Draft model law for savings and loan associations providing housing credit

Vf

UNITED NATIONS

ECONOMIC AND SOCIAL COUNCIL

Bast African Sub-regional meeting on Speoifio Aspects of Housing Finance

GENERAL

. 14/HCXJ/53

6

1 December

Original : ESGliSH

FOR SAVINGS AND LOAJST AS3OC0:ATrONS PEOVIIEKG HOUSING

B/CN.14/HOJ/53

DRAFT MODEL LAW

FOB SAVINGS AHD LOAN ASSOCIATIONS PROVIIOG HOUSING CEBUT

Draft model law to assist member States of the Commission in preparing legislation for the establishment of savings and loan associations where the operations of such

associations are governed "by its members

This model law may be amended or additions made to it by local draftsmen as conditions require.

. 14/BdET/53

TABLE OP

Paragraphs

PHBIIKCHABY " '■"■'"- '■ ' ■ - ■ 1-3

Short title" 'and date of commencement ... ... 1., Interpretation ••• .••"•' ... '••"• 2

Application of Law ... ' ..." ... "... 3

PART I -

OF ASSOCIATIONS AND MATTERS INCIJWTAL

THERETO J ... ... ... 4-15

Prohibition of unregistered association ... ,4-5 Matters which must be provided in rules of

association ;.. ... ... 6

Alteration of rules ' ... 7.

Bales open to-public ... o* '

Registration of associations .;•..• ... 9 Registrar may inspect books and accounts , . ,..,-..

"of any association' ... 10

Bffeo t of regi strati on ... 11'

Gonciusiveness of certificate of registration 12 Cancellation or suspension of registration ... 13

Name of associ ation ... ... ..* 14

Change of name of association ... ..^ ■. 15

PART II - " " "' '.'.'"'."• ' ' '.

POWSHS OF ASSOOLATrONS, lEBPOSOCTS, SHARES, ADVANCES .

AND ECNANCIAL PROVISI(»JS WITH.RESPECT TO ASSDOLUSt'OS^ '16 - 4<5

Powers of association. . ... ... ... ^ 16 Harried women and minors may be members of

association ... ... 17

Conditions in regard to savings deposits and

fixed deposits ... ... 18

Maximum savings deposit or' fixed deposit

by individual ';.. . ...; ^ 19

Saving in the oase of deposits by a trustee ... 20

Conditions relating to shards 21

Maximum shareholding - by indivi du al ... ... 22 Association may redeem share in certain oirouiu-

stano'es ... .,. «.. 23

, ■!

TABLE OF COKOMTS (c6nt.)

Advances must be reducible or fixed-term advanoes ...

Limit as to'amount of advance ,..

Government or looal government authori'fcy or

authorized agency,may guarantee repayment of advances Government or local government authority or

authorized agenoy may guarantee certificate of landholding as security for advance ...

Limit as to amount of advance when government or looal government authority or authorized agenoy has

guaranteed repayment ...

Method of calculating interest must be stated in

advertisement relating to advances .... ... ...

Conditions governing' advance on property already

mortgaged ;;... ... ... ,

Association may make further advanoes for certain purposes Limitation as to sum total of advances ... ■..'«' Valuation of property for purposes of advance ...

Valuator must have no pecuniary interest in advance .«.

Bity of director, etc., todisclose interest in advance Association may recover certain amounts in addition

to amounts entitled to under mortgage or cession •.*

Establishment of statutory reserve fund

Restriction on pledging of investments and mortgages -.

Restriction on borrowings ... P : ••."**' Association must hold certain amount daily as

security for repayments ... ...

Paragraphs

25 26

27

28

2?

30 \

31 32 33.

34 35

.36-' 37 38

3^

40

PAET III - .

MAKAGEMBRT £8? AMOTI STEAK ON.

Registered office of association Unancial year of association

Periodical statements as to financial position Annual accounts 1..

41 - 68 41 42 43 44

e/CN.H/hOJ/53

. TABLE OF CONTENTS (oont.)

Paragraphs

Association must provide fidelity cover •> 45 Annual and special general meetings of association ... 4©

Minutes of proceedings of meetings of association or

its governing boards ... 47

Inspection of minute books ... ... 4o

Keeping of books of account ... ... ••• *** ■ ' ^

Appointment of auditors *•• . •*• - 5°

Disqualifications for, appointment of .auditor fft 51

Contents of auditor's report ... •"* ... .

Auditor's right of access to books arid to meetings ... 53

Investigation of association.1 s affairs on application

"by members ••• ••• • • • -^

Investigation to associations affairs in other cases 55 Production of documents and evidence on investigations 56

Inspector's reports *•• • ... 57

Proceedings on Inspector's report ••• ■ 5*>

Expenses of investigation of association's affairs ... 59 Saving for legal practitioners and bankers ... ••• -»0 Office holders of the governing board • • • ol ■ Validity of facts of office holders ... -'•• ••• 62 Disqualification for appointment as office holder ... 63 Amalgamation of two or more association ... ••• ' "4 Modes of winding up affairs of association -65

Liability of members ... •>• •*• -•• °°

Liability of borrowers ... • • • °?

Judicial management of application - «•• oo

TABLE OF CONTENTS (oont.)

Paragraphs

PART IV -

FOHETC2I ASSOCIATIONS

Registration of foreign associations carrying on the same business ■■ t\ ••• ^{■ ■ • . • •■•}

Provisions of this law to. apply to foreign

associations ••* ••• •••

69 - 70

70

PAST V - 71-80

Lost or destroyed share certificates, pass books etc.

Exemptions from stamp duty ... • •••

Personal tax relief on interest on advances

made to individuals ••• ■*• ••• "*

Default in rendering accounts and furnishing information Acceptance of gratuities and benefits prohibited ...

False statements ..• ••• ' • • • • • • Default in complying with financial provisions

Evidence ... ••• ••• ••• ••• •"■

Penalties .. - • • • • • • • •"• • • • Regulations • ••• ••• ^{. • • ' a • •}

71 72

73 74 75 76 77 78 79 80

Wrrt^m

B/CH. 14/BCU/53' "

DRAFT MODEL

POE SAVINGS AND LOAN ASSOGTAKOTS SB0VIHEBO

(Name of oountry)

(Law No «... of 19..)

