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Restructuring and insolvency Q_A

VIEWS: 6 PAGES: 12

									Armstrongs

P O Box 1368,

Gaborone,

Botswana
Legal system
1.

What is the legal system (civil law, common law or a mixture of both)?


The legal system is common law, based on Roman Dutch law, with a mixture
of legislative provision.


Foreign investment
2.

Are the re any restrictions on foreign investment (including authorisations
require d by central or local government)?


There are no restrictions on foreign investment; there are no authorisations
required by central or local government. Obviously an investment is made in
an industry specific business, legislation may provide that the business
operation obtain a licence, i.e. in the case of banks, a banking licence under
the Banking Act, in the case of an insurance company, a short term or long
term insurance licence under the Insurance Industry Act.

3.

Are there any exchange control or curre ncy regulations?


There are no exchange controls in Botswana.
4.

What grants or incentives are available to investors? Are any of these aimed
specifically at foreign investors?


There are no grants or incentives available to investors; there are no grants
aimed specifically at foreign investors. There is opportunity however to
obtain, where the business contemplated, is that of manufacturing (as
defined) a reduction in corporate tax rate from 25% to 15%. There is also
opportunity to negotiate, with Government through the Ministry of Finance, tax
agreement for tax exemptions or tax holidays which, based on feasibility and
business plans, will assist in rendering the proposed activity sustainable.
Such tax agreement is approved by Cabinet, and placed before Parliament,
and once ratified by Parliament, dictates the tax regime for the business
operation.

Business entities
5.

What is the most common form of business entity used by foreign companies to
conduct business in your jurisdiction?

The most common form of business entity is the company incorporated in
Botswana.

Employees
6.

Main laws regulating employment relationships?

Employment Act

Trade Disputes Act

Employment of Non Citizen Act.


7.

Is a written contract of employment required? What, if any, other terms are
likely to govern the employment relationship?


A written contract of employment is not required. The Employment Act sets
down minimum requirements which all contracts of employment must adhere
to.

If there is no written contract of employment, those minimum requirements will
be given effect.
8.

Are employees entitled to manage ment representation and/or to be cons ulted in
relation to corporate transactions (such as redundancies and dis posals)?


Employees are not entitled to representation/or consultation unless that is in a
collective labour agreement.

9.

What statutory rules govern the termination of individual employme nt
contracts?

There are no statutory rules that govern the termination of individual
employment contracts. However our Industrial Court, has held, in a decision
that has judicial effect, that all contracts of employment, notwithstanding their
terms, must be terminated for “just cause”.

The term “just cause” has been interpreted to mean an employee may be
terminated for justifiable reasons. Three broad grounds have been identified
as constituting “just cause” namely:

(i)     misconduct;
(ii)    redundancy/retrenchment;
(iii)   capacity.

In respect of redundancy, the Employment Act provides that as soon as        the
employer makes up a decision to terminate an employment contract              for
purposes of reducing the size of the work force, he must consult with        the
employees and notify the Department of Labour. In carrying out               the
retrenchment an employer must follow the principle of “first in last out”.

With regard to incapacity this may either be physical incapacity or on grounds
of poor performance. With regard to physical incapacity, an employer is
obliged to establish, that the employee is incapable of performing the job for
which they were employed.

With regard to poor performance, the Industrial Court, has held that an
employer must consult with the employee, train and counsel an employee,
before finally giving the employee a final opportunity to state their case, prior
to dismissing such employee.

If the procedures prescribed, by the Industrial Court, are not followed,
termination of a contract of employment is likely to be held to be without just
cause or unfair.          There is distinction between fair/justified and
unfair/unjustified dismissal.
There is no statutory minimum notice period subscribed, this depends on the
length time which an employee is paid i.e. if the employee is paid monthly, the
period of notice should be monthly. However the parties are at liberty to
prescribe a longer period, in the employment contract. Termination of a
contract of employment may be summarily done, without notice, in the case of
“serious misconduct”.

Severance pay, is not payable on a termination of employment of contract
unless contractually agreed to or where the employee has worked for a
continuous period for five years in which case it is payable on the basis of one
day’s salary for every month worked and thereafter, i.e. after the end of the
first five years, two days salary for every month worked.

The remedies available for unfair dismissal, include compensation, and
reinstatement.

10.

Are redundancies/mass layoffs regulated? If so, please give details.


Redunancies/mass layoffs are regulated by Employment Act which provides
that whenever an employer has formed an intention to terminate a contract of
employment for purposes of reducing the size of his work force, the employer
must notify the Department of Labour and all employees likely to be affected
by the retrenchment i.e. the employer must then consult with the employees,
in order to find ways to minimise retrenchment. In carrying out the
retrenchment the following principles apply:

(i)    the employer must do so in respect of each category of employee,
       wherever reasonably practical to do so according the to principal
       commonly known as first in last out, provided that in doing so the
       employer has taken into account (a) the need for an efficient operation
       of the undertaking and         (b)  the ability, experience, skill and
       occupational qualifications of each employee concerned.

