Business Day
BU S I N E S S DAY.CO. Z A
Friday 28 August 2026
Business Law & Tax Review
Mapping next phase of crypto regulation Draft manual and new rules put cross-border crypto transfers under the microscope
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Key personnel departures and restraints of trade
By ANGELA ITZIKOWITZ, ARNAAZ CAMAY, ERA GUNNING & DYLAN MARTHEZE ENS
South Africa’s regulation of crypto assets is moving beyond licensing and anti-money laundering compliance into one of the more difficult areas of the market: cross-border value transfer. National Treasury and the South African Reserve Bank (the Bank) have published the draft Crypto Asset Manual for cross-border activities for public comment. The draft manual accompanies the draft Capital Flow Management Regulations, 2026 and explains who may facilitate crossborder crypto asset transactions, when a transaction becomes cross-border, and what must be reported to the Financial Surveillance Department (FinSurv). For crypto asset service providers (Casps), the draft manual introduces an additional authorisation requirement. A South African Casp may already be required to register with the Financial Intelligence Centre and hold an appropriate licence from the Financial Sector Conduct Authority. Under the proposed framework, however, those approvals would not, on their own, permit it to facilitate cross-border crypto asset transactions. A Casp wishing to do so would also need to be authorised by Treasury, through FinSurv, as an authorised Casp. The draft manual provides welcome clarity on the point at which a crypto asset transaction would be regarded as cross-border. The proposed trigger would arise when crypto assets are transferred between a domestic authorised Casp and an offshore Casp, or from a domestic authorised Casp to a noncustodial wallet, resulting in an inward or outward flow. By contrast, purchasing or selling crypto assets for rands through a domestic authorised Casp would remain domestic where the assets stay within the local regulated environment. Transfers between domestic authorised Casps would also be treated as domestic and would not be reportable to FinSurv. The proposed framework therefore does not treat every crypto transaction as a capital flow event. It focuses on the moment when the assets, or control over them, move beyond the domestic regulatory perimeter. At this stage, the ability to externalise crypto assets would largely be limited to resident individuals. They would be permitted to transfer crypto assets offshore through an authorised Casp within the applicable single discretionary allowance or foreign capital allowance. The draft manual sets the single discretionary allowance at R2m per individual per calendar year and provides for a foreign capital allowance of up to R10m per calendar year for a qualifying taxpayer who meets the relevant age and tax compliance requirements. The position for South African entities is more restrictive. Entities would be permitted to purchase, hold and sell crypto assets through domestic authorised Casps and transfer those assets between domestic authorised Casps. They would not, however, be permitted to externalise crypto assets under the proposed framework at this stage. This is likely to receive close attention
By DHEVARSHA RAMJETTAN & THOBILE NDABA Webber Wentzel
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from businesses using crypto assets for treasury management, settlement or investment. The draft manual proposes three categories of authorised Casps. A category one authorised Casp would facilitate specified remittance transactions between individuals using crypto assets as the settlement medium. These transactions would generally be limited to R5,000 per transaction per day and R25,000 per applicant per calendar month. A category two authorised Casp would offer South African custodial wallets capable of facilitating specified cross-border crypto asset transactions. A category three authorised Casp would be permitted to conduct both categories of activity.
The draft manual recognises that crypto assets can move value across borders without using traditional banking channels Becoming an authorised Casp would involve far more than completing an application form. Applicants would need to provide detailed information on ownership, beneficial owners, directors, governance, transaction monitoring, client asset arrangements, private-key management, outsourcing, third-party service providers and the proposed implementation of the FinSurv Reporting System. The financial requirements are equally significant. An authorised Casp would be required to maintain unimpaired capital equal to the higher of R5m or 15% of its average positive annual gross income over the preceding three years. That amount would have to be held in a segregated rand-denominated savings or investment account and remain unencumbered throughout the authorised Casp’s operations. For smaller or early-
stage businesses, this may present a significant compliance and capital commitment. Once authorised, Casps would face detailed reporting, record-keeping and supervisory obligations. Cross-border crypto asset transactions would have to be reported to FinSurv regardless of value. Records would need to capture the parties, wallet identifiers, transaction hash, crypto asset amount, exchange rate, rand equivalent and purpose of the transaction, and would generally have to be retained for at least five years. Authorised Casps would also have to make regular submissions relating to staff competence, training, financial statements, unimpaired capital and their risk management and compliance programmes. FinSurv would have the right to request information and conduct inspections. The draft manual is therefore a meaningful step towards a workable capital flow management framework for crypto assets. It recognises that crypto assets can move value across borders without using traditional banking channels but does not propose a blanket prohibition. Instead, it creates a controlled route through authorised intermediaries, prescribed allowances and direct reporting to FinSurv. The final commercial impact will depend on how the framework develops after consultation. The treatment of noncustodial wallets, the restriction on corporate externalisation, the capital requirement and the reporting burden are all likely to attract comment. The draft manual also records that it has not yet incorporated comments already submitted on the draft Capital Flow Management Regulations and that both documents remain subject to refinement. Interested parties have until close of business on September 30 2026 to submit written comments in the prescribed format. For Casps, fintech businesses and other participants in the digital asset market, this is an important opportunity to test whether the proposed framework reflects the commercial and technical realities of cross-border crypto activity.