(Snaoted .• •,...,• « .r*.* 19*•)

ARfiANGEMENT OF SECTIONS PBEIiEtttNABX

Section ;. ." ..*?/ ".''.' '. ---■ '■- ■ . ■

1* Short title and date of commencement 2. Interpretation . ,

3. Appliqation of law.

frtv>^».*:#ite£

Page 2

PABT I

Registration of associations and matters related thereto

. / ■ . ■ ■ - _ ■ .

4- Prohibition of unregistered association

5- Mode of forming association

6. Matters which must be provided in rules of associations

7. Alteration of rules .

8. Bules open to public inspection , 9« fiegistration of associati ons

10. Registrar may inspect books andaooounts of any association

11. Effeot of registration A

12. Collusiveness of oertifioatft: of registration 13. Cancellation or suspension of registration 14* Name of association

15- Change of name of association

t

4

Powers of associations* deposits^ shares, advanoes and fmanoial provisions with yroaqt td assooiations

16. Powers of assooiations ■

17» Harried women and minors may be members of associations •

18. Conditions in regard to savings deposits and fixed deposits

19- Maximum Barings deposits or fixed deposits by. individual 20".' Saving in the case of deposits by trustee

21. Conditions relating to snares 22. Maximum shareholding by individual

23« Association may redeem share in certain circumstances 24- Advances most be reducible or fixed-term advanoes

25- limit as to amount of advance ;

26* Government or local government authority or authorized agency

may guarantee repayment of advanoes.

27» Goveriiment or local government authority or authorized agency

^ guarantee certificate of land holding as security for advano».

Page 3

28. limit as to amount of advance wh«n government or local

government authority or authorized agenoy has guaranteed

repayment.

29. Method of calculating interest must be stated in advertisement '

relating to advances

30. Conditions governing advance on property already mortgaged

31. Association may make farther advances for certain purposes 32. limitation as to &im total of advances

33. Valuation of property for purposes of advance

34. Valuator must have no pecuniary interest in-advance

35. Duty of official of association to disclose interest in advance.

36. Association may recc/er certain amount in addition to amounts . entitled to under mortgage or cession

37. Establishment of statutory reserve fund

38. Restriction on pledging on investments and mortgages 39. Restriction on borrowings

40. Association must hold certain sum daily in cash.

iART III -.<:•>■.,.

Management and administration

41. Registered office of assooiatior 42. Financial year of association

43. Periodical statements as to financial position

44. Annual acoounts . ;■■-.-.'

45. Association must provide fidelity cover

46. Annual and special general meetings of association

47. Minutes of proceedings of meetings of association or its

governing board

46. Inspection of minute books

49. Keeping of books of account ... ■

50. Appointment of auditors

51. . ^qualifications for appointment of auditor 52. Contents of auditor's report

53. Auditor's right of access to books and to meetings

54. Investigation of association's affairs on application by members 55. Investigation to association's affairs in

S/GS.O4/BV/33

Page 4

56. Production .of documents of evidence on investigation 57- Inspector1s reporstss ■

5.8• Proceedings on Inspector's report

59* Expenses of investigation of association's affairs 60. Saving for legal practitioners and bankers

61. Office holders of the governing board 62. Validity of acts of office holders

63- Disqualification for. appointment as office holder 64» Amalgamation of two or more associations

65. Modes of winding up affairs of association 66. Liability of members

61* Liability of borrowers

68. Judicial management of association

PART IV , .

69- Registration of foreign associations carrying on the same business 70* Provisions of this law to apply to foreign associations

■■■ — PAST V

71- Lost or destroyed share certificates,, passbooks etc.

72, Exemptions from stamp duty*

73* Personal tax relief on interest on advances made to indificuals 74* Default in rendering accounts and furnishing information

75* Acceptance of gratuities and benefits prohibited 76. False statements

77* Default in complying with financial provisions 78. Evidence

79. Penalties 80. Regulations

First Schedule Second Schedule

Third Schedule , .

B/CN.14/H0a/53

Page 5

LAW TO CONTROL THE REGISTRATION KSJ> OPERATIONS

OF SAVINGS JXV LOAN ASSOCIATIONS IH. ■(.,.. ) (AND TO AMMD THE LAW RELATING' TO THB INVBSTHEffT OF THtTST MONEYS XX- TRUSTEES) AND' FOR MATTERS

THERETO AND CONNECTED THEREWITH.

PREUNENART

Short title and date of commencement

1- This law may be cited as the savings and loan association la*,

19.. and shall come into operation on a date to be. (fixed by th*

Minister responsible by notice in the ( )•

Inteypretati on

£. In this law, unless inconsistent with the context -

"advance" includes one or more advances on the security of a mortgage

or a cession of a lease of one property or of two or more properties

jointly; ,

"approved investment" means an investment approved in terms of paragraph

(j) of sub-section (l) of section seventeen; .

rtauthorised deposit" means a deposit mentioned in paragraph (g) of

Bub-eeotion (l) of section seventeen;

"Board of direotors" in relation to any society means the managing body thereof by whatever name it may be called;

"cession" means a cession of a registered lease of urban immovable

property, the unexpired period of which is at the date of cession

not less than thirty years; '

"court" means the High Courst (of ...) and in relation to any

offence under this law includes a subordinate court having jurisdioation

in respeot of that offence;

"direotor" includes any person occupying the position of director or

alternate direotor of an association by-whatever name he may be called;

"fixed deposit" means a deposit for a period which is fixed in accordance

with the provisions of paragraph (e) of section nineteen;

"fixed-period share" means a paid up share issued for a period of five years or for a longer period which may not be redeemed before the expiry

of the period to which it is issued; k

Page 6

"fixed term advance" means an advance oh terms and conditions which provide for the repayment of the capital amount with interest advanced within a.fixed period;

"general reserve fund" means any general reserve fund established by an association other than a statutory reserve fund and built up out of profits and not set aside for any specific purpose}

"member" in relation to an association meane a person who holds shares

therein,, whether fully or partly paid up, which participates in the

profits thereof whether or not such shares are held by the association as

security for an advance;

"mortgage" means a mortgage of land (including buildings erected

before or after the mortgage is established);

officer" in relation to an association means any directors, manager, seoretary, clerk, agent or other employee of the association but does not include an auditor of the association;

"permanent share" means a fully paid up share of which the holder shall

not be entitled at any time to demand redemption l?ut which the associa

tion may redeem after six months notice to the holder of its rules

so provide;

"reducible advance" means an advance on terms and conditions which provide

for the reduotion of the capital amount with interest advanoed by

periodical payments; '

"Registrar" means the officer appointed by the government to be

Refigstrar, and includes any officer acting as Registrar for the time

being.

