A long-running dispute between the South African Institute of Taxation (Sait) and the training body The Tax Faculty has jumped from the courts to social media after the former withdrew its recognition of The Tax Faculty as a continuous professional development (CPD) provider in January.
The Tax Faculty, which was founded with funds from Sait to provide training to tax professionals, hit back with a statement this week saying it viewed the move by Sait as a “hostile takeover”.
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What looks on the surface to be a fratricidal bust-up among tax professionals has more twists than a Stephen King novel.
Sait explains that its derecognition of The Tax Faculty is motivated by institutional integrity, one of the three factors required for CPD recognition.
“Training providers like The Tax Faculty must adhere to ethical business practices and conduct – just like members,” says Sait in a statement.
“Sait, as a professional body, strongly believes that The Tax Faculty leadership misappropriated the Tax Faculty after Sait provided significant funding and support to establish the Tax Faculty” for the benefit of members. Sait requires 30 CPD hours a year from its tax practitioners to remain members in good standing.
Founding document changed ‘for personal benefit’
Sait says The Tax Faculty unilaterally and illegally changed its memorandum of incorporation (MoI) over the 2021/2022 holidays “to obtain unfettered control for personal benefit”.
The previous MoI was crafted by the sole shareholder of the Tax Faculty (the Faculty Trust), giving it entrenched rights such as the right to remove and appoint directors.
After this “wholesale misappropriation”, Sait says it became difficult to endorse and conduct business with The Tax Faculty.
However, in principle, it had no problem with the majority of its lecturers or the quality of their content.
To resolve this impasse, Sait wants The Tax Faculty to reinstate the previous (2019) MoI, accept the removal of the current board of directors, and appoint a new board to assume control of its affairs.
“Unfortunately, the current leadership of The Tax Faculty seems bent on placing their personal interests above all else,” says Sait’s statement.
Faculty hits back
Thabo Moloi, chair of The Tax Faculty alumni members association, hit back, saying the allegations by Sait “are rejected with the contempt [they] deserve”.
“It is seemingly a ploy to cause concern amongst stakeholders in the tax profession and Sait members in general,” he said, adding that this was a pre-emptive move ahead of the Sait annual general meeting to secure funds for litigation.
What’s at stake here for The Tax Faculty alumni is their ability to earn a living by offering CPD training, says Moloi.
Sait replies that this holds no validity, as many of The Tax Faculty trainers operate on other competing CPD platforms that are readily accessible to members. Sait also offers a substantial amount of free CPD.
This still doesn’t make much sense without some background.
Sait is respected among tax professionals, the South African Revenue Service and others in the industry for speaking on behalf of professionals, enforcing a code of conduct, and offering training. Its CEO is Keith Engel, who spent many years at National Treasury before transitioning to Sait.
Read: Top executives suspended at accounting body
Moloi tells Moneyweb that The Tax Faculty alumni body has just 36 members who are also Sait members, and it simply wants to branch off on its own without being answerable to Sait.
Litigation 411
We asked what all the litigation was about and got access to a trove of court filings.
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It turns out there are currently eight outstanding cases on the go, including a Competition Commission complaint by The Tax Faculty against Sait that doesn’t appear to have gone anywhere and a case before the Commission for Conciliation, Meditation and Arbitration (CCMA).
The latter was brought by former Sait CEO Sebastiaan Klue, who is seeking to either be reinstated as an employee at Sait or awarded compensation he argues was agreed upon during his tenure at the tax body.
Klue was one of the founders of Sait and is now one of the drivers of The Tax Faculty.
Sait rejects Klue’s claims, specifically that he is entitled to what is, in effect, a lifetime royalty for his role in founding Sait.
Sait is suing Klue in the Western Cape High Court for the return of about R32.8 million on the grounds that his compensation agreements while at Sait were irregular, not authorised by the board, and in contravention of the Companies Act.
Klue responds in his court filings that any amounts paid before April 2018 are prescribed and therefore unrecoverable by Sait and that his compensation agreement was signed by a fellow director – to which Sait replies that the fellow director’s board appointment was done retroactively.
Klue also explains how the compensation was agreed: revenue from CPD training at The Tax Faculty was to be split 35% to the faculty and 65% to Sait, which had also agreed to a 15% quarterly profit share to Klue for his role in growing the faculty.
When this arrangement expired in 2020, the revenue share split was 85% to The Tax Faculty and 15% for Sait. In September 2019, The Tax Faculty converted from a for-profit to a non-profit company.
It doesn’t end there …
Yet another case before the Pretoria High Court seeks to have The Tax Faculty’s MoI declared null and void, and to reinstate the previous one agreed to by the sole shareholder (the Faculty Trust) at The Tax Faculty at the time of its conversion to a non-profit company.
An affidavit by Craig Hirst, chair of The Tax Faculty, says there is very little trust between the two sets of litigants and raises concerns as to whether the Sait trustees are legally appointed, adding that its members are funding the litigation “likely without their knowledge or consent”.
The case then veers into a complex legal argument regarding the validity of the previous 2019 MoI.
Read: Concern about reputational damage to accounting institution
Engel responds in his court filings that the amended 2022 MoI – resulting in the alleged misappropriation of The Tax Faculty – had not been approved by the only entity that counts, the Faculty Trust.
“The impugned MOI is nothing but a desperate attempt on the part of the Respondents [The Tax Faculty] to introduce an MOI that would suit [their] personal interests,” deposes Engel.
What this boils down to, says Engel in his court filings, is money, with Klue allegedly making unfounded monetary claims against Sait that could run into millions of rands a year.
Klue responds in his court papers that as a founder of Sait and The Tax Faculty, he is justified in his claims.
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