Uncategorized

Non-Compliance with Laws and Regulations (NOCLAR)

The International Ethics Standards Board for Accountants (IESBA)’s pronouncement “Responding to Non-Compliance with Laws and Regulations” became effective on 15 July 2017. This framework was developed to guide professional accountants (as defined) on how to best act in the public interest and how to respond when confronted with non-compliance with laws and regulations (NOCLAR).

NOCLAR is defined as any act of omission or commission, intentional or unintentional, committed by a client or employer, including by management, those charged with governance or by other working for or under the direction of the client or employer, which is contrary to prevailing laws or regulations.

This pronouncement comes after a six year project that was initiated to address concerns from the regulatory community and other stakeholders about (as per the IESBA website):

  • The duty of confidentiality acting as a barrier by auditors to properly disclose NOCLAR;
  • Auditors simply resigning from an engagement because of NOCLAR; and
  • A lack of guidance in these circumstances.

The scope of the project was eventually broadened to be applicable to all professional accountants in public practice and in business, not just auditors. This will therefore include accountants that are members of the South African Institute of Chartered Accountants (SAICA), South African Institute of Professional Accountants (SAIPA) and the Chartered Institute of Management Accountants (CIMA), irrespective of whether they work in a public practice or in commerce and industry.

The IESBA’s website states that the issue at the heart of the debate was about “what is reasonable to ask of professional accountants, given their responsibility to act in the public interest when they encounter or are made aware of NOCLAR or suspected NOCLAR, when providing a professional service to their clients or carrying out their duties for their employer.”

There are different requirements set for the way auditors have to respond to NOCLAR as opposed to professional accountants in public practice, as well as senior-level professional accountants as opposed to other professional accountants. In broad terms the response would include:

  • Raising the identified or suspected NOCLAR with the appropriate persons at the client or employer;
  • Understanding and complying with any relevant laws and regulations, which might include the reporting of the matter to an appropriate authority;
  • Attending to or assisting with or evaluating the rectification, remediation or mitigation of the consequences of the NOCLAR and the reducing of the risk of re-occurrence;
  • Determining if any further action is needed in the public interest (which can include withdrawing from the client or employer relationship); and
  • Attending to any disclosure (if necessary) to the auditor.
  • In exceptional circumstances, it may be necessary to disclose the matter immediately to an appropriate authority if there is an imminent breach of law or regulation that would cause substantial harm to stakeholders.

As Unik Professional Service uphold all applicable laws and regulations, and adhere to regulations set by the professional bodies that regulate us, we will henceforth include the provisions of NOCLAR in any engagement letters and act in accordance with the requirements.

Oddette Boshoff

Director

Read more →

Companies Act, No 71 of 2008 | Chapter 1 – The company as a separate legal person

I will deliver a series of articles on the Companies Act in order to convey a basic understanding thereof. Although the presentation will be based on the Act itself, and sometimes on case law, it should be recognised that the articles cannot be relied upon as absolute, as the articles will be summaries of the Act and will not cover all situations. Cases and facts may differ and the outcomes might be totally different. For specific cases expert advice should be sought.

It must first be thoroughly understood what a company is. In terms of section 19 of the Act a company is a juristic person, which exists continuously until its name is removed from the register at the Companies and Intellectual Property Commission (CIPC). It has all of the legal powers and capacity of an individual, except to the extent that a juristic person is incapable of exercising any such power, or having such capacity, or the company’s MOI (Memorandum of Incorporation) provides otherwise. The common-law principle that the company is a separate legal person was laid down in Salomon v A Salomon & Co Ltd (1897) AC 22 (HL). As the learned judge Innes CJ also said in Dadoo Ltd vs Krugersdorp Municipal Council 1920 AD 530 “It is one of the cardinal principles of company law that a registered company is a legal persona distinct from the members who compose it….. This conception of the existence of a company as a separate entity distinct from its shareholders is no merely artificial and technical thing. It is a matter of substance; property vested in the company is not, and cannot be, regarded as vested in all or any of its members”. This principle applies even if the company has only one member.

