The new companies Act has had significant impact on some of the services that SAMRO has offered to its members over the years. The most significant of the services affected by the Act is the distribution of the Non-Royalty Revenue (NRR). Various means of communication have been used by the organisation to communicate the implications of the Act with regard to the payment of NRR.
In order to ensure that SAMRO members are kept informed at all times, SAMRO has created a dedicated call centre line with extended operating hours. The call centre will operate from 07h00 to 24h00 on weekdays; 08h00 to 17h00 on Saturdays and 08h00 to 12h00 on Sundays.
TO TALK TO A CONSULTANT DURING THESE HOURS CALL 0800 247 247, OR SEND A “PLEASE CALL ME” TO 079 269 3417 AND A SAMRO REPRESENTATIVE WILL CALL YOU BACK.
WHAT IS NON-ROYALTY REVENUE (NRR)?
The Non-Royalty Revenue (NRR) is income that SAMRO derives from interest earned on cash held while awaiting distribution; from surplus on disbursement of investments (in other words profit when the company disposes of any of its assets including shares) as well as from administration fees earned by the organisation in the course of providing administrative support to its subsidiaries.
NRR has, until the coming into effect of the Companies Act, been distributed at the beginning of December every year to both members and affiliated societies.
WHY SAMRO IS NOT PERMITTED TO PAY NRR in 2011?
Until 1 May 2011, SAMRO was a Company Limited by Guarantee, a corporate form that emanates from the 1926 Companies Act and was allowed to continue in the subsequent Companies Acts of 1965 and 1973. As a Company Limited by Guarantee, SAMRO could operate in ways similar to that of a publicly listed Limited Company (LTD) even though it did not have share capital and therefore no shareholders. The most important characteristic of this was the ability to distribute income.
However, the new Companies Act of 2008 specifically does not allow the ‘Companies Limited by Guarantee’ corporate form to continue. Such companies were required to elect, within twenty days of the Act coming into effect, either to become a ‘profit company’ or a ‘non-profit company’. The two key distinctions between these two corporate forms are:
|FOR PROFIT COMPANY||NOT-FOR PROFIT COMPANY|
|1. Can distribute its income to its shareholders||1. Cannot distribute income except:1.1. Where there is a bona fide agreement between the company and the members1.2. As a payment in respect of any rights of members that are being administered by the company.
1.3. In respect of any legal obligation binding on the company.
|2. Upon dissolution, the company assets after settlement of creditors may be liquidated and distributed among the shareholders in proportion to their shareholding.||2. Upon dissolution, the assets of the company shall not be distributed to members, but may be donated to another non-profit entity with similar objectives as the company being dissolved.|
On 20 May 2011, SAMRO held an Extraordinary General Meeting (EGM) of members with a view to getting members to elect to become a for-profit company or non-profit company. To make this election, a special resolution voted for by at least 75% of the votes cast had to be passed. None of the proposed resolutions received the required minimum of 75% of the votes cast, thus rendering SAMRO a non-profit company (NPC) by default.
NRR does not fall within the exception created by the Act where in those specific instances non-profit companies may distribute income. It will therefore be illegal for SAMRO to distribute NRR to its members as a non-profit company.
Given the fact that this Act is new, and given the possibility of differing interpretations of the exceptions created in Schedule 1 of the Act, the SAMRO Board took a decision to seek a declaratory order from the courts of law. Until the order has been given, the payment of NRR has been suspended. This means that NRR will be computed as usual but will not be disbursed in any way.
WHAT ABOUT THE SAMRO RETIREMENT ANNUITY FUND (SRAF)
The SRAF is registered and administered in terms of the Pensions Funds Act. The money already invested on behalf of the members will not be affected by the introduction of the new Companies Act except that SAMRO may not continue contributions into the fund, at least in the current form.
To this extent, SAMRO will also be seeking a declaratory order with regard to continued contributions from the courts of law. This will be done simultaneously with the NRR declaratory order.
This means that members will benefit from the growth of the fund as a result of market / asset performance but there will not be any growth from contributions. More importantly, members who are already part of the fund may retire at any time in accordance with the Fund’s rules.
WHAT ABOUT THE SAMRO FUNERAL BENEFIT SCHEME.
The SAMRO Funeral Benefit Scheme is a group scheme that is being administered and underwritten at arm’s length. SAMRO pays an annual premium to the scheme. There is also uncertainty as to whether SAMRO can continue to make these contributions to pay the premium of the group policy.
For that reason the Board of Directors has taken a decision to seek a declaratory order from the courts at the same time as with the NRR and the SRAF.
As the premiums are paid annually in advance, the current premiums will still entitle members to the benefits of the scheme. Should the matter be resolved with the courts soon enough there will not be any impact on the scheme. Should there be delays, however, there is a likelihood that the premiums may not be paid resulting in the cancellation of the scheme.
In an event that it becomes necessary to cancel the scheme due to SAMRO being prohibited to pay the premiums, members will be notified in advance. In the meantime, SAMRO will continue to explore alternative but legal ways to sustain the benefits that its members have become accustomed to.
FOR MORE INFORMATION ON NRR, CALL 0800 247 247 (toll-free from Telkom landlines and 8ta lines), OR SMS A “PLEASE CALL ME” TO 079 269 3417 AND A SAMRO REPRESENTATIVE WILL CALL YOU BACK