When a senior adviser or executive walks out the door, especially to join a competitor, your restraint of trade clause is often the only thing standing between you and serious commercial damage. Here is what recent South African case law tells us about what works, what does not and what you need to do now. The starting point in South African law is that a restraint of trade clause in an employment contract is valid and binding. It is not automatically contrary to public policy simply because it restricts competition. Restraints of trade are treated as enforceable agreements, and it is the employee seeking to escape the restraint who bears the onus of proving that enforcement would be unreasonable. The test for reasonableness, as developed by case law, asks whether there is a protectable interest, whether that interest is genuinely threatened, whether the employer’s interest outweighs the employee’s right to earn a living and whether there is a broader public policy consideration. Courts also frequently ask whether the restraint goes further than is strictly necessary to protect that interest. This requires consideration of the duration, geographic scope and breadth of prohibited activities. In financial services, there are generally two protectable interests: your relationships, the client connections, internal talent management and goodwill built up over years, and your confidential information, client data, pricing, business strategies and anything else that would give a competitor an unfair advantage if disclosed. Where an employee has built close, personal relationships with the employer’s clients, using the employer’s time, resources and opportunities, to the point where those clients are likely to follow the employee to a competitor, those trade connections constitute a protectable interest. Evidence that clients have actually moved is powerful, but the employer need not wait for harm to materialise: a well-grounded apprehension that connections will be exploited is sufficient. Adviceworx (Pty) Ltd v Roux and Others[1] Continued on page 3
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BusinessLaw&Tax
Friday 28 August 2026
Phantom authorities: AI hallucinations in the courtroom Judgment is latest in growing line of authority addressing submission of AI-generated, fictitious case citations to courts By HENDRIK HUGO & THABANG POSHODI ENS
In Molawa, Springkaan, Smith v Matjhabeng Local Municipality and Another, Judge Allen-Yaman J was confronted with a disciplinary chairperson’s ruling that cited case authorities which, upon scrutiny, simply did not exist. The Molawa judgment is the latest, and among the most consequential, in a growing line of authority addressing the submission of AIgenerated, fictitious case citations to courts and tribunals. The Molawa judgment is a pointed reminder that the convenience of artificial intelligence cannot substitute for the irreplaceable duty of independent legal reasoning. The applicants, three municipal employees of the Matjhabeng Local Municipality, were charged with misconduct on March 12 2021. The disciplinary hearing was delayed by interlocutory disputes, ultimately resolved by agreement in review proceedings (Case No JR1790/21) on October 9 2024. Despite this resolution, the municipality took no further steps to prosecute the disciplinary charges until 2025. When the hearing was eventually reconvened, the applicants raised a point in limine before the appointed chairperson, Dr Dan Raseluma, arguing that the municipality had waived its right to discipline them by virtue of its noncompliance with the time periods prescribed in the South African Local Government Bargaining Council Disciplinary Procedure Collective Agreement. The chairperson dismissed the waiver argument in a written ruling dated June 3 2025. An application for his recusal was similarly refused on June 21 2025. The applicants then launched a review application (Case No 2026152359) challenging both rulings. When the municipality refused either to stay the reconvened disciplinary hearing or to appoint a new chairperson, the applicants brought an urgent application to the labour court for a stay of the disciplinary proceedings pending the outcome of the review.
The ghost authorities At the heart of the urgent application was a startling allegation: that the chairperson’s ruling on waiver relied on fabricated case authorities. Of four cited authorities, two were entirely fictitious and a third was materially misrepresented. Only one was both genuine and accurately characterised. The respondent’s argument that the chairperson “must have had other authorities in mind” was rejected. Allen-Yaman J observed: “The proposition that any reader of a decision or judgment ought to infer from the surrounding discussion … that the decision maker intended to refer to a judgment other than the one clearly expressed merely needs to be stated to be rejected.”
The court’s findings The court acknowledged that the precise source of the erroneous citations had not been conclusively determined. It held, however, that either explanation led to the same result — if the chairperson relied blindly on an AI tool that generated nonexistent authorities, the ruling could not stand; equally, if the errors were selfgenerated and the chairperson failed to explain or correct them when afforded the opportunity (through the recusal application), this constituted prima facie evidence of a failure to apply an independent mind to the law. Allen-Yaman J held that: “If the chairperson did, indeed, blindly rely on an AI ‘assistant’, South African courts and others
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have already expressed the unacceptable nature of such conduct.” The court found that exceptional circumstances justified intervention in the incomplete disciplinary proceedings. Continuing a process chaired by an individual whose decision-making and reasoning had been called into serious question would risk irreparable harm and grave injustice to both parties, particularly if the rulings were subsequently set aside on review.
A growing body of comparative authority The Molawa judgment situates itself within an increasingly robust body of domestic and international authority addressing the dangers of AI-generated legal citations. In Parker v Forsyth NO and Others, the court admonished practitioners in measured but firm terms: “In this age of instant gratification, this incident serves as a timely reminder to, at least, the lawyers involved in this matter that when it
The inevitable consequence of the use of ‘nonexistent, fake and hallucinated material’ in support of a judgment is the setting aside of that judgment comes to legal research, the efficiency of modern technology still needs to be infused with a dose of good old-fashioned independent reading. Courts expect lawyers to bring a legallyindependent and questioning mind to bear on, especially, novel legal matters, and certainly not to merely repeat in parrot-fashion, the unverified research of a chatbot.” In both Mavundla v MEC Department of CoOperative Government and Traditional Affairs KwaZulu-Natal and Others (Mavundla) and in
Northbound Processing (Pty) Ltd v South African Diamond and Precious Metals Regulator and Others (Northbound Processing), the courts referred the issues to the Legal Practice Council for investigation, signalling that reliance on AIhallucinated authorities may cross the threshold from carelessness into professional misconduct. The English High Court in Ayinde v The London Borough of Haringey; Al-Haroun v Qatar National Bank QPSC described the risk with characteristic precision: “In the context of legal research, the risks of using artificial intelligence are now well known. Such tools can produce apparently coherent and plausible responses to prompts, but those coherent and plausible responses may turn out to be entirely incorrect. The responses may make confident assertions that are simply untrue. They may cite sources that do not exist. They may purport to quote passages from a genuine source that do not appear in that source.” Most significantly, the Supreme Court of India in Singh v Jammu and Kashmir Bank Ltd and Another held that the inevitable consequence of the use of “nonexistent, fake and hallucinated material” in support of a judgment is the setting aside of that judgment. This represents the most far-reaching judicial consequence to date: the integrity of the adjudicatory process itself is compromised when its reasoning rests on fabricated foundations.
