When statutes collide - The application of section 45 of the Companies Act to a bank under curatorship in terms of section 69 of the Banks Act

• Jurisdiction: South Africa
• Author: Milton Seligson
• DOI: 10.10520/EJC172218
• Published date: 01 March 2015
• Date: 01 March 2015
• Pages: 1-10
• Published By: Siber Ink

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© SIBER INK

When Statutes Collide

THE APPLICATION OF SECTION 45 OF

THE COMPANIES ACT TO A BANK UNDER

CURATORSHIP IN TERMS OF SECTION 69 OF

THE BANKS ACT

MILTON SELIGSON SC

ABSTRACT

The main issue with which the article is concerned is whether the provisions

of section 45 of the Companies Act are applicable to a registered bank which

has been placed under curatorship pursuant to section 69 of the Banks Act.

Section 45 of the Companies Act governs the provision of loans and other

financial assistance by a company, amongst others to a related or inter related

company. There are stringent requirements that must be satisfied before

such financial assistance may be validly given. The board must pass a resolu-

tion authorising the financial assistance pursuant to a special resolution of

shareholders approving such assistance, and the board must be satisfied that

immediately after the provision of the financial assistance the company will

satisfy the solvency and liquidity test and further that the terms on which the

assistance is provided are fair and reasonable to the company.

In terms of section 11(1) of the Banks Act only public companies that

are registered under the Act may conduct the business of a bank. Banks are

therefore also companies and are, in general, subject to the provisions of the

Companies Act to the extent that such provisions are not inconsistent with

any provision of the Banks Act, according to section 51(1) of the Banks Act,

save that certain specified provisions of the Companies Act (not here relevant)

will not apply to banks.

Banks are therefore normally required to comply with section 45 when

they provide financial assistance covered by its provisions. But section 69 of

the Banks Act provides for banks to be placed under curatorship in certain

circumstances when they are in financial difficulty. On the appointment of a

curator, the management of the bank concerned vests in the curator, and any

other person vested with its management is divested thereof. Thus a bank

under curatorship lacks a crucial characteristic of a company, viz a board of

directors who are empowered to run its business.

Where the bank’s curator wishes to render financial assistance to a related

company (such as a subsidiary) if this is possible, and he/she believes this

to be necessary in the best interests of the banking group, its creditors and

employees, is the curator bound to follow the prescripts of section 45 of

the Companies Act? The article investigates the effect of curatorship on the

bank in the light of the relevant provisions of the Banks Act and their impact

on the applicability of section 45 of the Companies Act. The conclusion of

this exercise in statutory interpretation is that the requirements of section 45

are inconsistent with the powers vested in the curator and the underlying

purpose of section 69 of the Banks Act and accordingly that, as contemplated