"regulation" means a regulation made and in foroe under this law;

"savings deposit" means —

(a) a deposit other than a fixed deposit;

(b) a deposit for a fixed period not exceeding twelve months;

"secretary" in relation to an association includes any executive officer

of the association aoting in.the capacity of secretary;

B/CH,14/HOJ/53

Page 7

"association" means savings and loan association as defined in

section three.

"statutory reserve fund" means a statutory reserve fund established

in terms of sectiton thirty-nine;

"subscription share" means a share which - (a) is paid for by periodical contributions;

(b) is calculated to mature at the expiry of a period of not less than three years; and

(c) may not be redeemed before the expiry of the maturity

period;

is law" includes any regulation;

"urban immovable property" means -

(a) any piece of land registered as a lot in the Deeds (or Land Registry) Office;

(b) any small holding and any other piece of land not exceeding (five) hectares in extent situated in an urban area and as such under physical planning

legislation and used or intended primarily for residential purposes;

(c) any other land which the government or local government authorities where so authorized may classify as urban immovable properties for the purpose of this law.

Application of Law

3. Every association and foreign bodies corporate carrying on the same business unless otherwise provided for in this connexion

(1) The provisions of this law shall apply to every association..

(2) For the purposes of this law the expression "savings and loan association" means an association of persons -

(a) whose name or title contains the words "savings and loan association"; or

(b) whose principal object is raising money by issuing shares to its members and by accepting deposits or loans from its members and others, and using such money to made advances to members and others upon the security of a mortgage or cession for the pirpose of enabling the persons to whom such advances are to be made to acquire urban immovable property or to erect and maintain buildings upon urban immovable property;

B/CN.14/HOJ/53

Page 8

(o) any foreign "body corporate carrying on the same business

and register under this law for these purposes, provided that any foreign "body corporate "being already a limited liability company and carrying on the.same business*

PART I

REGISTRATION OP ASSOCIATIONS AND MATTERS INCIDENTAL THERETO Prohibition of unregistered associationt

4» (i) No society, association or company shall carry on business

in the country as a savings and loan association unless it is registered in terms of this law.

(ii) Any society, association or company which contravenes the

provisions of subr-section (i) shall be guilty of an offence and liable on conviction to a fine not exceeding ( ).

5* Any seven or more persons may form an association by subscribing their names and addresses to rules agreed to by them for the government of such association and by obtaining registration under this law.

Matters which must be provided in rules of association;

6» The rules of every association shall provide for the following

matters —

(a) the name of the association and the situation in the country

of its head office or in the case of a foreign savings and loan association registered under this law the name of the

association and the situation andpctfal address of its principal office in the country;

(b) the principal objects of the association;

(c). the manner in which the funds of the association are to be

raieed, the purposes to which they are to be applied and the manner in which surplus funds are to be invested?

(d) the manner in which a person may beoome a member and may

cease to be a member;

(e) the classes of shares to be issued, the conditions of redemption

or repayment of shares, and the preferential and other special rights attaching to each class of shares)

B/CN.14/HOU/53

Page 9

(f) the manner in and the conditions upon which advances upon the security of a mortgage or cession are to be

made and repaid, and the conditions upon which a borrower shall "be entitled to repay the amount owing "by him

"before the expiry of the period for which the advance

was made;

(g) the conditions upon which the association will acoept and

repay deposits;

(h) the fees, fines and charges that may be demanded from or imposed upon shareholders, depositors and borrowers;

(i) the manner of appointment of an auditor of the

association;

(j) the manner in which profits or losses are to be ascer tained and dealt with or provided for;

(is.) the manner of altering and rescinding the rules of the .;. ■ association and of making additional rules;

(l) the manner of electing, appointing, removing and

fixing the remuneration of directors, their qualifications.

powers and duties and the manner of appointment,

removing and fixing the remuneration of members of local ;

boards or committees and of officers of the

association;

(m) the manner of calling annual general meetings and special general meetings of members, the quorum necessary for the transaction of business at such meetings and the manner of voting thereat;

(n) whether disputes between the association and any of its members, or between the association and any persons claiming under the rules or whose claims are derived from members shall be settled by the court;

(o) such other matters as may be prescribed from time

to time.

The registered rules and any registered amendments thereto as hereinafter provided shall be binding on the association and members and officers thereof, and on all persons claim-ing under the rules or whose claim is derived from a member. •

Page 10

Alteration of rules: ... , .

7. (l) An association may, in the manner directed by its rules alter or rescind any rule, or make any additional rule, but no such alteration, rescission or addition shall be valid if - (a) Jt purports to affect the right of a creditor of an .

association who is not a member thereof; or

(b) It isdirected against .any particular individual} or , (o) It purports to alter the rights of members in a winding up-

(2) Two copies of every resolution for the alteration or

rescission of any rule or the making of any additional rule shall be signed by two directors and the secretary of the association,

and shall be transmitted by the secretary of the association to the Registrar, who if he i.s satisfied that such alteration, rescission or addition is in conformity with this1 Law, shall

register the resolution and return one of the copies to the secretary

of the association, with.,the date of registration endorsed thereon, and as from the date of registration the';alteration, rescission or addition, as the case may be, shall take effect.

Rules open to ]*iblic;

8. (l) Every association shall

for inspection by members of the public hours of the association.

make a copy of its rules available during the normal business

(2) Any association which seotion (l) shall be guilty of an a fine not exceeding (. ).