There are cases where the court has disregarded the company’s separate legal personality, and “pierced the corporate veil”, focusing on the persons behind the company. The court however held that Courts do not have a general discretion to disregard a company’s separate legal personality whenever they consider it just or convenient to do so. Only when fraud, dishonesty or improper conduct are present should it be considered. As one of the criteria in Ex parte application of Gore NO case supra was put “And the court will pierce the veil only so far as is necessary to provide a remedy for the particular wrong which those controlling the company have done”.

Section 19(2) states that a person is not, solely by reason of being an incorporator, shareholder or director of a company, liable for any liabilities or obligations of the company, except to the extent that the act or the MOI provides otherwise. However, in the case of a personal liability company (types of companies will be discussed in more detail in the next chapter), the directors and past directors are jointly and severally liable, together with the company, for any debts and liabilities of the company as are or were contracted during their respective periods of office.

It must be pointed out that there is an inconsistency between this section 19(2) of the Companies Act and section 181 of the Tax Administration Act. The latter determines that where a company, other than a listed company, is wound up other than by means of an involuntary liquidation without having satisfied its outstanding tax debt, the persons who are shareholders of the company within one year prior to its winding up are jointly and severally liable to pay the tax debt, to the extent that they receive assets of the company in their capacity as shareholders within one year prior to its winding up, and the tax debt existed at the time of the receipt of the assets. The liability of the shareholders is secondary to the liability of the company.

Chris de Jager

Specialist Consultant

Read more →

A Great Loss: Len Geldenhuys

 

It is with great sadness that we say goodbye to Len Geldenhuys, who passed away unexpectedly on 20 July 2017. Len worked at our firm for the past 17 years as administrative manager. We will always remember his big smile and kind heart. He was truly part of the Unik family, as a colleague and a friend.

Read more →

UKnow Editorial – June 2017

One of the services that we offer to our clients is to act as an independent trustee in their trusts. This is a very important appointment and independent trustees must fully understand and accept their fiduciary duty in this regard. The benefit of appointing a trusted business professional is that there usually already exists a relationship of trust built up over a period of time. In addition to this, the person acting as the independent trustee will have the in-depth knowledge of their client’s business and private environment in which the trust is generally structured. Unfortunately, due to the extent of risk and administrative burden taken on by the independent trustee, the costs of appointing such trustees are increasing. The Chief Master recently issued a directive on various matters when dealing with trusts. In this directive, the requirements for the independent trustee are clearly set out. Please read our article in this regard, and in fact the entire directive if you are involved in trusts in any capacity. We will also be communicating with our clients in this regard shortly.

Our second article in this newsletter is a very interesting one on the deduction of interest expenses against interest received, based on the way SARS allowed the application of Practice Note 31 in the past. The judgment delivered in a recent court case however changes things.

We hope that you find our newsletters interesting and informative. As always, if you want to respond to or comment on any of our news items or other relevant information, please contact us at news@unikone.co.za or 022 – 482 1169, or join the conversation on our social media platforms on Linkedin and Facebook.

Warm regards until next month.

Oddette Boshoff

Read more →

Requirements for Appointing an Independent Trustee

The Chief Master recently issued Directive 2 of 2017, to take effect from 6 March 2017. The directive is titled “Trusts – Dealing with Various Trust Matters”, and was issued to ensure uniformity in all Master’s offices in South Africa with regards to the administration of trusts.

The directive deals specifically with the requirements for independent trustees in paragraph 3.8.

The appointment of an independent trustee will be required for all “family business trusts”. This type of trust is defined in the directive as:

  • “A trust where the trustees have the power to contract with independent third parties, thereby creating trust creditors; and
  • The trustees are all beneficiaries, and
  • The beneficiaries are all related to one another.”

