In 2010, 35% of software used in South Africa was “pirated” – either it is downloaded illegally or a counterfeit copy of the software is purchased. The commercial value of this is in excess of R4 billion. It also puts businesses at risk as they are more likely to be exposed to viruses, have no recourse to the owners of the software in the event of it breaking down and take on the risk of being caught by increasingly vigilant owners of software.

Being in possession of pirated or counterfeit software is an offence in terms of the Copyright Act and/or the Counterfeit Goods Act. In addition, software vendors, such as Microsoft, will levy their own penalties when they find their software has been pirated. Apart from breaking the law, businesses are risking their reputations if they are caught. As it takes much hard work to build up a reputation, risking losing your good name by using pirated software makes no sense at all.

A new legal route to attack piracy

The 2008 Companies Act (“the Act”) offers software owners a new, potentially cost-effective and quick avenue of attack against software piracy. The Act provides that a company must not carry on its business –

  1. Recklessly,
  2. With gross negligence,
  3. With intent to defraud any person, or
  4. For any fraudulent purpose.

If the CIPC (Companies and Intellectual Property Commission) has grounds to believe that the above provisions have been breached, it may issue a notice to the relevant business giving it 20 business days to show that it is in fact not in breach, failing which the CIPC can issue a notice to the business requiring it to cease trading.

This is a devastating outcome for any business. So it is easy to imagine a software owner finding out that a company is illegally using its software and taking this to the CIPC.

Directors: Your personal liability risk

The Act makes directors personally liable for damages, losses or costs incurred by the business due to the director failing to meet his/her fiduciary duties (e.g. knowingly causing damage to the company) or not exercising the requisite due care and skill required of the director.

In the case of pirated software, directors (and this includes alternate directors and those senior managers deemed by the Act to be directors for this purpose) are clearly exposed in this regard to incurring substantial costs and, of course, potential criminal charges under the Copyright Act and the Counterfeit Goods Act.

Be Aware!

Software piracy is pervasive in South Africa and the consequences are severe for both the business and its directors personally if they are caught. The Act makes it easier to crack down on software piracy.
Make sure your business does not have any pirated software.

© DotNews, 2005-2012. This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.





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IC Marais

Professional experience:

IC Marais is a certified CA (SA) with public sector and private sector technical knowledge based on 5 years’ Public Sector accounting, auditing and financial management experience and 5 years audit, tax and accounting experience. Detailed knowledge of private and public sector accounting and auditing standards (GRAP, IPSAS, IFRS, IAS, ISA) and public sector financial legislation (MFMA, etc.)

He enjoys the outdoors, hunting and fishing.


Professional experience:

In 1995, Schalk started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and then Mazars Moores Rowland in 2007) in Bloemfontein. In 1998, Schalk was appointed as manager at Moores Rowland, where he became a partner in 2003. Schalk received his Postgraduate Certificate in Advanced Taxation in 2006 and in 2009 he received his Certificate in the Administration of Estates.


Professional experience:

Cedric started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and Mazars Moores Rowland in 2007), Bloemfontein, in 1986. After completion of his articles, he joined the Special Investigations Division of the Department of Finance (SA Revenue Services) as a senior inspector from 1990 to 1991.


Professional experience:

Lucha started her career as a tax inspector at the Inland Revenue Department of New Zealand. After this she worked in commerce in Canada, Mexico and the United States.

On her return to South Africa, she completed her CA training contract with us and has been with Newtons ever since. She became a Partner in 2012.

Apart from her CA(SA) qualification she also holds a postgraduate certificate in Advanced Taxation (2005) and has the overall responsibility for training as our Training Officer.