Topic: Banking

COVID-19 and Finance Documents: Could the Material Adverse Effect clause be triggered?

By Jackie Midlane on April 6, 2020 Posted in Banking

How does the COVID-19 pandemic affect borrowers and lenders and their financing arrangements? A Material Adverse Effect (MAE) clause is included in most finance agreements. It is a catch-all concept to capture unpredictable and unforeseen events or circumstances that would otherwise be difficult to incorporate into the agreement specifically. Broadly, a MAE clause covers a … Continue reading

The decline of LIBOR and the new risk-free interest rates

By Steve Chemaly and Claire Friedman on March 12, 2020 Posted in Banking

The history of manipulation and scandals surrounding interbank offered rates (IBORs), for example LIBOR and JIBAR, has led to the shift toward Risk-Free Rates (RFRs), a shift which is primarily market led and remains uncertain. The transition to RFR’s rests on the fact that rates such as LIBOR are forward-looking interest rates, calculated using estimates … Continue reading

FinTech in the legal arena

By Desiree Reddy (ZA) on July 24, 2019 Posted in Banking

Financial technology, often referred to as FinTech, is the marriage between financial and technology services. The FinTech offering seeks to provide innovative alternatives to traditional methods in the delivery of financial services. The different categories that sit within the ambit of the broader FinTech offering include: lending, payments, wealth management and personal finance, digital currencies … Continue reading

Judicial oversight of execution against property requires full facts before court

By Riccardo Petersen (ZA) and Vishana Makan on July 3, 2019 Posted in Banking

Where an order was sought declaring immovable property specially executable but no facts had been placed before the court by the defendant, the court authorised the sale. The court held that to deny an order declaring a property specially executable where the summons clearly draws a debtor’s attention to their right to lead evidence and … Continue reading

Draft Conduct Standard for Banks published

By Desiree Reddy (ZA) and Amina Yuda on May 3, 2019 Posted in Banking

The Financial Sector Conduct Authority (FSCA) has published a Draft Conduct Standard for Banks, under section 106(2)(b) of the Financial Sector Regulation Act 2017 (FSRA). The draft Conduct Standard applies to banks, mutual banks, co-operative banks, branches of foreign banks and representative offices of foreign banks (banks) and will apply in addition to any other … Continue reading

SARB intends to regulate crypto assets

By Lize Louw, Steve Chemaly and Desiree Reddy (ZA) on January 22, 2019 Posted in Banking

In mid-January 2019, the SARB published its Consultation Paper on Policy Proposals for Crypto Assets, amid a growing interest, investment and participation in crypto assets by financial institutions and individuals and an estimated market capitalisation of about US$200 billion for crypto assets globally. Crypto assets are digital representations or tokens that are accessed, verified, transacted … Continue reading

EIB report on Banking in Africa: Read the findings of our review of the state of bank recovery and resolution laws in Africa

By Patrick Bracher (ZA) on January 9, 2019 Posted in Banking

On 22 November 2018, the European Investment Bank (EIB) published the fourth edition of its banking in Africa report. This latest report, Banking in Africa: Delivering on Financial Inclusion, Supporting Financial Stability, focuses on recent developments in Africa’s banking sectors and the policy options for all stakeholders, and includes the results of the EIB’s survey of … Continue reading

Claim by shareholders against directors under section 218(2) of Companies Act fails

By Patrick Bracher (ZA) on October 11, 2018 Posted in Banking

Shareholders of African Bank Investments Limited failed in their claim for over R720 million against the directors and auditors of African Bank. The plaintiffs sued unsuccessfully under section 218(2) of the Companies Act 2008 alleging that the conduct of the defendants resulted in a loss to the shareholders because of the drop in the share price. The … Continue reading

Unrestricted financial assistance – Financiers to consider the risks

By Jackie Midlane and Steve Chemaly on October 3, 2018 Posted in Banking

The Companies Amendment Bill released on 21 September 2018 for public comment, proposes a raft of amendments to the Companies Act. Section 45 presently provides that any financial assistance granted by a holding company to its subsidiary must be authorised by the board and the shareholders by way of a special resolution. If not the … Continue reading

Proposed changes to financial laws to deal with failing financial institutions

By Desiree Reddy (ZA) on October 2, 2018 Posted in Banking

The Draft Financial Sector Laws Amendment Bill has been published for comment. The Bill proposes amendments to various acts including the Insolvency Act, the South African Reserve Bank Act, the Banks Act, the Mutual Banks Act, the Competition Act, the Financial Markets Act and the Insurance Act – with a view to strengthening the ability of … Continue reading

Financial assistance to subsidiaries reviewed in the Companies Amendment Bill: What is ‘its own subsidiary’?

