consequently, there has now been a restructuring enabling the Minister to take a decision at the Committee's recommendation. The individual concerned is informed and has a right to be heard. Nonetheless, going to court remains an available option.

The Chairperson emphasised that the Bill is still being discussed and that it is yet to go to the Provinces and several other places.

Mr Rasmeni confirmed that the Bill will be taken to the Provinces on the 15^th of June and thereafter return to the plenary on the 27^th June, 2001.

Mr Rasmeni indicated that sub-section 2 which is referred to in s 8A is difficult to find in the Bill.

Mr Strydom replied that reference to a sub-section in any given clause always refers to a sub-section in that very same clause and that where it refers to a different section altogether it specifically states it.

The Chairperson stated that there must be a joint meeting after the amendments have come back from the provinces. He explained that that the Bill could only be adopted the following week.

Close Corporations Amendment Bill 2001
Adv Flip Dwinger [Legal Services: South African Companies Regulatory Office (SACRO)] made a brief presentation regarding the Bill. He stated that it had been certified the same morning. The Bill deals with electronic issues. It will exist alongside the paper system used for the Close Corporations Act and in addition to the Acts current provisions. Hence the Bill will not replace the Close Corporations Act or replace the E-Commerce Bill.

The Bill aims at allowing computer systems developed at SACRO and other Departments to enable communication within the Departments. The system as it currently stands allows the transfer of newly registered Closed Corporations into the system of South African Revenue Service (SARS) for purposes of tax.

Documentation can be lodged, assessed and processed in an electronic format and the disclosure of information would also be done electronically. SACRO has a web page to with free usage. Certain other processes prescribed in the Bill will also be done on an electronic basis.

Discussion
Role of the Bill
Mr Rasmeni asked whether the tabled Bill was being introduced on an urgent basis since there was a general E-Commerce Bill to follow. He also asked if the general Bill will perhaps capture all the issues covered by this one. Finally he asked what kind of disclosure was being referred to in the tabled Bill.

Adv Dwinger agreed that the Bill is urgent. He stated that it aimed at addressing issues in addition to those covered by the E-Commerce Bill.

On the question of disclosure, Adv Dwinger replied that disclosure included listing the members of the corporation, where it is based, its correct name and the registration number and its capital. The system makes it easy for the information to be accessed in the shortest time possible.

Decentralisation
The ANC committee member asked how this system is intended to benefit people in the rural areas who have no access to the internet, if the documents are to be lodged electronically and everything else is to be dealt with on an electronic basis.

Adv Dwinger explained that the measures will enhance and make it easy for people to deal with SACRO. The system will allow SACRO to decentralise areas in which information can be procured. For example, post offices can become agents of SACRO so that wherever there is a connection information can be made available. In this way the system will be to the benefit of everybody.

He also said that regional offices will be established in the middle of 2002 in order to bring SACRO offices closer.

Measures to ensure absolute legal coverage by the Bill
The Chairperson asked which safeguards are embodied in the Bill as a means of ensuring that all matters dealt with electronically are legally sound - especially with regards to signatures. He asked how these are addressed since the E-Commerce Bill is not yet in place. In addition he asked who is to blame for detrimental and unbecoming practices.

Adv Dwinger said that SACRO would not wait for the E-Commerce Bill to come into effect. SACRO will ensure that there is no conflict with the E-Commerce Bill when it comes into existence. SACRO will consider the issues relating to the electronic lodgement of documents and the signatures.

Capital Gains Tax
Mr Conrow indicated that in terms of the Capital Gains Tax, people who own property will be able to transfer property from closed corporations to a new owner without payment of a transfer duty. Therefore, they will pay less when the property is sold at a future date. He asked whether there are any statistics regarding the number of closed corporations which currently own property. Further he asked how many corporations will continue after the 1^st of October, 2001 when Capital Gains Tax will come into existence.

Adv Dwinger responded that there had been initial discussions with SARS in this regard but that there are no available statistics for closed corporations owning property. He then stated that there had to be a legal existence for every closed corporation which includes property ownership. However, he indicated that close corporations may own property but names may not be linked to a property owning entity.

Adv Dwinger explained that property ownership is not one of the issues dealt with by SACRO and that property related issues such as acquisition fell within the ambit of the Deeds Office.

Mr Rasmeni asked if the decentralisation issue will be captured in the Bill to assure people that it will be addressed.

Adv Dwinger replied that the system was developed with this aspect in mind and that the post offices had been approached in this regard.

Draft Bill Provisions
Adv Dwinger outlined the provisions of the draft Bill.

Clause 1
This is an interpretation clause aimed at clarifying that when SACRO is ready to perform the services electronically, the Registrar will give notice of the relevant clause of the Bill applicable for electronic purposes.

The Chairperson commented that he could not identify the prescribed manner to be followed in facilitating the lodging of documents electronically.

Adv Dwinger responded that all necessary information will be available on the internet. The Registrar will give notification when lodging will take place.