Registration of associations:

contravenes the provisions of sub-

offence and liable on conviction to

9« (l) The persons intending ifo jestablish a savings and loan

association; shall lodge with the Registrar the rules agreed upon by them for the government of the association and signed by them, together with such particulars relating to -the signatories thereto as the

Registrar may require.

(2) ihe Registrar shall, after consideration of such rules '

and particulars and such further information and arguments as may be submitted to him by such persons, determine whether aocording to its rules, the association to be established is or is not an association in terms of this law.

/ Page 11

(3) If it be determined, in terms of sub-section (2) t£

society to be established is not an association, .the Registrar.**^

inform such persons accordingly*

Provided that the decision of the Registrar j^

Bisection shall be subject to an appeal to the Court, if such appeal be made within one calender month after

the decision of the Registrar has been announced.

(4) If it be determined in terms of sub-section (2) that the Law and if he is satisfied that the rules are financially

£»£ ra&ssos sss-JLrw

inspect books and aooounts of

10. The Registrar may at any time make an inspection orcause an

inspection to be made of the books, accounts and records of any

association of persons for the purpose of determining whether the

association is an association or not in the terms of this Law.

Effect of registration:

11, (l) ffrom the date of registration of an association under ifrfyp ■ Law suoh association shall be a body corporate which shall be oapajle of suing and of being sued in its registered name and subject to>the

provision of its rules and of this Law, of doing all such acts as a body corporate may by law perform.

(2) Whenever an association which is registered under a law

relating to companies is registered under this Law the Registrar shall no%if^ the Registrar of Companies in writing of such registration, and the Registrar of Companies shall thereupon strike the name of the

association off the register of companies.

(3) Whenever an association which is registered undier this Law is registered under a law related to companies, the Registrar of

companies shall notify the Registrar of suoh registration, and Hegistrar

shall .thereupon strike the name of the company off the register of

companies.

m/cauu/m/ss

Page 12

ConolnBiyenesB of certificate of registration:

12. A certificate of registration of an association issued by the Registrar shall, upon its mere production, in the absence of proof of fraud, be conclusive evidence that all the requirements of this Law in respect of registration and of-matters precedent and incidental

thereto have been complied with andthat the association is duly registered.

Cancellation or suspensions of registration:

13. (l) Where the Registrar has reasonable grounds for believing!

(a), that a certificate of registration has been obtained \

for an association by fraud or mistakej

(b) that an association exists for an illegal jurpose;

(c) that an association has willfully and after notice from •

the Registrar exceeded its powers or contravened any of . the provisions of this Law applicable to it; or

(d) .that an association has ceased to conduct business as an

association in terms of this Law;

the Registrar may apply to the court for an order for the oancella- tion or suspeotion of the registration of the association.

,,- (2) The Registrar shall, be^oi-e'making any such application,

give to the association not less than two months notice in writing of his intention to make the application, specifying briefly the grounds of the proposed application.

(3) The court may order the cancellation of the registration. ..

of the association or order the suspension of such registration for such period as it thinks fit, and may attach to any order such

conditions as it thinks desirable, or may.make any other order which in the circumstances it thinks desirable. The Registrar shall forthwith

give effect to any or^er for cancellation or suspension pf registration.

(4) Unless the court otherwise orders, the costs in connexion

with the application shall be paid by the association and shall be a first charge upon the assets of the association.

(5} The Registrar shall cancel the registration of an association

if the association by resolution, passed at a special general meeting oonvened for the purpose, resolves that the registration of the assooia- tion be cancelled. Such resolution shall be passed by a majority of the members voting in accordance with the rules of the association.

; -*■

B/CN.14/HCXJ/53.

Page 13

.., Provided that where the members so voting in favour of such resolution

io not hold more than one half of the value of shares of the association,

as. shown; in the books of the association, the resolution shall'not

become effective until the concurrence in writing is obtained of other members whose shares together with the shares of the members who voted in favour of the. said resolution exceed in value one half of'the total value of shares of the association, as shown in the books of the

association*

(6) The Registrar shall, as soon as practicable after any cancella tion or suspension under sub-seotion (3) or (5)j cause notice thereof to be published in the (Gazette) and in a newspaper circulating; i# tJ|*

cointryv , ■ ■-. ■ '■■■■■ ■ " " ■ ■ ' " ■■""■■■

(7) Any cancellation or suspention of registration shall be wi/t&out

prejudice to any right acquired by any person against the association before the publication in the (Gazette) of the notice referred to in

sub-section (6). '

Same of association

14* (l) tfo association shall be registered by a name which is identical

with that of a registered association or which so nearly resembles suoh name as to be calculated to deceive unless the registered association ia in liquidation and consents to the registration. .■'■-■■-.

(2) The Registrar may refuse to register an association by a name ' .:

which in his opinion is calculated to mislead the public or to cause, v, offence to any person or class of persons.

Change of name of association -

15« (l) An association may change, its name "by Resolution passed at a ;- s-peoial general meeting called for the purpose. . Such resolution shall be passed by a majority of the. members voting in accordance with the rules:

Provided that where the members so voting in favour of suoh resolution do not* hold more than. ojie. half of the value of shares of the association as shown in the books of the association, the resolution shall1,n-ot become effective until the concurrence in writing is obtained of othep members

whose shares together with the shares of the members who voted.in favour

of the said resolution, exceed in value one half of the total nominal or face value of the shares of the association as shown in the books of the association.

(2) Upon receipt of notice of such change of name, the Eegistrar,

subject to the provisions of section fourteen, shall enter the new name in his records in place of the former name and shall issue a certificate of registration to the association under its new name.

. £

Page 14

■i ■■, --,.

