To replace the Friendly Society Act 25 of 1956 with the proposed Insurance Bill 2015; a new perspective on society members’ benefits in exchange for a premium

• Published date: 01 December 2017
• Author: C.G. Kilian,E. Snyman Van-Deventer
• DOI: 10.10520/EJC-c8ea2af2c
• Pages: 281-302
• Record Number: dejure_v50_n2_a6
• Date: 01 December 2017

281

To replace the Friendly Society Act 25 of

1956 with the proposed Insurance Bill

2015; a new perspective on society

members’ benefits in exchange for a

premium

CG Kilian

MA LLM LLD

Research Fellow, Centre for Comparative Corporate Governance, Deakin University

Research Fellow, Department of Mercantile Law, University of the Free State

E Snyman Van-Deventer

LLM LLM LLD

Professor of Law, Department of Mercantile Law, University of the Free State

OPSOMMING

Om die Wet op Onderlingehulpverenigings 25 van 1956 te vervang met die

voorgestelde Versekeringskonsepwet 2015: ’n nuwe perspektief oor

hulpverenigingslede se voordele in ruil vir ‘n premie

Die Wet op Onderlinge Hulpverenigings is ’n besondere stuk wetgewing

wat om een of ander rede intense akademiese bespreking oor 60 jaar

vrygespring het. Onderlingehulpverenigings is ’n vorm van versekering

wat nie tipies as kort- of langtermynversekering in Wet 25 van 1956

bespreek word nie. Om hierdie rede is dit moontlik dat ’n lid se voordeel

verdere regsbepalings het volgens die kort- of langtermynwetgewing in

Suid-Afrika. Dit is ook moontlik dat die voordeel geensins deel vorm van

die kort- of langtermynwetgewing nie maar eerder ‘n sui generis-vorm van

versekering is, naamlik die stokvel as besigheidsvorm in Suid-Afrika. Met

die inwerkingtreding van die voorgestelde Versekeringskonsepwet 2015

gaan onderlingehulpverenigings nie meer as besigheidsvorm voortbestaan

nie, maar daar heers onduidelikheid oor die stokvel as besigheidsvorm in

die toekoms. Die nuwe wet gaan duidelikheid bring oor presies hoe

onderlingehulpverenigings as mikroversekering in die kort- en langtermyn-

wetgewings getipeer gaan word deur middel van wysigings aan beide

wetgewings. Alhoewel die wysigings nuut mag voorkom, bevat die Wet op

Onderlinge Hulpverenigings reeds bestaande begrippe wat nou ander

betekenisse kry volgens die Versekeringskonsepwet. ’n Praktiese

voorbeeld is die nuwe term om selstruktuurversekering te omskryf wat

voorheen bekend gestaan het as ’n sentrale onderlingehulpverenigings-

struktuur – geen akademiese bevestiging kon gevind word nie maar die

oorvleulende eienskappe tussen die twee terme dui op een en dieselfde

konsep. Om hierdie rede verskaf sentrale onderlingehulpverenigings

duidelike praktiese voorbeelde oor hoe formules omskryf kan word om

eensgesindheid te bring by die verdeling van winste in selstruktuur-

versekering. Buiten laasgenoemde word daar ook gelet op die nuwe

ledevoordele van mikroversekeraars volgens kort- of langtermyn-

How to cite: Kilian & Snyman Van-Deventer ‘To replace the Friendly Society Act 25 of 1956 with the proposed

Insurance Bill 2015; a new perspective on society members’ benefits in exchange for a premium’

2017 De Jure 281-302 http://dx.doi.org/10.17159/2225-7160/2017/v50n2a5

282 2017 De Jure

versekering en hoe dit tans vergelyk met bestaande ledevoordele van

onderlingehulpverenigings.

1Introduction

The Friendly Society Act was introduced in 1956 as a method to

introduce a new business entity into the South African corporate

landscape yet, sixty years later, little has been published concerning it by

South African law academics or the judiciary. In fact, our research for this

article into published case law matters and academic articles revealed

just five cases and three articles in law journals that related to friendly

societies in one way or the other since 1956; moreover, these articles

referred just briefly to friendly societies in South Africa.1 On the other

hand the Friendly Society Act 25 of 1956 has been amended by twenty-

five pieces of legislation over a sixty year time period. Although society

benefits are regulated in Sections 2, 18 and 19 of the Act, those benefits

have not been classified as either short term insurance or long term

1Oranje Benefit Society v Central Merchant Bank Ltd 1976 (4) SA 659 (A) deals

with ultra vires contracts entered into by society officials/directors with a

third party. The word director does not appear in Section 1 of the Friendly

Society Act 25 of 1956. The Act only defines an officer, which includes any

person/member appointed to manage the affairs of the society; Ex Parte

Steenkamp 1996 (3) SA 822 (W) deals with the legal requirements for

voluntary sequestration of a natural person’s estate, while a policy issued by

a friendly society is excluded from the estate to be sequestrated; Family

Benefit Friendly Society v Commissioner for Inland Revenue 1995 (4) SA 120

(T) where a society has not gone into business but asks the court for an

opinion on a tax matter should the society decide to conduct business.

Mouton v Die Mynwerkersunie 1977 (1) SA 119 (A) where a person

approached a society for a loan to develop property. The society could not

grant the loan but nevertheless used its creditworthiness to assist the

person in obtaining cash. The society’s constitution should permit loans or

grant the circumstances under which loans could be granted; Volks kas

Beleggingskorporasie v Oranje Benefit Society 1978 (1) SA 45 (A) where any

loan granted ultra vires allows the society to claim back any money paid

plus interest; Central Merchant Bank Ltd v Oranje Benefit Society 1975 (4) SA

588(C) refers also to ultra vires loans as decided in the previous matter; See

in general Swart & Lawack-Davids ‘Understanding the South African

Financial Markets: An Overview of the Regulators’ 2010 Obiter 619-637;

Mpedi & Millard ‘Bridging the GAP: The Role of Micro-Insurance in a

Comprehensive Social-Protection System in South Africa’ 2010 Obiter 497-

517; D Millard ‘For Whom the Bell Tolls … Interplay between Law of Delict

and Social Security Law in Three Modern Compensation Systems’ 2010

TSAR 532-557; See in general Von Nessen ‘Financial Services Reform: What

can be Learned from the Australian Experience?’ 2006 TSAR 64-82. While

this article is interesting, nevertheless, the requirements of product

disclosure and or disclosure of financial services rendered are not

applicable to friendly societies in terms of the Friendly Society Act 1956;

See in general as to the first friendly society in South Africa as a ‘medical

scheme’ in McLeod ‘Mutuality and Solidarity in Healthcare in South Africa’

2005 South African Actuarial Journal 135-167.