The Chairperson insisted that the prescription of actual documents to be submitted had to be clear. This he said will prevent instances where individuals send e-mails and claim to have complied with the relevant section.

Adv Dwinger replied that such issues are dealt with in the main body of the Bill and could therefore not be considered in terms of the interpretation clause.

Clause 2
This clause concerns fee payment (prescribed by the Bill) once electronic disclosure has been made. It also concerns the inspection of documents in a registration office.

Clause 3
This clause concerns electronic payments. This clause is still under review and aims to establish an account receiving these payments. Clause (b) enables the Minister to know when payment has been issued.

Clause 4
This clause relates to the conversion of paper documents into an electronic format after scanning. This does not change the original contents of such documents.

Clause 5
This concerns the lodging of documents in triplicate.

Clause 6
It deals with the question of the Registrar being able to amend registration numbers in order to avoid duplication which was perceived to be a likely problem during the Y2K period. This is important since the law only allows changing of names and not the numbers.

Clause 7
This concerns the manner in which the Registrar tackles the issue of amended statements.

Clause 8
This relates to name objections. This clause aims to rectify an omission relating to an amendment which existed a few years back. This amendment resulted in payment whenever there was a name change.

Clause 9
This relates to the duplication of names and requires that the name and registration number of the disclosed corporation be used in all its official publications. In addition, this information is now required to appear in all electronic publications.

Clause 10
This concerns the conversion of companies into closed corporations where endorsements are required on paper. Since such an endorsement is not possible electronically, the Registrar must issue a Certificate of Incorporation as proof thereof.

Clause 11
This clause deletes an obsolete provision.

Clause 12
This clause relates to the publication of members of a corporation in an electronic format and demands that such publication be in the same manner as the publication of a company's name.

Clause 13
This clause deals with a redundant issue relating to marital power and was deleted.

Clause 14
This clause relates to the substitution of "certified posts" for "registered posts". South Africa no longer has certified posts but now has registered posts.

Adv Dwinger pointed out the typographical error on paragraph 4 of page 2 under the Memorandum.

The Chairperson stated that the discussion on this Bill would continue the following week. He added that there would be a need to indicate changes in this version as against the published version. Recommendations from the consulted parties would also be tabled.

Discussion
Mr Rasmeni reiterated the issue of decentralisation and sought further assurance that something would be done in this regard.

Ms Dlulane asked how access to information will be facilitated.

Adv Dwinger replied that the Bill allows the Department to use electronic technology but explained that this will not be the only method of registration. He added that the Departments will have to decide how to facilitate access to information.

The Chairperson agreed that the Bill allows electronic communication but argued that ensuring rural accessibility was beyond the purview of the Bill.

Adv Dwinger commented that the system provides for the registration of agents and that approximately 8000 agents throughout the country have now been registered.

Further, he said that once established, the system will allow people to access it and lodge documents from any part of the world. In order for decentralisation to take place there must be an electronic backup. Therefore, information terminals such as post offices will be used. Finally he said that the system is still in the development phase but he anticipated tremendous progress within a 12 to 15 month period.

In conclusion, the Chairperson stated that empowering those without electronic access to the proposed system was more crucial than upgrading the conditions for those who already have access.

The meeting was adjourned.

Appendix
Close Corporations Amendment Bill, 2001: Briefing Notes
The Close Corporations Act, 1984, was written without any consideration of electronic processing of documentation, mainly because at that point in time electronic documentation and any processing thereof were but a mere dream of the future.

Approximately four years ago the South African Companies and Close Corporations Office (SACRO), in co-operation with SARS, various departments of state, other regulators and interested parties from the private sector, embarked on the development of a completely electronic and computerized system for the incorporation of companies and close corporations and the registration of corporate information in respect of these entities. The development phase has now been finalized and SACRO is ready to proceed with the final implementation of the new system.

This Bill now needs to amend the Close Corporations Act, 1984, to enable the lodgment of documents and disclosure of information in respect of close corporations by means of electronic processes. The Bill seeks to introduce provisions enabling the following:

-the phasing in of electronic lodgment of corporate forms;
-the phasing in of electronic payment of prescribed fees and other fees for services rendered;
-electronic disclosure of corporate information.

The new system has been developed over several years in ongoing co-operation with stakeholders and has already been partially implemented. All types of documentation lodged with the office is currently recorded on an electronic tracking system, which makes it possible to determine exactly when any document has been received and what its status in respect of processing is. This information is already freely available on the SACRO Internet website.

One of the main attributes of introducing this new electronic system is that it will enable SACRO to take its registration and disclosure services to the masses and to all remote areas in South Africa. Presently there is only one national office in Pretoria providing these services but with a proper database and electronic processing system, which will allow remote electronic lodgment of documentation and requests for information, these services can be decentralised. In this regard it is the intention to provide the majority of these services not only via the Internet in order to make them readily available, but also at various other public offices throughout the country. This electronic decentralisation of services will form part of the next phase of the automation project at SACRO.