,_. . The change of name shall not -affect any right or Obligation .';*

of the association or of any member thereof* or other person ooncerned, or sender defective any legal proceedings by., or ^against .the society :r and: any legal proceedings that may have fceen commenced 03? continued r.-r:-;-;.

by or, against it under its former name may be continued under its

new name, .. , : , * ■ ,

(4) The Registrar of Deeds upon production to him "by the society of

any. mwp-^jage bond or of, the title deeds of any immovable^ property [''.

belonging to .iihe association and a certificate, by the Registrar of the-

regj^rajfcion. of^ the; assooiation.under its new name; and upon, payment of

the fees that may be payable in terms of any law relating to deeds -."<

offices, shall make such endorsements upon such bond or title deeds and jBueJi alterations in his registers as are necessary by, reason of -

the change of name. ,t ... . , .,:■ ;. ,:

POWERS OF ASSOCIATIONS, KEPOSETS, SHARES, ABVANCBS, OT.AH&AL PHOVIStCNS WIOH EBSPECT TO

Powers of association; *

16, (l) aibje$t to the provisions of this Law an association shall

have the following powers:

(a) to acquire or retain the ownership of land or the lease

of land and to erect buildings thereon-primarily required : for the administration of the association's affairs, and

from time to time to alienate such land or terminate or ' j ■ .-■ oede such lease and acquire or hire other orr further land J

-for like jurjioses and to let such portion of the buildings in which the business of the association is carried on .: ^-c as may not be required for the pur^oees of the vassooiations

..-= ' -provided that the total value of land acquired and tiuildings v-; 'erected shall not, without the consent in writing of the ; ;, :■■ ■-■•■■ Eefip-strat, exceed an amount equal toJ twenty per cen^fc 6f its

periQanlent share capital and the amount standing to the orediV of its statutory reserve fund- and general reserve fund;

(b) to buy in immovable property mortgaged to the association

or aoquire leases of land ceded to the association in security for debt and to sell such iittmovable property or leases wi tnin

(twelve months) of possession. r

B/CH.14/HOJ/53

Page 15

(c) to receive savings deposits;

(d) to receive fixed deposits;

(e) to borrow money other than in.the form of deposits, and to arrange overdraft facilities with a bank;

(f)' from time to time to issue shares of suoh classes

and denominations, with or without accumulating dividends, and with such preferential rights regarding dividends and capital, and subject to such conditions of transfer and repayment as may be decided by the association in

accordance with its rules;

(g) to hold cash and make deposits with any institution authorized by Law to provide banking services;

(h) to lend or advance money to members and others on the security of mortgages or cessions, and to negotiate the purchase or sale and the hiring or letting by

members or others of urban immovable property mortgaged

or to be mortgaged to the association;

(i) to lend money to members and others on the security of their deposits and to members on the security of

their shares;

,(j) to invest in such bills, bonds, certificates, debeninres, stock or municipal loans as may be offered to the jublic under government or local government authorities notice;

(k) to act as the agent of insurance oompanies in effecting insurances affecting property mortgaged or to be mortgaged to the association and any other insurances designed to secure a debt to the association and to collect on "behalf of such companies the premiums in respect of any

insurances pledged to the association;

(l) to pay pensions or gratuities to its employees, or to establish a pension fund or to adopt a pension scheme for providing pensions or gratuities for its employees, or to join with other associations in establishing or adopting any such fund or pension scheme;

(m) to do all lawful things incidental or conducive to the powers conferred upon it in terms of this section;

*■< ,^

S/C&M4/HOJ/53

16

(2) An association shall not,undertake any business other than that authorized by this section, and' in particular shall not enter . into any contract (other than a contract for the allotment of shares

in terms of paragraph (f) of sub-section (l)» or for the receipt of money on deposit .orJloan in terms of paragraphs (o), (d) or (e) of

that sub-section) whereby, in return for one or more aims of money paid to the association, the association agrees to pay a sum of money at a future date or a series of sums of money at Juture dates.

Married wd&en and minore may be members of association:

17. Unless otherwise provided by the rules of the association, a minor over the age of sixteen years or a married woman whether under marital power or not may be a member or depositor of any association and may without assistance execute all necessary documents, give all

neoessary acquittances and enjoy all the privileges (except,that a

minor shall not hold office) and be liable to all the obligations

attaohing to me&bers or depositors.

Conditions in regard to savings deposits and fixed deposits*

18. No association shall «' '

(a) issue any form of application to make savings.deposits which does not contain a printed reference:-.to this

section; ■

(b) issue any form of application to make a fixed deposit whioh does not contain a printed .reference to this seotion?

(c) accept-a deposit from any person unless such person has signed a form of application to make deposits, with suoh association;

(d) accept any deposit as a fixed deposit for a period whioh

; is less than twelve months or more than five years t Provided that the directors in their discretion may authorize the withdrawal of a fixed deposit before its

due date; - ; ; ■ ' _

(e) allow any savings deposit to be withdrawn except after due notice given in accordance with its rules;

(f) allow any deposit to be withdrawn by cheque, draft or order payable on demand;

(g) allow a notice of1 withdrawal of a savings deposit to run concurrently with a notice of withdrawal which was

previously given.

B/C3J.14/HC0/53:

Page 17

Maxinum savings deposit or fixed deposit by individual;

19- Expept with1 the written consent of the Begistrar and subject

tp such conditions as he may determine, no association shall, in

delation to its total assets as severally set out in the first

column of the First Schedules allow any person -

(a) to maintain a oredit balance in his sayings: deposit

account in excess of the amount set out in the seoond column of the said Sohedulej or

(b) to hold fixed deposits which exoeed in the aggregate,

exolusive of interest, twelve times'- the amoutiV set out"

in the third column of the said Sohedule or which fall due for repayment in any one month in an ^mount ' which exceeds, exolusive of interest, the amount set

out in the said third column. : ;

Saving in the case of deposits by a trustee;

20. Notwithstanding the provisions of section nineteen an

association may accept deposits from a trustee for different

trusts which exceed in the aggregate the limits specified in that section if the amount deposited in respeot of eaoh individual trust

does not exceed such limits.

Conditions relating to shares:

21'« No association shall -

(■*).: issue any prospectus relating to. its shares unless

.such prospectus is printed in (English) and states - (i/ the names of the directors of the association;

fii) the classes of shares issued or to be issued by the association, the conditions of redemption

-■\ or repayment thereof and'the, preferential- ,,;,V;,r; _. and other special rights attaching thereto; and

I111) tlie provisions of section sixty-four;

, .Id; issue.any form of application of shares unless there

, ,.., .. . is firmly attached to such forffi a prospectus whioh is

in accordance with the provisions of paragraph a),;,.

