FINANCIAL INSTITUTIONS ACT, 2004

SCHEDULE 4

Section 66(4)

REORGANISATION OF FINANCIAL INSTITUTIONS

PART I
REORGANISATION OF LOCAL FINANCIAL INSTITUTIONS

Appointment of reorganising agent

1. (1) Where under paragraph 5(1)(a) of Schedule 3 the Central Bank decides to reorganise a local financial institution, it shall appoint one of its officers or a suitably qualified person as reorganising agent to direct the reorganisation in accordance with this Schedule.

(2) The reorganising agent shall act under the supervision of the Central Bank and shall give effect to any direction given to him by the Central Bank which is not inconsistent with this Act.

(3) In this Schedule, and in section 49, "reorganising agent" means a reorganising agent appointed under this paragraph.

Reorganisation plan

2. (1) The reorganising agent shall, as soon as possible, and taking into account the interests of persons concerned with the local financial institution, draw up a reorganisation plan for the local financial institution.

(2) The reorganisation plan shall –

(a) be equitable to all depositors, beneficial owners, other creditors, safe deposit box lessees, owners of funds or property held by the financial institution as a fiduciary or on hire, loan, deposit or pledge and to the shareholders of the institution;

(b) provide for an amalgamation with or transfer to another financial institution under Schedule 1, or for bringing in new funds, so as to establish adequate ratios between –

(i) capital and deposits; and

(ii) liquid assets and deposits;

(c) provide for the removal of any director, manager, officer, employee or agent of the financial institution who in the opinion of the Central Bank was responsible for or contributed to the circumstances which led to the seizure of the institution under Schedule 3; and

(d) be approved by the Central Bank before copies are sent out under paragraph 3.

Notice of plan

3. (1) The reorganising agent shall send to all depositors, beneficial owners, other creditors, safe deposit box lessees, owners of property held by the institution as a fiduciary or on hire, loan, deposit or pledge and the shareholders of the institution a copy of the reorganisation plan with notice that –

(a) if, within 30 days of the date on which it is sent, the plan is not objected to in writing by persons holding one-third or more of the aggregate amount of deposits and other liabilities of the institution (as determined by the Central Bank), the reorganising agent will proceed with the reorganisation in accordance with this Schedule; and

(b) those persons may submit written objections to the plan to the reorganising agent within 30 days of the date on which it is sent.

(2) The reorganising agent shall publish in the Gazette and in a local newspaper a notice that the reorganisation plan is available for examination by any interested person at such place and at such times as are specified in the notice.

(3) The Central Bank may, before the commencement of the 30-day period, exempt the reorganising agent from sending copies of the reorganisation plan to any person specified by the Central Bank if it is satisfied that –

(a) it is impracticable to do so; and

(b) such person has otherwise had adequate notice.

Objections to and modifications of reorganisation plan

4. The reorganising agent shall consider all objections to the reorganisation plan submitted under paragraph 3(1)(b), and may, in his discretion –

(a) modify the plan on account of one or more of the objections, and where he does so the procedure provided for in this paragraph and paragraph 3 shall apply to such modification as it applies to the reorganisation plan;

(b) proceed with the original plan as if no objection had been made; or

(c) if on account of the objections he considers that the reorganisation of the financial institution will not be possible, request the Central Bank to revoke the banking licence of the institution and start its compulsory winding up in terms of paragraph 8:

Provided that paragraph (b) shall not apply if persons holding, in aggregate, one third or more of the deposits and other liabilities of the financial institution (as determined by the Central Bank) have objected to the reorganisation plan under paragraph 3(1)(b).

Approval of the Supreme Court

5. (1) Where the reorganising agent decides to proceed with the reorganisation plan either in its original form or with modifications, he shall, with the approval of the Central Bank submit the reorganisation plan for the approval of the Supreme Court.

(2) Before submitting the plan for approval, the reorganising agent may, with the approval of the Central Bank and without complying with the procedures under paragraphs 3 and 4, amend or modify the plan so as –

(a) to remove any unfairness to any class of depositors, beneficial owners, other creditors, interested parties or shareholders;

(b) to make its execution more workable or practicable; or

(c) to correct any error or ambiguity.

(3) The Supreme Court may –

(a) approve the reorganisation plan subject to such modifications or alterations as it may determine; or

(b) reject the reorganisation plan either with or without making a direction to the Central Bank in terms of paragraph 8(1)(d) to revoke the banking licence of the financial institution and start its compulsory winding up.

Execution of reorganisation

6. (1) The reorganising agent shall carry on the reorganisation plan as soon as it has been approved by the Supreme Court and, for this purpose, the reorganising agent has all the necessary and incidental powers in respect of and in relation to the financial institution, notwithstanding the powers vested in the Central Bank under paragraph 3(1) of Schedule 3.

(2) When the reorganisation of the financial institution has been completed to the satisfaction of the reorganising agent he shall so inform the Central Bank.

Completion of reorganisation

7. (1) (a) Where the reorganising agent informs the Central Bank under paragraph 6(2) that the reorganisation of the financial institution has been completed to his satisfaction; or

(b) if at any stage of proceedings under this Schedule the Central Bank is of the opinion that it is no longer necessary to proceed with the reorganisation,

the Central Bank shall terminate the seizure effected under Schedule 3 and return full management, control and possession to the local financial institution.

(2) Paragraph 5(2) (further action by Central Bank) of Schedule 3 applies to termination of a seizure under this paragraph.

Revocation of banking licence

8. (1) Notwithstanding paragraphs 5(2), 6 and 7 if at any stage of the procedure under this Schedule –

(a) the reorganising agent so requests under paragraph 4(c); or

(b) the reorganising agent is of the opinion that –

(i) the assets of the financial institution will not be sufficient for the full discharge of all its obligations; or

(ii) completion of the reorganisation is unduly delayed; or

(iii) it i s impracticable to proceed with the reorganisation of the financial institution; or

(c) the Central Bank is of the opinion that it is impracticable to proceed with the reorganisation of the financial institution; or

(d) the Central Bank is directed to do so by the Supreme Court,

the Central Bank shall revoke the banking licence of the financial institution and appoint a liquidator for the compulsory winding up of the institution in terms of Part II of Schedule 2.

(2) Sections 13(2) to (5) (taking effect of revocation) and 16 (appeals against revocation) do not apply to a revocation under this paragraph.