The qualifying criteria to be eligible to be appointed as an independent trustee are also set out in the directive:

  • The person must be an independent outsider who fully understands the fiduciary duties to be taken on, who will ensure that the trust functions properly and who will ensure that the provisions of the trust deed are observed.
  • The person must be aware that any failure to observe his or her duties as an independent trustee may result in action for breach of trust.
  • The person may be a professional accountant, admitted attorney, a trust company, etc., but does not necessarily have to be such a professional person.
  • The person may have no family relation or connection to any of the existing or proposed trustees, beneficiaries or founder of the trust.
  • The person must be competent to observe the actions of other trustees and to guide and advise them to ensure that their conduct is in observance of the provisions of the trust deed as well as applicable legislation.
  • The person must have knowledge and experience of the business environment in which the trust will operate.
  • The person is expected to be knowledgeable about the legislation applicable to trusts and would therefore be expected not to conclude or approve transactions that may be invalid.
  • The person will not have any interest in the trust as a beneficiary.
  • The person is not disqualified to act as a trustee in terms of the Trust Property Control Act, 1988.

The independent trustee can and should be nominated specifically when the trust is registered with the Master. If the trust deed does not make provision for the appointment of an independent trustee, the Master will consult with the founder, the existing trustees and any beneficiaries with a vested right in the trust to nominate an independent trustee. However, the Master is not bound by that nomination and may instead appoint a person that he considers suitable.

The independent trustee is entitled to a remuneration along with any other trustees in the trust. Due to the criteria set out in the directive as well as the significant risk and the extent of work and administration involved for the independent trustee, it is expected that the fees paid to such trustees will increase. However, the benefit of having a competent independent trustee applying his or her expertise and knowledge to ensure that the interests of the beneficiaries are looked after is worth its weight in gold.

As a result of this directive, two new forms updated with requirements contained in the directive were issued by the Master for the appointment of independent trustees, namely the J417 Acceptance of Trusteeship as well as the prescribed Sworn Affidavit by Independent Trustee.

The directive can be read at http://www.justice.gov.za/master/directives.html .

Oddette Boshoff

Director

Read more →

Practice Note 31 and the Deduction of Interest

“To give is better than to receive”.  Not the first phrase that comes to mind when one thinks of the revenue service.  However, once in a blue moon, the powers that be magnanimously decide to permit taxpayers to do something that is, strictly speaking, not allowed by the Income Tax Act.

Until now, the deduction of interest incurred by ordinary taxpayers has been one of those rare occurrences.  The general rule for deductions is laid down in sections 11(a) and 23(g) of the Act.  In determining the taxable income from carrying on any trade, a taxpayer is allowed to deduct expenditure and losses actually incurred in the production of the income, only to the extent that those moneys were laid out or expended for the purposes of the taxpayer’s trade.

Now, the simple act of investing money or advancing a loan to another party (unless you are a moneylender) does not, by the furthest stretch of the imagination, constitute a “trade”.  Enter Practice Note 31.  Issued in 1994, paragraph 2 of the Note was like manna from heaven for taxpayers who both earned and incurred interest:

While it is evident that a person (not being a moneylender) earning interest on capital or surplus funds invested does not carry on a trade and that any expenditure incurred in the production of such interest cannot be allowed as a deduction, it is nevertheless the practice of Inland Revenue to allow expenditure incurred in the production of the interest to the extent that it does not exceed such income. This practice will also be applied in cases where funds are borrowed at a certain rate of interest and invested at a lower rate. Although, strictly in terms of the law, there is no justification for the deduction, this practice has developed over the years and will be followed by Inland Revenue.

And follow it, they did.  To such an extent that, very often, taxpayers were allowed to set off any interest incurred against any interest earned and it was seldom that SARS even tried to establish whether the interest was incurred “in the production” of the interest income.  That is, until the Tax Court delivered its judgment against Mr X on 13 December 2016.