Practical implications for legal practitioners The Molawa judgment, read together with the comparative authorities, yields the following practical imperatives for legal practitioners: ● Verify every authority independently. AI tools are capable of generating citations that are superficially plausible, complete with case names, neutral citations and law report references, yet refer to judgments that have never been delivered. Every authority produced by an AI tool must be independently verified against official law reports or approved electronic databases before inclusion in any submission, opinion or ruling.
● Apply an independent mind. The duty is not merely to cite accurately, but to read, understand and independently evaluate the authority’s relevance and correctness. A practitioner who submits an AI-generated list of authorities without reading the underlying judgments has abdicated the very function for which the profession exists. Understand the disciplinary exposure. The referrals to the Legal Practice Council in Mavundla and Northbound Processing signal clearly that the submission of fabricated authorities is not treated
Every authority produced by an AI tool must be independently verified against official law reports or approved electronic databases before inclusion as a mere oversight. Practitioners face potential investigation and disciplinary proceedings that could affect their right to practise. The Molawa judgment stands as a salutary warning. AI is a tool of extraordinary potential, but it is precisely that: a tool. It does not reason; it generates. It does not verify; it predicts. The legal profession’s commitment to accuracy, integrity and independent reasoning cannot be outsourced to an algorithm. As the Molawa judgment makes clear, the consequences of doing so may include the stay or setting aside of proceedings, referral to the Legal Practice Council and the irreparable compromise of a decisionmaker’s credibility. Practitioners would do well to heed the admonition in Parker v Forsyth: the efficiency of modern technology must still be infused with “a dose of good old-fashioned independent reading”. In an age where AI can fabricate with alarming plausibility, that old-fashioned virtue has never been more indispensable.
TAXING MATTERS
South African trusts: too much regulation?
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By DAWID OOSTHUIZEN AJM
he Trust Property Control Act has been with us since 1988. On August 7 2026, the Government Gazette published the Regulation of Trusts Bill, which proposes to repeal and replace the act in its entirety. Justice and constitutional development minister Mmamoloko Kubayi indicated that the bill is intended, among other things, to respond to recommendations of the Financial Action Task Force (FATF) and to modernise the regulation of trusts. The objectives are understandable. South Africa has experienced the consequences of inadequate beneficial ownership transparency, including its greylisting by the FATF. Trusts, like companies and other legal structures, can be abused to conceal assets. Recent revelations concerning corruption, illicit financial flows and matters emerging from the Madlanga Commission have only reinforced the need for effective oversight. The Honourable Julius Malema, sitting at the Kgosi Mampuru Correctional Centre, famously asked Vusimusi “Cat” Matlala before the Ad Hoc Committee investigating the allegations made by Lieutenant-General Nhlanhla Mkhwanazi why Matlala had not transferred his shareholding in Medicare24 to a trust. The exchange is a useful illustration of the role that trusts can play in
public discussions about asset ownership and concealment. It is nevertheless worth questioning whether the existing trust law is properly described as “outdated” simply because the principal legislation dates from the 1980s. Many of the core concepts underlying South African trust law have survived precisely because they were expressed as broad principles capable of adapting to changing circumstances. Trust law has continued to develop through the common law and the courts. The problem is not that the concept of the trust has failed to keep pace with the times. Rather, it is that trusts have increasingly been used in ways that the state now, quite reasonably, seeks to prevent. The bill is also part of a broader international movement towards the codification of law. That distinction matters because the bill does considerably more than address abuse. It introduces a number of new statutory definitions, including “discretionary beneficiary” and “independent trustee” in the context of family trusts. There is value in greater certainty, but statutory definitions necessarily establish parameters. Once those parameters exist, advisers and taxpayers will inevitably consider how structures can be designed around them. The question is whether these definitions genuinely address abuse or simply create another layer of technical compliance and planning opportunities.
The bill also sets out requirements for the creation of a trust. Yet its wording leaves some uncertainty as to whether a trust is created in terms of the legislation or whether the trust is created independently under common-law principles and merely regulated by the act. Much of what is presented as statutory requirements already reflects principles developed in South African trust law, including those associated with the late Professor Tony Honoré. The codification of these principles may provide certainty, but it also risks replacing the flexibility of the common law with rigid statutory rules. This tension is most apparent in the proposed regulation of amendments to trust deeds. Traditionally, a trust deed could be amended in accordance with its own provisions, subject to the applicable law, with the master being notified of the amendment. The bill changes this significantly.
An amendment will not be effective until the trust’s beneficial ownership information has been brought up to date and the amendment noted by the master
An amendment will not be effective until the trust’s beneficial ownership information has been brought up to date and the amendment has been noted by the master. There is a compelling policy rationale. The ability to add and remove beneficiaries can be abused to obscure beneficial ownership, frustrate investigations or manipulate the apparent ownership of assets. Although not necessarily criminal, we have also seen ingenious tax schemes exploiting precisely this flexibility. In the context of FATF recommendations and the abuse of trusts by criminals and corrupt officials, it is entirely legitimate for the state to ensure beneficial ownership information remains accurate. There is, however, another interested party in all of this: the South African Revenue Service (Sars). Greater documentary requirements, beneficial ownership information and mandatory filing obligations inevitably provide Sars with a more comprehensive picture of trust structures and their activities. This development sits alongside the recent expansion of trusts’ obligations to register for income tax and submit annual income tax returns. Greater transparency may be justified, but it would be naive to ignore the broader regulatory and revenue-collection consequences of these changes. This comes at a cost. ● See part 2 on the potential practical consequences of these changes on page 4.