(ii)   where contracts of employment have been terminated for the purposes
       of reducing the size of the work force, the employer shall if he again
       seeks employees in the occupations to which those contracts related,
       give priority of engagement to such extent as is reasonably practicable,
       to those persons whose contracts of employment were so terminated
       provided however for re-employment is within six months of
       termination.
11.

What income tax or social security contributions must the following pay:

     Tax resident employees.

     Non-tax resident e mployees.

     Employe rs, in relation to their employees.

Tax resident employees

The marginal rate is 25% of any income over P120,000 per annum.
Non-tax resident employees

The marginal rate is 25%, for income over P120,000 per annum.

Employers

The tax rates for employees is based on a table commencing at 5% of income
in excess of P30,000 per annum to 25% of excess over P120,000 per annum.
The employer is obliged to withhold tax from employee emoluments, on a
monthly basis, and submit the tax to the Commissioner of Taxes reconciled as
per an ITW 8 employee income tax declaration form.

The only other contributions required by employers is the payment of
insurance, determined on an annual basis by the insurer, in respect of
Workmens Compensation Insurance which is based on the number of
employees, and the level of earnings of the employees.

12.

Do foreign e mployees require work permits and/or residency permits?

Yes

Tax
13.

In relation to business entities, what constitutes tax residency in your
jurisdiction?


A company is defined as a body corporate……..a collective investment
undertaking……an association or society whether incorporated or registered
or not.

Residents in the case of company means
(i)       its registered office or place of incorporation is in Botswana or
(ii)      it is managed and controlled from Botswana.

14.

What proportion of a tax resident business entity's income is taxed and what are
the main taxes that potentially apply (including rates)?


The gross income of every person (including a company resident or non
resident) for each tax year is the total amount whether in cash or otherwise
accrued or deemed to have accrued to him in that tax year from every source
situated or deemed to be situated in Botswana.

Generally speaking every company or business entity is entitled to deduct
from such income, or expenses necessarily incurred in the production of that
income, to determine chargeable income.

The income tax rate for companies, on chargeable income is 25%.


15.

How are the activities of non-tax resident business entities taxed?


In the event an entity derives gross income in a tax year from a source
situated or deemed to be situated in Botswana, that entity, whether it is
resident or not, is obliged to register for tax purposes, and submit tax returns
in respect of the income accrued or deemed to have accrued to it in a tax year
from every source situate or deemed to be situated in Botswana and any
expenditure necessarily incurred by it, in generating such income.

A non resident company is liable to pay tax on chargeable income at a rate of
25%.

16.

      Dividends paid to foreign corporate shareholders.

These are subject to 15% withholding tax.

      Dividends received from foreign companies.

In terms of the Income Tax Act any investment made outside by Botswana or
business carried on outside Botswana by a resident of Botswana is deemed
to be income accrued from a source in Botswana, and would form part of the
income of the Botswana recipient.
Any investment made outside Botswana or business carried on outside
Botswana by a resident of Botswana, who is an individual, and not a citizen of
Botswana, is not taxed in Botswana.

     Inte rest paid to foreign corporate shareholders.

Interest on foreign loan, made by foreign corporate shareholder, is subject to
withholding tax at 15%.

     Intellectual property (IP) royalties paid to foreign corporate shareholders.

Payment of a commercial royalty management or consultancy fee to a foreign
corporate shareholder, is subject to withholding tax at 15%.

The rates of withholding tax may defer in the event there is a Double Taxation
Agreement between Botswana and the country of origin of the foreign
corporate shareholder. Currently Botswana has Double Taxation Agreements
with UK, South Africa, Russia, France, Sweden, Seychelles, Mauritius,
Namibia.

17.

Are there any thin capitalisation rules (restrictions on loans from foreign
affiliates)? If so, please give details.


No, save in the case of non resident controlled mining companies where the
ratio debt to equity is set at 3:1.

18.

Are there any controlled foreign company rules? If so, please give details.

No.

19.

Are there any transfer pricing rules? If so, please give details.


No, save that the Commissioner of Taxes is always at pains to determine
whether amounts charged in respect of goods or services or licences or
royalties by a foreign corporate shareholder, to its subsidiary or associated
company in Botswana is at arms length, and market related on the basis
where that where the pricing from the foreign entity is inflated, the
Commissioner will seek to set aside the transaction, under powers the
Commissioner has under the Companies Act, in order to allow only the market
related price as a deduction from income, for tax purposes.

20.
How are imports and exports taxed?


Imports and Exports are subject to Customs and Excise duties subject to
certain goods being exempted. Imports are further subject to Value Added
Tax (VAT).

21.

Is there a wide network of double tax treaties? If so, please give details.


Botswana has Double Taxation Agreements with South Africa, UK, France,
Sweden, Mauritius, Seychelles, Namibia, Russia.

Competition
22.

Are restrictive agreements and practices regulated by competition law?