Mr X is a solicitor, admitted in England and Wales, but not allowed to practice as a qualified attorney in South Africa.  Nevertheless, he was employed by a South African law firm as an “Equity Director” in all but name.  In terms of his contract of employment, he was obliged to contribute a predetermined amount to a “director’s loan account”.  In theory, the firm could have required Mr X to borrow a lump sum to deposit in the account.  Instead, the conditions of his contract made provision for the amount to be deducted proportionally from Mr X’s remuneration until the predetermined amount was reached.  Interest accrued on the outstanding balance of the loan account at the prime rate.  Depending on the availability of funds, the Finance Director would recommend occasional distributions of interest.

A year later, Mr X decided to acquire a residence and, like most of us do when buying a house, secured a mortgage bond from a bank.  This home loan was later converted to an access bond, whereby Mr X had “paid in and drawn on the facility to fund any of his expenses”.  Specifically, any distributions of interest from his loan account were deposited into the bond.  The bond carried interest at prime less 1.85%.

Relying on Practice Note 31, Mr X claimed the interest incurred on the bond as a deduction against the interest earned on the loan account.  He was of the opinion that there was a sufficiently close link between the interest incurred and interest earned which would justify the conclusion that the interest was incurred in the production of the interest income.  Furthermore, he argued that had it not been for the compulsory contributions in respect of the loan account, he would have been able to utilise those funds to repay the bond and, accordingly, would have paid less interest on the home loan.

SARS disallowed the deduction as well as the taxpayer’s objection, on the basis that a deduction will only be allowed where funds are borrowed and then advanced to a third party as an interest-bearing loan.  In Mr X’s case, the funds were borrowed to buy a house and not for the purpose of granting a loan to his employer.

The Court’s decision to uphold SARS’ assessments that disallowed the deduction of interest was mainly based on the following:

  • The source of the funds that were advanced to the employer as the loan account was apparently a deciding factor. Practice Note 31 refers to the investment of capital or surplus funds.  Mr X earned interest on “funds which have accrued to him as income and retained by his employer” and, therefore, “interest income earned by the appellant on his loan account is not interest income on capital or surplus funds invested, but simply interest income earned on his loan account on funds retained by the appellant’s employer in terms of the contract of employment”.
  • SARS argued that the application of Practice Note 31 requires two steps. Firstly, the taxpayer has to borrow the funds and secondly, the taxpayer must advance those funds to a third party in the form of an interest-bearing loan.  This argument, although neither specifically accepted or rejected, seems to underpin the Court’s ultimate decision.
  • For an expense to be deductible there must be a “sufficiently close link between the expenditure and the income earning operations, having regard to both the purpose of the expenditure and to what it actually effects”. In the case of Mr X, the funds were borrowed for the purpose of buying a house.  Therefore, interest was incurred to finance the acquisition of a capital asset.  The monies were neither borrowed for the purpose of earning interest income, nor did it have the effect of earning interest.
  • Ultimately, there is not a sufficiently close connection between the interest earned and the interest incurred to justify a conclusion that the expenditure was incurred in the production of the interest income.

There are a few aspects of the Court’s decision that may be open to debate.  For instance, there seems to be great emphasis on how Mr X advanced the funds to his employer.  Although the loan was created from amounts retained from Mr X’s remuneration, it is important to remember that the funds first accrued to him.  Once invested, after-tax income can very easily be classified as capital.  Furthermore, while the Practice Note refers to the investment of “capital or surplus funds”, it does not necessarily require a once-off investment.  It may be argued that what happened every month was that Mr X, albeit under compulsion, made an investment by forwarding an amount to his employer as an interest-bearing loan.  Had it not been for the specific provisions of his employment contract, he could very well have paid these contributions from his access bond.  In fact, what probably happened was that Mr X’s cash flow suffered a bit as a result of the deduction of his contributions, and therefore he was required to dip into his access bond.  Bearing in mind SARS’ two-step approach to Practice Note 31, requiring the taxpayer to first borrow funds and then advance these funds to a third party, this would have been a case of Mr X putting the cart before the horses.