BusinessLaw&Tax
Friday 28 August 2026 CONSUMER BILLS
When key people leave: what businesses need to know about restraints of trade Continued from page 1
PATRICK BRACHER COLUMNIST
Must the human in the loop be in the room?
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he latest buzz phrase in the many, many articles written about the use of artificial intelligence (AI) in the professions is about the need to have a human in the loop. This seems to be rather obvious because, so far, only humans can join the professions. Problems arise in deciding when the human is the human in person. Laws and regulations are having difficulty in keeping up with the pace of change. The Covid-19 pandemic taught many people that it is possible to work remotely and often more efficiently by working at home rather than abroad. There are many good reasons for doing so. The difficulty arises when something needs to be done in person and the question is whether that means in actual bodily presence. The Legal Practice Council has decreed what lawyers must do when they accept the obligation to provide direct personal supervision of their candidate attorneys to enable them to attain an adequate level of competence. Lawyers are obliged to provide regular, day-to-day, in-person oversight, guidance and control of the candidate’s work and training at the office in which the candidate attorney serves lawyers. The council has decreed that it does not constitute compliance with the direct personal supervision requirement if supervision is predominantly exercised by electronic or virtual means. When a candidate attorney finishes their training, the principal must provide an affidavit that the candidate attorney has been properly trained in the profession. Whether, not how, is the test. Prohibiting attorneys from training lawyers predominantly by electronic or virtual means does not recognise where the world has got to and limits opportunities for learning. Obliging some people to drive two hours to work and two hours home instead of using the time constructively to learn the practice of a profession makes no sense. At the same time, draft regulations have been published about commissioning affidavits made on oath or affirmation before a commissioner of oaths. A practice that was used of necessity during Covid-19 times of doing so electronically through an audiovisual communication will now be authorised. The mark or typed name of the person deposing to the affidavit online on the space provided will be treated as a signature. Surprisingly, in this age when almost perfect electronic impersonation is possible, there is no requirement to take even basic steps to ensure the identity of the person deposing to the affidavit. Curiously, there never has been. When a document is signed before a notary, it is the obligation of the notary to be satisfied as to the identity and competency of the party signing. Other commissioners of oaths do not have that obligation. Few who sign an affidavit at a police station, for instance, are asked to present their identity document. From now on, most of us will not go out to find a commissioner of oaths when an online commissioner can be found. The possibility for fraud and perjury will increase substantially. The other place where the electronic world has moved well beyond regulation is in the protection of professional privilege and personal information. The Protection of Personal Information Act requires us to secure the integrity and confidentiality of personal information by “taking appropriate, reasonable, technical and organisational methods to prevent loss of privacy”. The duty to keep legal documents privileged is similar. The question is how to take reasonable technical measures to prevent unlawful access to information in an age where billion dollar companies have developed AI to a point where hacking can become an irresistible force. Candidate attorneys need to be properly trained, deponents of affidavits need to be properly identified, and information is to be reasonably secured. All we can do in all these examples is for people of integrity to do the best they can in fulfilling their obligations.
Prohibiting attorneys from training lawyers predominantly by electronic or virtual means does not recognise where the world has got to
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provides a vivid illustration. The court found that 820 clients had already migrated to the competitor within weeks of the employees’ departure, with a further 433 having partially terminated their mandates. This concrete evidence of actual harm, combined with evidence of data copying and deletion of records, was central to the court’s decision to grant final enforcement of the restraint. Turning to confidential information, the second protectable interest, bare assertions that information is “confidential” will not suffice. The courts require specific evidence of what the particular information is, why it is confidential and how the employee had access to it. In both Merchant West Specialised Finance (Pty) Ltd v Le Grange and Another[2] and Cut-N-Weld Supplies (Pty) Limited v Britz and Another,[3] employers lost their enforcement applications because they could not provide this level of factual detail. Equally, in Fidelity Services Group (Pty) Ltd and Another v Goveia and Another,[4] the court found that the employee’s general knowledge of profit margins and client relationships constituted “life skills” rather than protectable proprietary interests. Across these cases, the critical distinction is between information that genuinely belongs to the employer’s business and general skills, experience and industry know-how that the employee has accumulated and is entitled to use. Courts will not enforce a restraint designed to prevent an employee from using the latter. A common misunderstanding is that an employee who joins a competitor automatically breaches their restraint. What matters is what the employee will do in the new role. Courts look carefully at whether the employee’s new responsibilities genuinely threaten the employer’s protectable interests or whether they will be working in an entirely different area of the competitor’s business that poses no real risk. In FX Group (Pty) Ltd v Steyn,[5] enforcement was refused even though the new employer was a direct competitor in some product lines, because
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the employee’s new role related to a product division in which the former employer had no involvement at all. Employers often argue that a restraint should not be enforced because the employee was dismissed or resigned in response to an intolerable working environment. However, the circumstances surrounding termination are ordinarily irrelevant to whether a restraint should be enforced. The only recognised exception is where the employer hired and dismissed the employee fraudulently and solely for the purpose of triggering and imposing the restraint. The restraint exists to protect business interests after employment ends, not to punish the employee, as confirmed in Backsports (Pty) Ltd v Motlhanke and Another.[6] South African law does not require separate compensation for a restraint of trade as the employee’s overall remuneration is sufficient consideration. Nevertheless, dedicated restraint payments are common in senior and financial services roles and offer practical advantages. In Adviceworx, specific “noncompete and
performance incentive” payments linked to client book value reinforced the protectable interest claimed. As confirmed in Nu Angle Aesthetics (Pty) Ltd v Taylor and another,[7] such payments make it difficult for employees to argue financial hardship. However, compensation alone does not guarantee enforcement where the employer’s interests were not genuinely threatened. One of the most practically important lessons from the recent case law is the risk that a broadly worded settlement agreement can inadvertently extinguish an employer’s restraint rights. The labour appeal court addressed this directly in Wheelwright v CP De Leeuw Johannesburg (Pty) Ltd,[8] holding that a settlement agreement using “full and final settlement” language covering “all claims … whether from contract, delict, operation of law, equity, fairness or otherwise” had the effect of extinguishing the employer’s right to enforce the restraint. Accordingly, where an employer settles a CCMA or labour court dispute but wishes to preserve its restraint rights, the settlement agreement must contain an explicit carve-out to that effect. The failure to include such a carve-out can mean the permanent loss of the employer’s most important post-employment protection. A further drafting risk concerns severability. Where a restraint goes further than is reasonably necessary, a court may read down the restraint and sever the objectionable portion in order to enforce what remains, but only where the offending words are clearly separable. Accordingly, employers who draft deliberately broad restraints on the assumption that a court will read them down are taking a significant risk. A restraint of trade clause is only as effective as the thinking that went into drafting it and the quality of the evidence available to support it. South African courts have demonstrated, across a range of recent decisions spanning the labour court, labour appeal court and high court, that they will enforce well-constructed restraints against genuine competitive threats, but they will not rescue poorly drafted clauses or bare evidentiary assertions. The time to invest in getting this right is before the key person resigns, not after.