(c) accept any person as a member unless he has signed

a form of application for shares in the association;

(d) issue any shares other than permanent shares, fix^d-

period shares variable paid up shares or subscription

shares;

Page 18

/

(e) issue any permanent share or fixed-period share unless

it is paid for in full when the application for such share

is accepted;

(f) issue any share at a value other than its nominal or faoe

value; . -

(g) pay dividents on shares except out of profits which are

available after provision for the statutory reserve fund • _: .has teen-made in accordance with the provisions of section

thirty—seven.

Maximum shareholding by-individual:

22. No sooiety shall, except with the written consent of the Eegistrar and subject to such conditions as he may determine, allow any one person to hold fixed-period or subscription shares in excess of the amount set out in the second column of the Second Schedule in relation to the

association's total assets as severally set out in the first column of the said Schedule.

Association may redeem share in certain ciroumstances:

23. Notwithstanding anything contained in this Law an .association

may redeem any share -

(a) at any time if the owner and the association agree to

the redemption;

(b) in the event of the death or insolvency of the holder

thereof if the executor or trustee, as the case may be

consents thereto. ;

Advanoes must be reducible or fixed-term advances:

24- U) No association shall, on the security of a mortgage or

cession, make any advance other than a reducible advance or a fixed-

term advance. ... . .

(-2) The terms of a reducible advanoe shall provide for the

annual reduction of the capital amount outstanding and for the repayment of the total capital amount without a period of not more than

(twenty) years. If any portion of the capital amount advanced has

been repaid to the association and the association has re-advanced

an amount equal to the portion so repaid, the capital, amount of the original advanoe still outstanding and the amount so re-advanced

shall be repaid with a period of not more than (thirty) years

calculated from the date of the original advance.

E/CN.14/HOJ/53

Page 19

(3) The terms of a fixed-term advance shall provide that the capital amount advanced shall he due for repayment within a period

of not more than (seven) years.

: (4) The aggregate amount of fixed-ierm advances shall at no time exceed ten per cent of the total amount of ali advances made

"by an association on the security of mortgages and cessions.

Limit as to amount of advance;

25» (l) Subject to the provisions of sub-section (2), no

association shall, on the security of a mortgage or cession, make

an advance in exoaess of (ninety) per cent of the value of the

property mortgaged or the lease ceded as determined at the time of making the advances

Provided-that in- respect of property which was mortgaged to an association and which'has "been purchased by the association owing to the default of the debtor or which has been sold in execution or upon insolvency or under the authority of the debtor granted^

subsequent to his default under a registered mortgage bond, an , association may make a reducible advance to a purohaser on the security of a mortgage in an amount not exceeding the amount due. to the association by the previous owner at the time of sale and

previously secured by the mortgage of the said property.

(2) An association may in conjunction with an advance made on

the security of a mortgage or cession, make an additional advanoe against collateral security on such terms and conditions as may be determined by the Registrar.

Government or local government authority or authorized agenoy may guarantee repayment of advances

2fi. (l) The government or local government authority or authorized

agency may guarantee the repayment of advances made by ah association on the security of a mortgage or cession. , :

(2) Any guarantee given in terms of this section shall be

deemed to be collateral security for the purposes of sub-section (2) of section twenty-five.

e/cn. 14/HOU/53

Page 20

Government or local government authority or authorized agency may guarantee certificate of landholding as. security for advanoe

27. Government or local government authority or authorized agency may, where individual ownership of land on whioh an advance has been

requested cannot be proven, issue a certification of landholding in favour of the applioant for an advance sufficient to oover his occupation of the land over the period of repayment of the advance.

Provided that occupation of the land satisfies any.other existing rule of Law.

Limit as to amount of advance when government or local government authority or authorized agency has guaranteed repayment;

28. The total amount of any advance and of any additional advance

of whioh the government or local government authority or authorized agency has guaranteed repayment in terms of section twenty-six shall not exceed in any individual case (ninety) per cent of the value of the property mortgaged or the lease ceded as determined at the time of making the advance.

Method of calculating interest must be stated in advertisement

relating to advances:

2?*. No association shall issue any advertisement, notice or other

similar document relating to its advances unless such advertisement, notice or document contains a clear statement containing the method by whioh interest is calculated, e.g. instalment system or annuity

system.

Conditions governing advance on property already mortgaged

30. An association may advance money on the security of immovable property which is subject to an existing mortgage provided that the mortgage be made over in favour of the association and shall, from the time that such mortgages be made, become the first charge on the immovable property affected.

Association may make further advances for certain purposes:

31. Notwithstanding the provisions of sections twenty-five and twenty-

eight an association may for the purpose of protecting immovable

property mortgaged or a lease ceded to it or for the purpose of maintaining its security for the repayment of an advance, make further advances in respect of -

E/CN.14/HOJ/53

Page 21

(a) Premiums on insurance policies designed-to provide further security for the repayment of

an advance;

(b) Hates and taxes in respect of the said immovable

property;

(o) The maintenance and repair of the said immovable

property;

(d) The installation Cf sewerage on the said immovable

property.

Limitation as to sum total of advances;

32. The sum total of all advances on each of which tfcere is owing

to the association an aggregate amount in excess of ( )

shall at no time exceed the percentage set out in the second ooiaimn of the Third Schedule in relation in each case to the total assets of the association as severally set out in the first column

of the First Schedule. - > -.

Valuation of property for purposes of advances

33. (1) No association shall make any advance unless it is based upon a valuation made in accordance with the provisions of sub

sections (2), (3) and (4) by a person, hereinafter called a valuator' appointed by the association for the purpose.

(2) Every valuator shall make a personal inspection of the immovable property concerned:

Provided that a valuator shall not be required to make such inspection in the case of vacant land with which he is personally acquainted.

(3) Every valuator shall record his valuation and the date of his inspection on a prescribed form and shall sign such form.

(4) In the case of immovable property which is acquired by purchase not more than six months before the date of valuation, the valuation shall not exceed the true purchase price of such property as declared by the parties concerned for transfer duty

purposes "by more than ( '•••) unless the board of directors of the association resolves that in ate opinion on the information furnished to it a stipulated valuation in excess of such purchase price is reasonably justified.