The Court’s decision was based on the facts of this particular case, with the nature or source of the “investment” apparently playing a particularly important role.  Different facts may have resulted in a different outcome.  What is clear, however, is that this decision has turned the way SARS applies Practice Note 31 on its head.  The lenient approach adopted in the past will most likely make way for a strict application.  Interest paid be will no longer allowed ‘willy-nilly’ as a deduction against interest received. In order to prove that the interest expense was incurred in the production of the interest income, taxpayers will have to show a connection between the interest incurred and the interest earned.

Annalize Duvenage

Specialist Tax Consultant

Read more →

UKnow Editorial – May 2017

 

Normally we do not write about our clients and their businesses for various and obvious reasons. However, this month is an exception.

As mentioned in last month’s newsletter, one of our clients had a massively successful run recently on an international crowdfunding platform following their invention of Nimuno Loops, now commonly referred to as “Lego Tape” (caveat – be aware of all the counterfeit wannabe’s out there!). What is not so widely known, is that this invention comes from the same company that invented the popular children’s bike Y-bike almost a decade ago. We experienced this incredible journey with them and both we and they thought it a good idea to write about it as we are all great believers in the use of technology and alternative business strategies such as crowdfunding to grow entrepreneurs and businesses. I realised as we went along that our traditional ways of thinking about business have to change if we want to stimulate invention and entrepreneurship. I was so excited to see what is already happening in the world and look forward to being part of that change.

What a privilege to live in such exciting times!

We hope that you find our newsletters interesting and informative. As always, if you want to respond to or comment on any of our news items or other relevant information, please contact us at news@unikone.co.za or 022 – 482 1169, or join the conversation on our social media platforms on Linkedin and Facebook.

Warm regards until next month.

 

Read more →

The Story of Ybike, Nimuno Loops and the Chrome Cherry Design Studio

It all started with four friends – let’s call them Pierre, Phil, Jaco and Koos. A bunch of creative, forward-thinking entrepreneurs. Sometimes a bit crazy… but hey, we like crazy!

All four of them have successful careers individually.

Pierre Swart spent many years at British American  Tobacco, ending up as Global Head of Innovation Delivery (Next Generation Smokeless) before leaving the company in 2011 to establish his own international career in design, innovation and consulting. He is based primarily in the United Kingdom and the United States, where he currently resides. Phil Conradie owns and manages a manufacturing and consulting company in the signage industry in Cape Town and you will see his products countrywide on many car dealerships, drive-through restaurants and petrol stations – and even my office reception! Jaco Kruger has been many things in his professional career, ranging from restaurateur to business development manager and consultant. He currently juggles his time between his duties in managing the business of Chrome Cherry Design Studio in Cape Town, his passion for underwater hockey (yes, he is a Springbok!) and his artistic career. His sculptures arecarried by many prestigious galleries, including the Melrose Arch Gallery. Koos Pieterse is a chartered accountant who has served as the Chief Financial Officer for Media 24 and the Chief Executive Officer for On the Dot Couriers. In 2016 he decided to also pursue an entrepreneurial career and his is currently involved in various business enterprises in different industries.

They met and became friends over the years and frequently exchanged thoughts about creating a business that could give life to all their inspirations and ideas. As with all great decisions, the guys finally made the firm commitment at a wine festival to form a company that could innovate, design and develop their own products. And so the company Chrome Cherry Design Studio was registered in 2004.

Many design ideas were attempted, but the first product of company that finally made it to market was the YBike – a new take on the children’s push bike. The innovation was in the way the bike was designed to improve children’s balancing abilities and motor skills. The traditional push bike is essentially a trike as it has two wheels at the back. The YBike has only one. This also has the added benefit of children not bashing their heels against the back wheels when pushing the bike forward. This innovation went on to win the Toy of the Year. Today YBikes are still sold worldwide and has become a bit of an icon amongst South African parents and children.