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BusinessLaw&Tax
Friday 28 August 2026
Stand out from the crowd: distinctiveness in South African trademark law By MOHAMMED JAMEEL HAMID & SANDA NYOKA Adams & Adams
The concept of distinctiveness is a central and often contested feature of trademark law. As with many provisions within intellectual property (IP) frameworks, the statutory requirements relating to distinctiveness have necessitated further judicial interpretation. This article examines how distinctiveness is addressed in the Trade Marks Act 194 of 1993 (the act) and considers key cases that clarify the scope, meaning and practical application of the concept in relation to word marks, geographical indications and shape marks. Distinctiveness is a cornerstone of trademark protection in South Africa. A mark must be capable of distinguishing one trader’s goods or services from those of another. Importantly, this reflects the need to balance the interests of trademark owners against the public’s (including other traders’) right to use descriptive language in commerce. Section 9 of the act provides the foundational rule relating to distinctiveness. To be registrable, a mark must be capable of distinguishing the goods or services of one undertaking from those of another. A mark will be regarded as capable of distinguishing if, at the date of application, it is either inherently distinctive or has acquired distinctiveness as a result of use. In essence, the provision requires that a mark be assessed in relation to the goods or services for which it is used and that, when considered in that context, it must enable consumers to distinguish those goods or services from those offered by other traders.
Absolute grounds Section 10 of the act sets out the absolute grounds upon which a mark may be refused registration on the basis of non-distinctiveness. In particular, a mark will be unregistrable if it consists exclusively of a sign or indication that serves, in trade, to designate the kind, quality, quantity, intended purpose, value, geographical origin or other characteristics of the relevant goods or services, including the mode or time of production of the goods or the rendering of the services. Marks that consist exclusively of signs or indications that have become customary in the current language or in the bona fide and established practices of the trade are likewise excluded from registration. At its core, the act seeks to protect consumers
The greatest likelihood of confusion generally arises where similar marks are used in relation to similar goods or services
Key terminology Inherent versus acquired distinctiveness A mark is inherently distinctive where, by its nature, it is arbitrary or unique in relation to the goods or services for which registration is sought. Acquired distinctiveness, by contrast, refers to a mark that was not originally distinctive but has become capable of distinguishing through use in the marketplace. Descriptive terms The European case of Laboratoire Garnier et Cie assisted in clarifying this concept. The mark NATURAL BEAUTY was refused registration because the relevant public would understand the words as describing products intended to preserve or enhance natural beauty. The mark therefore conveyed information about the characteristics of the goods rather than functioning as a badge of trade origin. However, descriptive marks may acquire distinctiveness over time once consumers primarily associate the term with a particular trade source rather than with the goods or services themselves. Assessing distinctiveness The factors to be considered when assessing the distinctiveness of competing marks were discussed in New Media Publishing. Similar marks may coexist where the respective goods or services are sufficiently different such that confusion is unlikely. Conversely, where similar marks are used in relation to similar goods or services, a likelihood of confusion may arise. Geographical indications Century City is a well-known commercial and residential development in Cape Town. The name CENTURY CITY was registered as a trademark at a time when it had no geographical significance. However, by the time the matter reached the Supreme Court of Appeal, the term had acquired a geographical meaning. The mark therefore became vulnerable to removal from the register because it had become primarily descriptive of a geographical location rather than distinctive of a single trade source. Shapes In Beecham Group Plc v Triomed (Pty) Ltd, the issue concerned the distinctiveness of a tablet shape as a trademark. The court held that the oval, bi-convex tablet shape was common within the pharmaceutical industry and therefore lacked inherent distinctiveness. The shape had also not acquired distinctiveness through use because consumers and pharmacists did not associate the shape with a single trade source. The case demonstrates that shapes serving a primarily functional purpose will generally lack inherent distinctiveness unless they have acquired distinctiveness through use.
from confusion as to the trade origin of goods or services. Section 10 gives effect to this by preventing the registration of marks that do not function as badges of trade origin. Put differently, where a mark merely describes the relevant goods or services, or consists of terms that are commonly used within the trade, it is incapable of distinguishing one trader’s offerings from those of another.