Page 22

Valuator must have no pecuniary interest in advance:

S4. (1) No association shall appoint as a valuator, in terms of

sub-section (l) of section thirty-three, any person who has any

direot or indirect pecuniary interest other than the payment of fees for professional or legal services in the granting of an advanoe.

(2) Wo person shall make any valuation for the purposes of sub-section (l) of section thirty-three if he has any direct or

indirect pecuniary interest other than the payment of fees for

professional or legal services in the granting of ah advance, or if he is related within the third degree of consanguinity or

affinity to any person having such an interest in the granting of an

advance. ..

(3) Any association which or person who contravenes the, provisions of this section shall be guilty of an offence and

liable on conviction to a fine not exceeding (.. )•

Duty of director, etc., to disclose interest in advanoei

35. (l) Every director, local director or member of a local

committee of an association who has any direct or indireot pecuniary interest in the granting of an advance shall declare the nature and extent of such interest at any meeting of,the directors, local directors or local committee of the association where the granting of such advance or the valuation of any property offered as security

for such advance is considered.

(2) No such director, local director or committee member shall take part in the discussion at such meeting or exercise

his vote thereon*

(3) Any person who oontravenes any of the provisions hereof shall be guilty of an offence and on conviction liable to a fine

not exoeeding ( ) •

Association may recover certain amounts in addition to amounts entitled to under mortgage or cession:

36. An association may obtain judgement for and recover any ambuni

disbursed by it on behalf of any person to whom it has made an advance on the security of a mortgage or cession in respect o£ :

(i) premiums oh insurance polioies designed to provide further security for the repayment of the advance? .

Page 23

(ii) rates, taxes and fees in respeot of the immovable

property which has been mortgaged or the lease of which has been ceded}

(iii) the maintenance arid repair of the said immovable

property1; and

(iv) the installation of sewerage on the said immovable

property; ;

in addition to the amounts whioh it would be entitled to obtain judgement for and recover under such mortgage or oessionf

Establishment of statutory reserve fund:

37-(l) . Every association shall-establish a fund to be known

as the statutory reserve fund, '

Sibject to the provisions of sub-section (3) an association shall at the end of each finanoial year pay into the statutory reserve fund an amount which shall not be less than ten per cent

of its ascertained net profits.

(3) If and so long as the amount standing to the oredit of the

statutory reserve fund is equal to or more than ten per oent of the sum of the association's total liabilities to depositors and in res pect of loans and overdrafts-received and the paid up share capital ,of the association, the association shall not be obliged to make the

payment referred to in sub-section (2).

(4) Ho dividend bonus or donation shall be paid out of

the statutory reserve fund.

(5) Moneys standing to the credit of the statutory reserve

fund shall be invested in approved, investments or any loane oxT advances to members or others on the security of mortgages or cessions in terms of paragraph (h) of sub-section (l) of section

sixteen.

(6) M association may charge against the statutory reserve-fund

any net loss remaining to the association in any year after apf>lyitig to such loss any undistributed profits brought forward from previous

years* - ■ ■

4*

Page 24

Restriction of pledging on investments and. mortgages*

38. An association shall not pledge any approved investment as secu

rity for a loan or overdraft unless it holds in cash or on authorized deposit or in approved investments sufficient assets, excluding the investment so pledged, to enable it to comply with the requirements of section forty.

(2) An association shall not pledge any mortgage as security for

a loan or overdraft unless it holds sufficient unencumbered assets in cash, or on authorized deposit* or in approved investments, or in mortgages to cover the total amount of its liabilities as set.out in

sub-^seotion (l) of section forty including any amount received, on the

security of such pledge. :

Restriction on borrowings;

39« (l) Subject to the provisions of this section, an association

shall not accept any money on deposit or borrow any'money by way of loan or bank overdraft if -

(a) the sum of its permanent share capital and the amount

of its statutory reserve fund and general reserve fund is or would by so doing be less than one quarter of the sum of its liability for deposits; loans and bank over drafts and the paid up value of its other classes of shares; or

(b) its total paid up share capital is or would by so doing

be less than forty per cent of the total amount of its liability for. deposits, loans and overdrafts.

(2) For the purposes of paragraph (b) of sub-section (l)

the amount of the paid up share capital shall be deemed to be reduced by the aggregate amount owing to the association on loans made against the security of shares in the assooiatibm

Provided that in any case where an advance made by the association is secured by a mortgage or by a cession in addition to a.pledge of shares in the association, the amount of the paid up share capital shall be deemed to be reduced only by the amount by which the advance exceeds seventy-five, per cent of the value of

the property which is mortgaged or of the lease which is ceded,

as the case may be.

(3) Of the paid up share capital taken into account for

the purposes of paragraph (b) of sub-section (l) hot less than

three quarters shall consist of permanent share capital.

E/CSM4/HCU/53

Page 25

Association must hold certain amount daily as security-for repayments:

40. (l) Subject to the provisions of this section, every associa

tion shall, after making provision to meet its liabilities other than those mentioned in this section from day to day hold an amount in cash or on authorized deposit or in approved investments as security

for the prompt repayment of fixed-period and subscription shares and of deposits, loans and overdrafts and for the payment of interest

accrued thereon.

(2) Sich amount shall not be less than the sum of the follow

ing amounts;

(a) an amount equal to thirty per cent of the aggregate

amount of its liabilities in respect of -

i) savings deposits;

ii) unsecured bank loans and overdrafts;

iii) other loans to the extent to which the

lenders may demand repayment within a period of one year;

iv) interest accrued on all loans and deposits;

(b) an amount equal to twenty per cent of the aggregate

amount of its liabilities in respect of -

i) fixed deposits;

ii) subscription shares issued for a period of

not more than five years and fixed-peri"od

shares;

iii) loans to the extent to which lenders may

demand repayment within a period of five years but excluding any amount which has been taken

into account in computing its liabilities in

respect of such loans in accordance with ' paragraph (a):

Provided that where deposits are fixed period shares

have been pledged to the association as security for

advances made by the association, the liabilities of

the association as calculated for the purposes of

this paragraph shall be reduced by the amount of

deposits or fixed-period shares which at any time

remain pledged to the association;

Page 26

/

' . : £pt) ...an amount,.9qjjal.t0.ten per oent of the aggregate. ... ..

amount of its liabilities in respect of -

(i) subscription shares issued for a period of more than five years and fixed period shares;

(ii) loans other than any specified in paragraph (a)

and (b) and repayable after a period of five

years:

Provided that where shares have been pledged against advances made by the association, the liabilities of the association as calculateted for the jxirposes of this, paragraph shall be reduced "by the value of the shares which at any time remain pledged to the

association;

(d) an amount equal to thirty per cent of the aggregate amount of its liabilities in respect of advances which the association has undertaken to make but which have not yei been made.