By Jackie Midlane and Steve Chemaly on October 1, 2018 Posted in Banking, General

The amendments proposed in the Companies Amendment Bill 2018 have caught the attention of financiers and attorneys in so far as the provision of financial assistance (e.g. providing a loan, guaranteeing a loan, and securing any debt or obligation), to ‘its own subsidiary’ is concerned. The Amendment Bill proposes to amend section 45 by removing … Continue reading

The South African Companies Amendment Bill 2018

By Stephen Kennedy-Good on September 27, 2018 Posted in Banking, General

The long awaited South African Companies Amendment Bill (Bill) was published on 21 September 2018 for comment. Substantial changes to the South African Companies Act 2008 (Companies Act), which became law in 2011, have been proposed. Comments may be submitted to the SA Department of Trade and Industry by 20 November 2018, and we encourage business to consider … Continue reading

Financial Sector Regulation Act in force from 1 April 2018

By Patrick Bracher (ZA) on April 3, 2018 Posted in Banking, Insurance

Most sections of the Financial Sector Regulation Act 2017 were brought into force from 1 April 2018. This step was anticipated as the first step towards the commencement of the new Insurance Act on 1 July 2018. By a two-step process the Minister was empowered in a Gazette of 29 March 2018 to make regulations, which were passed … Continue reading

Consequences of shareholders’ loans in Mozambique

By Zaida Kathrada (ZA) on March 18, 2018 Posted in Banking, General

The Mozambican commercial code provides that a loan with a maturity of 1 year or more, made by a third party who later becomes a shareholder of the borrower via equity subscription, becomes a shareholder loan. This has enforcement consequences for the lender, subordinates the loan and affects set-off because of the connection between the … Continue reading

Asset management in South Africa – Ten things to know

By Shawn Barnett (ZA) on March 18, 2018 Posted in Banking

1. Licensing of asset managers South African asset managers must register as financial service providers (FSPs) with the Financial Services Board (FSB) under the Financial Advisory and Intermediary Services Act (FAIS). Any person carrying on asset management business in South Africa, or from abroad directed at South African clients, whether in a discretionary or non-discretionary capacity … Continue reading

SARB announces establishment of Fintech programme

By Kerri Gevers (SG) on February 20, 2018 Posted in Banking

The South African Reserve Bank (SARB) has established a Financial Technology (Fintech) programme to assess the emergence of technological innovations in the financial sector and consider their regulatory implications. In a statement issued on 13 February 2018, the SARB stated that it ‘takes a balanced approach to technological innovations, considering the potential benefits and risks … Continue reading

Bank sued for paying on instructions to director acting fraudulently (UK)

By Patrick Bracher (ZA) on February 13, 2018 Posted in Banking

A sole shareholder and director who had dominant influence over the affairs of the plaintiff company acted fraudulently and paid out the company’s money from its bank accounts for his own personal benefit. The bank was held liable because on the facts it was found that any reasonable banker would have realised that there were … Continue reading

Voting against a business rescue plan

By Caroline Theodosiou and Adriaan Louw (ZA) on November 6, 2017 Posted in Banking

Creditors of a company in business rescue do not have an unfettered vote to reject a proposed business rescue plan because their vote may be set aside by a court if it is inappropriate. The Supreme Court of Appeal in Firstrand Bank Ltd v KJ Foods CC considered the meaning of ‘inappropriate’ relating to business rescue … Continue reading

Can cessions in security be suspended in business rescue?

By Riza Moosa on September 7, 2017 Posted in Banking

A cession of rights as security may include rights which only come into existence in future as in the cession of future book debts. The agreement to cede such rights requires no further action on the part of the cedent at the future time when those rights come into existence. They automatically form part of … Continue reading

Suspension of agreement in business rescue: What can a creditor do?

By Riza Moosa on August 29, 2017 Posted in Banking

The powers of a business rescue practitioner to suspend contracts has given rise to concern and speculation as to the effect of the exercise of those rights in business rescue and the implications for creditors. It has been clarified that a creditor whose agreement is suspended in business rescue has the right to withhold the … Continue reading

Business rescue asset disposals

By Riza Moosa on June 19, 2017 Posted in Banking

An owner whose property is in the possession of another without consent can recover possession by way of vindication (rei vindicatio). But what happens if the person in possession is legally permitted to sell those goods? In EnergyDrive Systems (Pty) Ltd v Tin Can Man (Pty) Ltd the Johannesburg High Court heard a matter dealing with … Continue reading

Islamic finance update – new draft governance standards

By Riza Moosa on February 23, 2017 Posted in Banking

The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is an independent Islamic international non-profit body that prepares accounting, auditing, governance, ethics and Shariah standards for Islamic financial institutions and the industry. AAOIFI is respected in the industry and their governance standards are used by many firms globally. The AAOIFI central Shariah board has … Continue reading

Nuclear New Build Programme announced

By Donovan Brown on December 14, 2016 Posted in Banking

On 14 December 2016, the Minister of Energy, in consultation with the National Energy Regulator of South Africa (NERSA), published the Department of Energy’s determination notice for the Nuclear New Build Programme (Nuclear Programme). The Minister announced that 9 600MW of energy capacity should be procured and generated from nuclear energy under the Nuclear Programme. … Continue reading

The perils of rushing into bond foreclosure proceedings

By Aslam Moosajee (ZA) on December 12, 2016 Posted in Banking

Banks should be careful about rushing into bond foreclosure proceedings, when the arrears owed are not significant. Instead, the bank should try to engage with the consumer and see if a settlement can be negotiated to prevent foreclosure and the consumer losing their home. In FirstRand Bank Limited v Makaleng, Mr Makaleng was in arrears … Continue reading