The fundamental requirement The Appellate Division in Brian Boswell Circus (Pty) Ltd v Boswell-Wilkie Circus (Pty) Ltd confirmed that, in the context of passing off, a name or mark must function as a badge of origin. The source need not be identified by name, but the public must nevertheless associate the mark with a single trade source. Although not formally part of South African law, South African courts and practitioners
frequently refer to the Abercrombie spectrum as a useful framework for evaluating the strength and distinctiveness of trademarks. Fanciful marks are completely invented words with no prior meaning, such as KODAK or EXXON. They are generally regarded as the strongest form of trademarks. Arbitrary marks use ordinary words in an unrelated context, such as DOVE for soap. Suggestive marks hint at qualities or characteristics of the product but still require some imagination on the part of the consumer. JAGUAR for motor vehicles is a common example. Descriptive marks directly describe a characteristic, quality, purpose or feature of the goods or services, such as FULL MILK for milk products. Such marks are generally not registrable unless they have acquired distinctiveness through use. Generic marks are common terms for the
goods or services themselves and can never function as trademarks.
The average purchaser In Plascon-Evans Paints v Van Riebeeck Paints, the court provided important guidance regarding the assessment of confusing similarity between trademarks. The enquiry requires a comparison of the competing marks and an assessment of the impression they would create on the average purchaser. The comparison considers the visual, phonetic and conceptual impressions created by the marks, viewed both side-by-side and separately within their commercial context. Allowance must also be made for imperfect recollection, since consumers generally remember marks by their overall impression rather than by precise detail. Distinctiveness turns on whether a sign is inherently capable of distinguishing the goods or services of one undertaking from those of another, either by its nature or through acquired use. Descriptive terms, geographical indications, common shapes and customary trade terms are generally excluded from registration where they fail to function as indicators of trade origin. Determining the likelihood of confusion requires a holistic assessment of the marks, taking into account visual, phonetic and conceptual similarity, together with the relationship between the goods or services and the characteristics of the relevant consumers. The greatest likelihood of confusion generally arises where similar marks are used in relation to similar goods or services. Ultimately, distinctiveness reflects the fundamental purpose of trademark law: enabling consumers to identify commercial origin efficiently and reliably while preserving competitors’ ability to use ordinary and descriptive language honestly in trade. As technology and commerce continue to evolve, debates concerning distinctiveness are likely to remain both important and finely balanced. In the end, the selection of a trademark involves a careful balancing exercise. A mark should be sufficiently distinctive to function as a valuable commercial asset capable of generating goodwill and brand recognition, while at the same time complying with the requirements of trademark legislation so that it may be effectively enforced. Even substantial commercial investment in a mark may be undermined if the mark is inherently weak from a legal perspective, rendering enforcement difficult, uncertain or impractical.
As technology and commerce evolve, debates concerning distinctiveness are likely to remain both important and finely balanced
TAXING MATTERS
Trust regulation overhaul — at what cost? Continued from page 2
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By DAWID OOSTHUIZEN AJM
n August 7 2026, the Government Gazette published the Regulation of Trusts Bill, which proposes to repeal and replace the act in its entirety. South Africa has an extensive and legitimate use of family trusts. Trusts hold holiday homes, farms, family businesses and investment assets. Trusts are also frequently used in the commercial environment to make investments and facilitate transactions. Their deeds are often amended because circumstances change. Trustees may need to amend investment powers, administrative provisions, trustee powers or other terms to facilitate a transaction. Under the bill, the effectiveness of these amendments may depend on an administrative process controlled by the master. What happens when documents are lost? What happens when an application is not considered for months? What happens when the transaction for which an amendment is required has to be implemented tomorrow? More fundamentally, how much authority should the master have over the private affairs of individuals who have established a trust for legitimate purposes? These are not merely administrative inconveniences. They go to the usefulness of the trust as a flexible legal structure whereby trust property is dedicated to a separate estate protected from creditors of the trustees, the founder or beneficiaries in their personal capacities. The bill therefore marks an important shift in the relationship between private parties and the state. A trust is created through an arrangement between private parties, although the trustee occupies a fiduciary office and the trust is subject to public regulation. Historically, however, the state has largely regulated the office and conduct of trustees rather than supervising every aspect of the private arrangement itself. The bill provides for the state moving further
into that private relationship. It increasingly makes the effectiveness of private decisions dependent on administrative intervention. The same issue arises with trustee resignations. The bill seeks to resolve an existing uncertainty by providing that a trustee’s resignation becomes effective when the trustee receives the master’s written acknowledgement of the resignation documents. There is merit in certainty. But a trustee may have good reasons to resign immediately, particularly where relationships between trustees have broken down or where the trustee is concerned about potential personal liability. It is difficult to see why the effectiveness of a private fiduciary resignation should necessarily depend upon the speed with which a government office processes the paperwork, particularly given the
It is a movement towards greater certainty and transparency, but potentially also towards greater rigidity and compliance costs master’s existing administrative challenges. A similar concern arises in relation to the termination of trusts. Trust deeds generally provide for when a trust terminates and when that termination takes effect. Section 28 of the bill instead provides that a trust terminates when its name is removed from the trust register. This potentially creates tension with the common law and the terms of the trust deed. An administrative act should ideally record the legal position, rather than determine when a substantive legal relationship comes to an end. Not all of the bill’s changes are controversial, nor all of its FATF-related measures entirely new. The requirement concerning foreign trustees dealing with South African property, for example, follows amendments already introduced through