For the next few years the team continued to improve on and grow the YBike range, but they also started to look at expanding to non-related products in the toy and other markets.

Cue Anine Kirsten and Max Bassler. These two youngsters joined the company during the last few years as product designers, working with Jaco on product development, and a renewed focus was placed on innovation and design outside of the YBike range. Ideas started to flow and the company gained some new energy and momentum. I am always amazed at what goes on in their minds. At every management meeting I get so excited about this creativity and obvious talent when they deliver their progress report that I cannot understand why every proposed product is not launched and becomes a roaring success. But for a product to make it to market successfully takes much more than just a good idea.

The idea of Nimuno Loops grew from the team’s experiences and observations when they attended the Toy Fair in New York. The patent for Lego expired recently, which gave rise to the idea of creating a new generation Lego compatible creativity toy.  Back home they started experimenting with the idea, prototyping several possibilities and then going back to improve upon it until they presented a final product that was ready to go to market.

As it was a new concept that would require initial capital layout for machinery and other expenses, the team decided to use crowdfunding as a means of raising the capital to finance the production, instead of more traditional ways such as obtaining shareholders loans or third party financing.

After much research and preparation, the crowdfunding campaign was launched during March on the platform Indiegogo. The team split their manpower to have people on the ground in New York, while others manned the station in Cape Town. The initial target to be able to produce the first batch of Nimuno Loops was calculated at $8 000, and was therefore registered as the required target funding. At first, the response to the campaign was disappointingly slow, raising only a few thousand dollars in the first few days. And then, suddenly, it went viral! The team had to work all hours of the day and night marketing the product, answering backers of the campaign on their queries, and expanding the offering on the campaign as it gained more and more success. It was a 24 hour job for the 30 days of the campaign, leaving barely enough time to have a cup of coffee as the world jumped on this new phenomenon. I remember sitting in our monthly management meeting in Cape Town and the excitement was building as each hour passed. When we started our meeting, around $200 000 had been raised. Three hours later, at the close of our meeting, it was approaching $400 000.Every few hours for the next few days we would text each other with the achievement of a new unbelievable target. On 16 March, the $1 million mark was reached. The campaign eventually raised in excess of $1,6m dollars on Indiegogo.

Nimuno Loops has broken many records during its campaign, having raised funding of more than 20 000% of its target on Indiegogo – the most a campaign has ever achieved. Due to its success it is still available for purchase on the “In Demand” section of the platform. It has been hailed by influential media as ground breaking and “the best invention of 2017”, even featuring in Time magazine.

However, it was quite disturbing to experience how quickly counterfeit products were advertised during the course of the campaign and even now how many companies sell “Legotape” as their own product, while it is in fact counterfeited as Chrome Cherry Design Studio have registered all the patents and trademarks on this innovation.

The company that is today Unik Professional Services has had a professional relationship with Chrome Cherry Design Studio almost from the beginning. As with most start-ups, initially the owners managed most of the work themselves. However, as the business grew the workload and administrative burden increased. Also, with the increasingly complicated business and tax environment, they eventually needed professionals and experts to take care of the business administration, giving them the freedom to focus on the business itself. Our services to them grew over the years from the standard compilation of annual financial statements and the corresponding tax compliance, to the outsourced management and advisory services that we offer today. These services include attending to the daily financial and administrative duties, compiling management accountsand financial analysis that we review with them monthly at management meetings, taking care of tax and other legislative compliance, and offering full business advisory and tax structuring services.

Working with such a team of innovative, forward-thinking entrepreneurs also gave us the opportunity to innovate within our scope of services and work in ways that are not necessarily traditional. I love the fact that we can manage the entire back-office administration of the company on online platforms from wherever we are. Utilising emails, Skype and online systems to perform our duties and provide output to the client erases the need for both us and them to be physically based at a fixed place. We have grown with them as their business expanded and broke new grounds.  It is incredibly exciting to be part of a changing business world and help pioneer new ways of thinking.