No. Currently there is no competition legislation.


Intellectual property
23.

Outline of the main intellectual property rights that are capable of protection in
your Bots wana:

     Nature of right.

     How protected.

     How enforced.

     Length of protection.

Patents
Nature of right.

An invention shall be patentable if it is new, involves an inventive step, and is
industrially applicable.

How protected.

Registration at the Registrar of Marks, Patents and Designs.
How enforced.

The owner of the patent can institute court proceedings. The remedies
available are (i) interdict, (ii) damages, (iii) delivery up or destruction of any
infringing product, article or product of which the infringing product forms an
inseparable part, (iv) an account of the profits derived from the infringement.

Length of protection.

20 years and the right is renewable.


Trade marks
Nature of right.

A mark shall not be registered if it is: (i) incapable of distinguishing the goods
and services of one enterprise or business from those of another enterprise or
business, (ii) contrary to public order or morality, (iii) likely to mislead the
public in trade circles, (iv) identical to, or is an imitation of, or contains an
element, an armorial bearing, flag or other emblem, a name, abbreviation or
initials of, or official sign or hallmark, (v) identical to, or confusingly to, or
constitutes a translation of, a mark or trade services of another enterprise, or
if it is well known, and registered in Botswana, (vi) identical to a mark, or if it
so nearly resembles a mark belonging to a different owner of a registered
mark and already on the register.

How protected.

Registration at the office of the Registrar of Marks, Patents and Design.

How enforced.

The registered owner may institute Court proceedings. The remedies
available are an interdict, delivery or destruction of any infringing product,
article or product of which infringing product, damages or an account of the
profits derived from the infringement.

Length of protection.

Ten (10) years and the right is renewable.
Registered designs
Nature of right.

1.     The design must be new (a design is deemed to be new if it has not
       been disclosed to the public anywhere in the wo rld by publication in a
       tangible form, or by use or in any other way, prior to the date of the
       application for registration).

2.     The design is not contrary to public order or morality.
How protected.

Registration at the Office of the Registrar of Marks, Patents and Designs.

How enforced.

The owner of the patent can institute Court proceedings. The remedies
available are (i) interdict, (ii) damages, (iii) delivery up or destruction of any
infringing product, article or product of which the infringing product forms an
inseparable part, (iv) an account of the profits derived from the infringement.

Length of protection.

Five (5) years but may be renewed subject to renewal fees for only two
consecutive terms of five years each.
Unregistered designs
Nature of right.

Unregistered designs are not protected under Botswana laws.


Copyright
Nature of right.

1.     The work must be original.
2.     It must not be contrary to public policy.
3.     The first publication of the work must have taken place in Botswana.
4.     The author of the work was a qualified person at the time when the
       work was first published.

How protected.

The author of the work enjoys protection from the moment the work is
created.

How enforced.

The owner of the copyright can institute court proceedings. The remedies
available are by way of an interdict and damages.

Length of protection.

Fifty (50) years.
Confidential information
Nature of right.

1.      The information must be the product of time, money, effort and
        experimentation.

2.      It must not be public property or public knowledge.

How protected.

The owner of the ideas/information enjoys protection from the moment the
work is created. The Common law provides the basis for the protection.

How enforced.

By instituting Court proceedings based on the Acquilian action.

Length of protection.

From the date of inception.


Marketing agreements
24.

Are marketing agreements regulated? :

    Agency.

Agency agreements, per se are not regulated. The Commissioner of Taxes
will investigate whether fees payable to the agent are market related. In
certain circumstances an agent will require an agency licence under the Trade
Act.

    Distribution.

Agency agreements, per se are not regulated. The Commissioner of Taxes
will investigate whether fees payable to the agent are market related. In
certain circumstances the distributor, operating in Botswana will require a
wholesale and distributors licence, under the Trade Act.

    Franchising.

Franchise agreements are not regulated in our jurisdiction.              The
Commissioner of Taxes will always seek to investigate that the agreement is
on arms length market related terms. In certain circumstances the franchisee
will require a trade licence under the Trade Act.
E-commerce
25.

Are there any laws regulating e-comme rce (such as electronic signatures and
distance selling)?

No.

Data protection
26.

Are there any data protection laws?

The only protection afforded to data is through the Banking Act which
prohibits the disclosure of a customer’s information or any of the customer’s
banking transactions by a bank. In so far as electronic banking exists, this
protection would extend to electronic transactions.


Product liability
27.

Are there any laws regulating product liability and product safety?


The Consumer Protection Act provides protection for consumers in
circumstances where a supplier employs a deceptive method, act or practice
that constitutes an unfair business practice.

In addition the common law provides for two actions, one based on a
contractual claim and the other based on the Delictual Action.

The Contractual claim, in addition to the usual elements that one has to prove
in a claim based on contract has to prove that the other party was a
manufacturer who publicly confessed to having the skill and expert knowledge
of the product.

The Delictual Claim is based on the Aquilian remedy.

								
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