the General Laws Amendment Act in response to the FATF greylisting. Similarly, beneficial ownership obligations are not being introduced for the first time. The bill builds on an existing regulatory framework. The increased oversight of the master is also understandable. The chief master will be required to cause risk assessments to be carried out on trusts, with reference to matters including United Nations sanctions lists and Financial Intelligence Centre Act requirements. Given South Africa’s international obligations and the pressure to address money laundering and illicit financial flows, greater risk-based supervision is difficult to oppose in principle. The bill also codifies various aspects of trustees’ powers and duties, including their investment powers. This again has advantages and disadvantages. Codification provides certainty, accessibility and consistency. But the common law has the advantage of being able to evolve. Detailed statutory requirements can become rigid, and there is a risk that trustees will spend their time ticking statutory boxes rather than exercising proper fiduciary judgment. The proposed annual returns and annual financial statements are similar examples. Trustees will, for the first time, be subject to an express annual reporting obligation, whereas the master previously had discretion to call trustees to account. Annual financial statements will also become mandatory. Proper financial statements are hardly objectionable and should arguably already have been regarded as good governance. But the cumulative effect is important. Annual returns, beneficial ownership declarations, financial statements and increasingly prescriptive trustee obligations impose a materially greater compliance burden. One must also ask whether this additional compliance will improve the administration of trusts in any meaningful way. How many additional resources will be required merely to review annual submissions? Will this oversight identify genuinely problematic trusts? There are also welcome developments. The
express recognition of electronic signatures is sensible and reflects modern commercial practice. Trust administration increasingly involves parties operating remotely and across jurisdictions, and there is little justification for unnecessary formalities where secure electronic execution is appropriate. The bill’s provisions concerning access to information should also be considered carefully. Trust affairs have traditionally enjoyed a degree of privacy that many journalists complain about. The bill places access to information held under the act within the framework of the Promotion of Access to Information Act. This should not, however, be confused with the creation of an open, searchable trust register comparable to CIPC’s public company information. The bill does not appear to contemplate such a system, although the eventual position will also depend on regulations and subordinate legislation. The central question, therefore, is not whether trusts should be regulated. Nor is it whether South Africa must respond to the FATF recommendations and the abuse of trusts. The real question is at what cost. Regulation may close loopholes and improve transparency, but every additional layer of regulation carries a price. In the words of Thomas Sowell, there are no solutions, only trade-offs. The bill represents a movement from a relatively flexible private-law structure, regulated by legislation, common law and judicial oversight, towards a system in which the state has a much greater role in determining when private arrangements become legally effective. It is a movement towards greater certainty and transparency, but potentially also towards greater rigidity, administrative dependence and compliance costs. One has reason to be concerned by the tendency of recent legislation to increasingly distrust citizens’ ability to manage their private affairs without state intervention. The danger is that, in seeking to prevent the abuse of trusts, we redesign the trust for everyone.
BusinessLaw&Tax
Friday 28 August 2026
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Cool Joy! gets the cold shoulder: ARB upholds imitation complaint Ice cream packaging comes under scrutiny as advertising board takes dim view of Epic Foods’ brand imitation By ILSE DU PLESSIS ENS
Ice cream may be sweet, but the Advertising Regulatory Board’s (ARB) recent ruling leaves a bitter taste for Epic Foods. On June 29 2026, the ARB’s Directorate upheld a complaint by Magnum ICC, finding that Epic Foods’ “Cool Joy!” ice cream packaging constituted undue imitation of the complainant’s well-known “Joy!” brand and exploited its established advertising goodwill.
Above: Advertiser’s products. Below: Complainant’s products.
The complaint A number of issues were raised by Magnum ICC: ● Imitation: Epic Food’s packaging (COOL JOY) imitates the packaging, get-up and trade dress used for JOY ice cream products. ● Font: the stylised font used for COOL JOY is very similar to that used for JOY. ● Colour combination: the colour combination used for COOL JOY (white text on a darker background) is the same as that used for JOY. ● ! (exclamation mark): an identical red exclamation mark is used on both products. ● Logo: the red and white Epic logo that appears on the COOL JOY product is similar to the OLA Heart Device trademark that appears on the JOY product. ● Heart shape: this appears behind the COOL JOY name and it is apparently similar to, or reminiscent of, the OLA Heart Device trademark.
The alleged contraventions The Magnum ICC argued that Epic Foods had contravened Clauses 8 and 9 of the ARB Code, namely that: ● The COOL JOY trademark wholly incorporates the JOY trademark; ● The font used for COOL JOY is stylised and similar to the font used for JOY;
● A red exclamation mark appears on both products; ● The EPIC logo appears in red and white, as does the OLA Heart Device; and ● The heart shape behind the COOL JOY name is similar to the OLA Heart Device trademark. Magnum ICC also claimed it had advertised extensively and created advertising goodwill. It argued Epic Foods’ packaging misappropriates the goodwill and reduces the distinctiveness and goodwill in Magnum ICC’s product.
The ARB’s rulings The ARB dealt with various issues: Clause 9 of the ARB Code states that an advertiser should not copy an existing
advertisement in a way that is “recognisable or clearly evokes the existing concept” and may result in a loss of potential advertising value. A likelihood of confusion is not required. An issue to be considered is this — is the concept “distinctive or crafted as opposed to in common use”? The ARB dismissed Magnum ICC’s complaint regarding the red-and-white brand logos, finding insufficient similarity to constitute imitation and noting that placing a brand icon above the product name is common industry practice. It also declined to consider flavour-variant colour schemes, acknowledging these as generic conventions. However, the ARB said it would be reasonable to assume Epic Foods would have been familiar with Magnum ICC’s product “at the time of
conceptualising and creating its own packaging”. The ARB went on to hold that the similarities between “Joy!” and “Cool Joy!”, including the typeface, the dark background, the prominent red exclamation mark and the stylised lettering, were “more than coincidental”. Evidence indicated that the “Cool Joy!” product appeared on the market in October 2025, roughly six years after the complainant’s “Joy!” launch, and no independent creative evolution was demonstrated. The ARB found this amounted to conscious copying that clearly evoked the existing concept, in breach of Clause 9. On Clause 8, Magnum ICC was held to have acquired protectable advertising goodwill in its “Joy!” mark, consistently used since at least 2020, and EPIC Foods’ packaging took advantage of this goodwill without permission. It further flagged the genuine likelihood of consumer confusion, noting consumers might assume “Cool Joy!” was simply a new product format from the same brand. There are lessons to be learned here: ● It is worth noting that Epic Foods had not “refuted the allegation that it was aware of and deliberately crafted its packaging to resemble that of the complainant’s”, which left Magnum ICC’s allegations entirely uncontested. Participating in the process, even as a nonmember, allows an advertiser to put forward legitimate explanations for design choices. ● Operating in the same product category and competing for the same shelf space raises the bar considerably. Design choices that might pass unnoticed in a different market segment invite scrutiny when products sit side by side. ● While individual, generic packaging elements may not attract protection, a distinctive combination of elements such as typeface, colour contrast, punctuation marks and lettering styles can form a protectable whole.
