Real Estate Investor Magazine South Africa May 2013 | Page 37

RESIDENTIAL
companies” have now become under the
new Act ie “non-prof it companies”, and in
particular careful consideration must be taken
of the provisions of Schedule 1 to the new Act
in this regard;
• the Articles of Association of pre-existing
companies are usually replete with crossreferences to sections of the old Act to
add substance to their provisions, which is
exceptionally problematic because very few of
those sections correspond to the much abridged
and substantially re-arranged layout found in
the new Act. Even when one does eventually
find the provision of the new Act which deals
with the subject matter of the particular
“Article” it is not uncommon to find that the
wording of the new Act is different from that
used in the old Act and in numerous cases the
fundamental approach to that issue may have
been changed too!
• then there is the issue of the distinction
which the new Act draws between “unalterable
provisions” (the majority of the Act) and
“alterable provisions”, which are instances where
the legislature recognised that the stakeholders

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of a company could be afforded an election
as to the extent to which the company would
want to bound by the standard rule as set out
in the Act. There are over 50 such “alterable
provisions” in the new Act and many could
have application in respect of HOAs, and
the downside of not considering the extent
to which such provisions should be modified,
changed or amended, extended or negated, in
the case of a particular HOA is that you might
just be left with a “default” situation as catered
for in the new Act which is highly unsuited for
that HOA!

“Careful consideration must
be taken of the provisions of
Schedule 1 to the new Act”
• the new Act a lso recognises that the
drafters of the Act were neither omniscient
nor omnipotent and accordingly allowance is
made for the Memorandum of Incorporation
to include and deal with issues which are not
otherwise specified in the new Act, subject
of course to an overriding requirement of

“consistency” with the Act. This is a further
opportunit y to tailor the Memorandum
of Incorporation to the specif ic needs and
circumstances of the particular HOA.
Finally we would also recommend that
the members of HOAs take the time out to
consider the status of their Memorandum of
Incorporation when relations between the
members are on an even keel. The task will
be much more difficult at a later stage if there
are any “skirmishes” between the members!
And if there is a major battle in the future one
certainly does not want to enter into the fray on
either side armed with a set of outdated Articles
of Association which may be impossible to
interpret and apply to the current situation.
So, there may be some expense involved in
adopting a new Memorandum of Incorporation
at this stage, but it is also worth remembering
the time-honoured adage: “A stitch in time
saves nine”.

RESOURCES
Ivan Zart Attorneys

May 2013 SA Real Estate Investor

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