Nimuno Loops is currently running their campaign on the South African crowdfunding platform Thundafund at https://thundafund.com/project/nimunoloops where it is available for pre-sales.

What a proud moment for South African entrepreneurship!

Oddette Boshoff

Director

 

 

Read more →

Crowdfunding 101

Crowdfunding has become all the rage, but to many this concept is still quite foreign. It is a wonderful alternative way to obtain financing for your venture, bypassing a lot of the red tape and obstacles faced by start-ups and early stage businesses, such as providing the security required by traditional financing options.

There are a number of different platforms, all with slightly different features, that facilitate crowdfunding – some based locally and some international. In short, it is an online system where you can market your product, service or idea and hopefully raise funds from a large number of participants worldwide in advance to make those dreams a reality. Your idea does not even have to be a business! Social causes and other non-profit ventures have had much success with crowdfunding.

There are a number of different ways in which you can utilise crowdsourcing to raise funds, including:Donations: Participants support your campaign by simply donating money toward it, having no expectation of any reward.

  • Debt Funding: Participants contribute money toward the campaign as a loan, expecting the capital and some form of return on equity such as interest once the enterprise reaches set milestones.
  • Equity Funding: Participants contribute money towards the campaign in exchange for equity in the business, with an expectation of a worthy return on capital.
  • Pre-Sales: Participants buy your product in advance (mostly before production even starts) at a discounted price.
  • Purchasing Experiences or Unique Items: Participants can support campaigns by purchasing unique experiences such as dinner with the campaigner, or a hand-drawn sketch to help raise funds.

So, to begin you will choose a crowdfunding platform based on your individual needs and preferences. All of them have slightly different processes and features and it is important that you are fully aware of these. You then have to package your brilliant, well thought-out idea and make it as visually attractive and informative as possible, especially in a digital format. Your campaign video for instance is the most important tool you have to explain and sell your campaign. The challenge is to get your product, service or idea noticed amongst all the other great ideas marketed on the platform. You have to decide on what terms you attach to your proposal. For instance, you have to state the minimum amount of funding you need to be able to proceed with your enterprise (and therefore for your campaign to be a success). You can opt for a fixed “all-or-nothing” goal, meaning that if you did not reach your minimum amount by the end of the campaign, your supporters will be refunded their contributions and you will receive no money. Alternatively, you can opt for a flexible goal, meaning you will receive all contributions made by supporters whether you reach your set goal or not. You have to set a number of days that your campaign will run, during which time people can contribute to your campaign. During your campaign it is wise to frequently engage with your audience and even update your offerings if possible, based on feedback.

Once your campaign has ended, the platform hosts will transfer the funds raised to you, minus their agreed costs. Some platforms offer the option of people continuing to contribute even after your campaign has ended due to its popularity.

As simple as this sounds, this market is fast becoming a specialist area on its own, with marketing campaigns now designed around the launch on the platform to increase chances of success.  Some platforms offer various levels of support during the campaign and can even be contracted to assist with the fulfilment.

Crowdfunding offers a significantly simpler and quicker access to financing, especially for start-ups. To my mind, one of the biggest advantages of this concept is that your product, service or idea is already validated as successful or not before you fully launch your enterprise. Customer feedback is immediate, which allows you to tailor or change your offering before production starts, potentially saving you an incredible amount of time and money. On the downside, participants have to keep in mind that the crowdfunding industry is still somewhat unregulated, which certainly poses risks for all involved.

Although traditional financing methods will always have a place, these alternative and innovative ideas are changing our world forever. However, I expect this will evolve more and more and we as business participants will need to understand, adapt and use this to our full advantage.

Oddette Boshoff

Director

Read more →