(3) For the purposes of this section an approved investment

shall be valued at the cost thereof to the association or the market .value thereof, whichever is the lower.

*

(4) The amount held by an association for the purposes of

this section shall not include any moneys belonging to its statutory reserve fund.

(5) An association shall not pledge or.otherwise encumber

any moneys deposits or investments held for the purposes of this section:

Provided that the Registrar may in special circumstances permit an association to pledge or otherwise encumber suoh moneys, deposits or investments to suoh extent, and for such period and on such terms and conditions as he may determine.

, 14/HOJ/53

Page 27

PART III

MANAGEMENT ' AND ADMINISTRATION

Registered office of association:

41- (l) Every registered association shall haye its head ofifiotf

in the country or, in the oase of a foreign savings and loan

association registered under this Law, such association shall have a principal office in the country.

(2) Notice in writing of the situation and postal address

of the head or principal office shall he lodged "by the association with the Registrar when application for the registration of the association is made, and whenever any ohange takes place in the situation of the head or principal office a notice in wrting of the change shall he lodged by the association with the Registrar

within fourteen days thereof.

Financial year of association:

42. The financial year of every association, shall encl on the thirty-first day of ( ...)•

Periodical statements as to financial position :

43. Every association shall at such intervals and in such form as may be prescribed, transmit to the Registrar a statement signed >y two directors and the secretary, setting out the financial position

of the association in relation to the requirements of sections thirty-

nine and forty-

Annual Accounts: - '■*

44. (l) Every association shall at the end of every financial

year prepare:

(a) an account of all the revenue and expenditure of

the association since the close of the period covered by the preceding account:

(b) a statement of its assets and liabilities; and (o) such subsidiary statements as may be prescribed;

which account and statements shall include such information and shall be prepared in such form as may be prescribed.

f

.L

-■\ ■v--.---.-i>.

Page 28

/

(2) No such acoount and statement shall include as an asset

any sum representing expenses of organization or extension or the purchase of "business or goodwill unless provision is made for the writing off of such sunn during a period not exoeeding-five years.

(3) A copy of every such annual account and statement shall

be sent to the Registrar within such period;."as he may determine. ■ Association must provide fidelity cover; . . : , .- . ■ :

45* (l) Every society shall, either by insurance with an insurance

company approved for such purpose by the Registrar or by the establish ment of a fund for the purpose, furnish and maintain suoh security as the Registrar deems adequate to make; good any loss resulting from the negligence' or dishonesty of any of the association's officers.

(2) The assets of any fund established in terms of sub-section (1) may be invested in deposits with the society, but shall not in any

other way be merged with the assets of the association.

Annual and special general meetings of association:

46. (l) Every association shall hold a general meeting within

four months after the close of every financial year. Suoh meeting shall be designated the annual general meeting and shall be held at the head or principal office of the association or at suoh other convenient place and at such time as may be prescribed by the rules

of the association. .

(2) The following matters shall be dealt with at the annual

general meeting: .

(a) consideration of the accounts and statements referred

to ip section forty-four;

(b) the report of the directors;

(o) the report of the auditor?

(d) the election of directors fand the financial position

of the society may be considered and general business

transacted. ■

B/CN.H/HOa/53

Page 29

(3) A special general meeting may be conveyed by thre© oi"

more directors and shall be convened by the board of directors on the requisition' of\£i£ty. members or not Jess than ,one-tenth of

body of members if the membership is less than five hundred, or.of such smaller number or propoirt on of members as the rules of the associatioiimSy

(4) If within fourteen days after.the receipt of such a .

requisition, a special general' meeting of the association is not.

convened by the board of directors, it may be convened by the

requisitionists or' a majority of them* :'

(5) Notice of annual and special general meetings of an association shall be given to members, the Registrar and the auditor of the association in accordance with the rules* and. shall specify the day, hour and place and the agenda of the meeting*' -and if any alteration? rescission or addition to the rules is intended to be proposed, the notice shall contain every such alteration, rescission!

or addition. -■ -.,-.. ...

Minutes of proceedings of meetings of association or its governing

board. ■; ■ . . ". . ■ ' '.

47* (l) Svery association shall cause ifiinutes.of1 all proceedings

of general meetings and all proceedings at meetings of its directors to be entered in 'the (English)language in books kept for that purpose.

(2) Any such'ininutes if purporting to be signed by the

chairman of the Lieeting at which the proceedings were had. ox- by the chairman .of. the next, succeeding meeting, shall be evidenoe

of the proceedings* ... - . :

Inspecti n.of minute "books: , . , . . ... ,-,-.■ ,: u--

■■-■■'.' ■ '■- ■,-,■■, . . ... c ■ ■ ■

48. . ,('!.). ■■ The books :or .cop-ies of the books.certified by,a direqtpr.

or the secretary, containing the minutes of proceedings of any general meeting of an association held after the ^onua.enc.ejnent of this I*aw (' ., shall be.^ept .at .the PQgistered office of the^sqcieiyj and,siiall ■ ' during business hours (-subject to such reasonable restr^otipns

as the association may by its rules or in general meeting impose, so that not les'tj than two hours in each day be allowed for inspection) be open to the inspection cf any member without charge.

(2) jjny member shall be entitled to be furnished withiii-

fourteen days after he has made a request in- that behalf to the association with a copy of such minutes as aforesaid certified by the secretary or a director; as correct*