Sick notes, traditional healers, incapacity and the law By JONATHAN GOLDBERG & JOHN BOTHA Global Business Solutions
The Judicial Conduct Tribunal examining the capacity of Free State High Court Judge Lepono Lekale has drawn attention to a difficult question: what happens when a traditional healer’s opinion conflicts with a diagnosis from a medical practitioner? Medical specialists reportedly regard Judge Lekale’s loss of sight as permanent, while traditional healers have assured him that his vision will return. Although judicial incapacity is governed by a different process from workplace incapacity, the matter raises important questions for business owners: ● Can an employer reject a sick note from a traditional healer? ● What happens when medical practitioners and traditional healers offer different opinions? ● Could refusing to consider traditional-healer evidence result in unfair discrimination or an unfair dismissal? South African law requires business owners to balance reliable medical evidence and operational requirements with employees’ cultural, religious and equality rights.
Not every sick note meets the legal requirements The Basic Conditions of Employment Act (BCEA) regulates employees’ minimum sick leave entitlements. During a three-year sick leave cycle, an employee is generally entitled to paid sick leave equal to the number of days the employee would ordinarily work during six weeks. An employer may ask for a medical certificate when an employee is absent: ● For more than two consecutive days; or ● On more than two occasions during an eightweek period. Under section 23 of the BCEA, the certificate must be issued and signed by a medical practitioner or another person who is authorised
to diagnose and treat patients and registered with a professional council established by legislation. The practitioner’s registration status is therefore important. A note issued by someone who is not registered with a recognised statutory professional council may not satisfy the BCEA requirements for paid sick leave.
Traditional healers are receiving greater legal recognition The Traditional Health Practitioners Act provides a framework for regulating practitioners such as diviners, herbalists and traditional birth attendants. It is intended to support registration,
The situation becomes more complicated when a medical practitioner and a traditional healer offer conflicting opinions about whether an employee will recover professional oversight and minimum standards of practice. Further draft regulations published in 2024 dealt with the registration, training and categories of traditional health practitioners. As this framework becomes fully operational, certificates issued by appropriately registered traditional health practitioners may increasingly satisfy the requirements applicable to people authorised to diagnose and treat patients. Business owners should therefore avoid inserting a blanket statement into their leave policies that certificates issued by traditional healers will never be accepted. A better approach is to consider: ● If the practitioner is registered with an appropriate statutory council;
● If the certificate contains sufficient information; ● If it covers the employee’s period of absence; and ● How the certificate is treated under the business’s leave policy.
An invalid sick note may still be relevant A certificate that does not meet the BCEA requirements may still be relevant when a business owner considers if an employee’s conduct was reasonable. This distinction emerged in Kievits Kroon Country Estate (Pty) Ltd v Mmoledi. The case involved an employee who took leave to attend traditional-healer training associated with what she understood to be an ancestral calling. Her employer rejected the traditional healer’s note and dismissed her for misconduct arising from her absence. The courts ultimately found the dismissal substantively unfair. Although the note did not qualify as a conventional medical certificate under the BCEA, it supported the employee’s explanation and reflected a sincerely held cultural belief. The case does not mean that business owners must accept every traditional-healer note as proof of illness. It demonstrates that the validity of a certificate for paid sick leave and its relevance to the fairness of disciplinary action are separate questions.
Conflicting medical opinions require careful management The situation becomes more complicated when a medical practitioner and a traditional healer offer conflicting opinions about whether an employee will recover. An employee should not be dismissed only because of an illness, injury or disability. Before considering dismissal for incapacity, an employer must assess if the employee can continue working with reasonable accommodation. Depending on the position and the business’s
resources, accommodation may include: ● Adapting certain duties; ● Changing working hours; ● Providing assistive technology; ● Allowing a reasonable period of additional leave; ● Reallocating nonessential tasks; or ● Considering a suitable alternative position. Reasonable accommodation has limits. A business is not necessarily required to remove the essential functions of a position, create an unnecessary role or carry an arrangement that causes unjustifiable operational hardship. If reliable evidence establishes that the employee cannot perform the essential duties of the position, even with reasonable accommodation, dismissal for incapacity may be fair. However, it should follow a proper consultation process and remain the last reasonable option.
What business owners should do Businesses should review their sick leave and incapacity policies to ensure they reflect the BCEA and the developing regulation of traditional health practitioners. When traditional-healer evidence is submitted, employers should: ● Verify the practitioner’s registration status; ● Assess the certificate under the BCEA and workplace policy; ● Give the employee an opportunity to explain the circumstances; ● Distinguish possible misconduct from genuine incapacity; ● Obtain appropriate medical or functional assessments where necessary; ● Consider reasonable accommodation; and ● Document all consultations and decisions. The safest approach is neither automatic acceptance nor automatic rejection. Business owners should make decisions based on the certificate’s legal status, reliable evidence, the employee’s functional capacity and the operational needs of the business.