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Mutual Banks Act, 1993 (Act No. 124 of 1993)

Chapter VI : Provisions relating to Aspects of the Conduct of the Business of a Mutual Bank

57. Shares

 

(1) A mutual bank shall not issue any shares other than—
(a) shares for an indefinite period, which shall be paid-up shares of which the shareholder shall not be entitled at any time to demand redemption, and which the mutual bank shall, subject to the provisions of this section, be entitled to redeem after six months' notice to the shareholder;
(b) fixed period shares, which shall be—
(i) paid-up shares issued for periods of not less than five years;
(ii) subscription shares calculated to mature after the expiry of a period of not less than three years, and of which the shareholder shall not be entitled to demand redemption and which the mutual bank shall not be entitled to redeem before the period of issue has expired or the share has matured; and
(c) permanent interest-bearing shares.

 

(2) Subject to the provisions of this section, a mutual bank may issue any or all of the classes of shares described in subsection (1).

 

(3) No mutual bank shall purport to undertake to give more than six months' notice of its intention to redeem any indefinite share, and any undertaking so given shall not bind the mutual bank.

 

(4) A mutual bank shall not give notice of its intention to redeem any indefinite share before the expiration of a period of one year from the date of issue of that share.

 

(5) Whenever the period of issue of a paid-up fixed period share expires the mutual bank shall redeem that share.

 

(6)
(a) Whenever the period after which a subscription share is calculated to mature, expires, the mutual bank shall redeem that share unless the shareholder requests that it be not redeemed.
(b) Where a subscription share is by virtue of the provisions of paragraph (a) not redeemed
(i) the mutual bank may pay out monthly dividends on that share;
(ii) the shareholder may upon giving three months' notice to the mutual bank obtain redemption of that share;
(iii) the mutual bank may upon giving six months' notice to the shareholder redeem that share.

 

(7) Notwithstanding anything contained in this section, but subject to section 58(4), the registered owner of any share, except a permanent interest-bearing share, in a mutual bank may upon giving three months' notice obtain redemption of that share if the mutual bank then agrees to redeem it: Provided that no such share shall be redeemed before the expiration of a period of 18 months from the date of acquisition of that share by the shareholder: Provided further that the period of 18 months and the requirement in regard to notice shall not apply—
(a) where the share forms part of the assets in an insolvent or a deceased estate;
(b) where the registered owner has been notified of the intended reduction of the dividend rate in terms of section 58(3) and he applies for redemption during the period of notice mentioned in the said section;
(c) where the shareholder has been placed under curatorship;
(d) where the shareholder has been placed under judicial management or in liquidation;
(e) in the case of a share ceded to the mutual bank or another mutual bank or a bank as collateral security for a mortgage loan, if the cessionary of such share requires its redemption; or
(f) in such other cases as the Registrar may approve either generally or in any particular case.

 

(8) Notwithstanding the provisions of subsection (1)(b), the board of a mutual bank may in its discretion, and in the manner and under the circumstances set forth in the articles of the mutual bank, repay before the date of maturity the aggregate amount of the periodical contributions made in respect of a subscription share and any accrued dividends.

 

(9) No mutual bank shall issue any share with a right to a cumulative dividend except where such right is limited to the seven years immediately succeeding the first registration of the mutual bank and any claim to such accumulated dividends is limited to the available profits of the said seven years.

 

(10) No mutual bank shall issue any paid-up share, except a permanent interest-bearing share, at a price other than its nominal or face value nor shall it redeem any such share at an amount which exceeds the nominal or face value of such share.

 

(11) No mutual bank shall issue any share conferring a preferent claim to the assets of the mutual bank in the case of its winding-up.

 

(12) No mutual bank shall issue any share which confers upon the holder thereof any voting rights more favourable than those conferred by any of the other shares issued by it.

 

(13) No mutual bank shall grant a loan against the security of any share issued by it at a rate of interest which is not at least one per cent on the amount of such loan higher than the rate of dividend payable on such share.