Update: Assignment of IP to non-residents

A false start to relaxing Exchange Control Regulations

In June 2012, virtually overnight, the South African Reserve Bank (SARB) amended the Exchange Control Regulations, making it compulsory to obtain advance approval before any South African IP is assigned to a foreign national. This was in blunt, devastating response to the judgment of Oilwell (Pty) Limited vs Protec International Limited, which said precisely the opposite, and for a number of very good reasons. SARB's position has come in for criticism, not only for the manner in which the provision has been introduced, but also for the Authority's decision not to publish any form of guideline on the matter. It has made for a very unhappy state of affairs.

However, just as suddenly and again without any warning, in early 2014, SARB published a Circular indicating that approval would be granted for certain transactions in which ownership of IP was intended to be assigned to non-Residents. Once again, heart-rates were sent soaring – only this time, there was an expectation that the judicial wisdom in OIlwell had prevailed. On a proper review of the Circular, though, this is not the case. To start off, the Circular extends exclusively to residents in the Technology, Media & Telecommunications industry, and even then only under very limited conditions. In fact, the liberalisation of the Regulations (if it is that) is so narrow in its application that it will not apply to anybody, except for the smallest microcosm of cases. It is, in effect, no liberalisation at all. It should also be noted that the Circular does not remove the pre-approval requirement, in any event. And so, for all practical purposes, the state of affairs remains. If you're considering assigning any South African IP to a non-resident, it is extremely important that you take proper advice in advance because of the extremely serious consequences that follow non-compliance, and which can't be remedied.

This article is not intended to be a comprehensive statement of the law, nor does it constitute an opinion or guarantee of any kind, and should not be construed as such. It should not be relied upon as a substitute for specific advice regarding particular scenarios. Margo® Attorneys, Inc. cannot accept responsibility for the consequences of any person relying on the contents of this document for any other purpose. The views expressed in this article are also not necessarily those of Margo® Attorneys, Inc.