Does the NCA affect all agreements?

[duncan drennan]

4. (1) Subject to sections 5 and 6 (deals with incidental credit agreements and juristic persons), this Act applies to every credit agreement between parties dealing at arm's length and made within, or having an effect within, the Republic, except-

(a) a credit agreement in terms of which the consumer is-

(i) a juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, equals or exceeds the threshold value determined by the Minister in terms of section 7(1) (currently set at R1 000 000.00);

"juristic person" includes a partnership, association or other body of persons, corporate or unincorporated, or a trust if-

(a) there are three or more individual trustees; or

(b) the trustee is itself a juristic person, but does not include a stokvel;

I was just looking at this again. Couple of questions...

1. Does the NCA apply to ALL natural persons, regardless of their net worth?
2. If a trust has only 2 trustees, but one of them is a juristic person, is it a "juristic person" under the NCA?

[Dave A]

Does the NCA apply to ALL natural persons, regardless of their net worth?

It would seem so, yes.

If a trust has only 2 trustees, but one of them is a juristic person, is it a "juristic person" under the NCA?

It would seem not.

The fact that there has been some effort to define a juristic person in a manner that is inconsistent with the juristic person definition of pretty much any other piece of legislation I've come across so far is, to me, something quite interesting. It flies in the face of a directive in an ongoing legal revue process that is striving for consistency on definitions across all legislation.

[duncan drennan]

One that I find quite interesting is that a partnership, which is in essence two natural persons AND requires no formal legal registration, has the benefit of the R1mil exemption, while a natural person does not. Quite strange to me.

[Dave A]

And following that line of thought, if a husband and wife own property jointly, that would be a partnership (?)

[duncan drennan]

And following that line of thought, if a husband and wife own property jointly, that would be a partnership (?)

Exactly what I was thinking! Are we going to see lots of little Duncan & Donné Lifestyle Management Partnership's popping up?

[Dave A]

There was a time when folk were getting divorced to get around joint taxation of married couples. Do you think that little twist in the NCA could help reduce our horrific divorce rate?

[duncan drennan]

Hmmm...except that partners don't need to me married?

[Dave A]

Agreed. I don't think it'll lead to more marriages. But consider for a moment:

Traditionally, the property ends up in one or the other spouse's name (normally the one with the better housing subsidy).
Owning jointly now helps facilitate access to finance.
If the relationship hits rough waters, the partners are materially bound together just that little bit closer. And small shifts like that can produce fairly big changes.

Without going too far off-topic, I suspect a fair number of divorces nowadays are as a result of people giving up too soon. And adding a little more complexity to the act of disengaging could just be enough to disuade a few more folk from taking the "easy" option.

[Eugene]

Duncan / Dave you posted very interesting questions regarding spouses contracting with each other.

The NCA applies to every (1) credit agreement entered into between (2) parties dealing at arm’s length (3) made within or having an effect within the RSA. Remember the exceptions contained in section 4(1)(a)-(d), eg. where the consumer is a juristic person with an annual turnover or asset value that > R1 million.

‘Dealing at arm’s length’ not specifically defined in the Act, but see sec 4(2)(b) as to what does NOT constitute dealing at arm’s length:

• When a juristic person borrows money from a person who has a controlling interest in the juristic person.

• When a juristic person as consumer, enters into a credit agreement with a person who has a controlling interest in the juristic person

• A loan to a shareholder

• When a juristic person lends money to a person who has a controlling interest in the juristic person.

• When a juristic person, as credit provider, enters into a credit agreement with a person who has a controlling interest in the juristic person.

• A credit agreement service, such as between persons in a familial relationship when one or both are dependent on the other.

• Any other arrangement where the parties are not independent of each other and they do not strive for their best possible advantage.

• Any other arrangement deemed by the law not to be "at arms length"

[Dave A]

OK. Let's test this a little further. Do the arm's length provisions apply to the creditor/consumer relationship, or to any aspect of the relationships regardless of exactly where those connections may lie?

There is ordinarily an arm's length relationship between the bank (credit provider) and the partnership forming the consumer (in this instance our happy couple alluded to above). Whilst it might seem we're kidding around a bit here, the same principle surely applies to pretty much any "mom & pop" business partnership out there.