PARTICIPATION BONDS ACT 55 OF 1981
[ASSENTED TO 18 AUGUST 1981] [DATE OF COMMENCEMENT: 9 SEPTEMBER 1981]
(Afrikaans text signed by the State President)
as amended by
Financial Institutions Amendment Act 51 of 1988
Financial Institutions Amendment Act 7 of 1993
Financial Institutions Second Amendment Act 104 of 1993
To consolidate the laws relating to the securing of the rights of holders of participations in certain mortgage bonds ; and the definition of the rights of such persons; and to provide for matters incidental thereto.
Section 1 Definitions
In this Act, unless the context indicates otherwise -
"manager" means a company or firm with which or person with whom a nominee company has entered into an agreement such as is referred to in paragraph (c) of the definition of nominee company ;
"nominee company" means a nominee company which has been approved by the registrar in terms of section 37 (2) (a) of the Unit Trusts Control Act, 1981, and which -
(a) has as its principal object to act as nominee for or representative of any person or persons in the holding of any property in trust for such person or persons ;
(b) is precluded by its memorandum of association from incurring any liabilities other than those to the persons on whose behalf it holds property to the extent of their respective rights to and interests in such property ; and
(c) has entered into an irrevocable agreement with another company, firm or person in terms of which such other company, firm or person has undertaken to pay all the expenses of and incidental to its formation, operations, management and liquidation ;
"participant" means a person who holds a participation in a participation bond ;
"participation" means a share of, or all, the rights secured under a participation bond ;
"participation bond" means a mortgage bond over immovable property -
(a) which is described as a participation bond and is registered as such in the name of a nominee company and is included in a scheme ; and
(b) by which, if it is so registered on or after 1 October 1967, and unless -
(i) it ranks equally with such an existing bond in respect of the same immovable property and the same mortgagor ; or
(ii) ownership in such immovable property is held under a sectional title deed in accordance with the provisions of the Sectional Titles Act, 1971 (Act 66 of 1971), and such immovable property immediately before the holding of ownership therein in the said manner, formed part of immovable property over which a mortgage or mortgages were registered in the name of the nominee company referred to in paragraph (a), the total sum secured at registration is not less than R20 000 ;
"particulars", in relation to a participation bond, means -
(a) the name of the deeds registry in which it is registered and the identification number and date and ranking of the bond ;
(b) the name of the mortgagor ;
(c) a description of the immovable property mortgaged under the bond and the number and date of the title deed under which such property is held ;
(d) the value placed on the immovable property mortgaged and the name of the person who made the valuation and the date of such valuation ;
(e) details of any collateral security held in respect of the debt secured by the bond ;
(f) the total sum secured by the bond and the amounts and identification numbers and dates of any prior ranking bonds ;
(g) the rate of interest payable in respect of the amount owing under the bond ; and
(h) the terms of repayment of the principal debt secured by the bond and of payment of interest ;
"registrar" means the Registrar of Unit Trust Companies appointed under section 2 of the Unit Trusts Control Act, 1981 ;
"rules of the scheme" means the rules approved by the registrar which govern the operation of the scheme concerned ;
"scheme" means a scheme or arrangement permitting of participation in a specified mortgage bond or in specified mortgage bonds which has been exempted by the registrar in terms of section 37(2)(a) of the Unit Trusts Control Act, 1981, from the provisions of that Act and the rules of which have been approved by the registrar.
Section 2 Registration of mortgage bonds in the name of nominee company
(1) Notwithstanding anything to the contrary in any other law contained, a participation bond clearly described as such shall be registered as such in a deeds registry in the name of a nominee company as nominee for or representative of the participants therein.
(2) It shall not be necessary to set forth in any participation bond the names of the participants therein.
(3) Participants in any mortgage bond registered in a deeds registry as a participation bond and included in a scheme shall be deemed to hold their participations subject to the provisions of this Act.
Section 3 Grant of participations in mortgage bonds
(1) A manager may accept money from any person in terms of a written agreement to be invested on his behalf upon the security of a particular participation bond or of any participation bonds, whether such bond or bonds are already registered or not: Provided that -
(a) if a participation is not granted within 60 days as from the date of acceptance of such money or within such further period as the registrar may allow in a particular case, the money shall be refunded to the person from whom it was accepted ; and
(b) as from 28 June 1972 -
(i) an amount of less than R1 000 shall not be so accepted ; and
(ii) such agreement shall provide that, except in the circumstances set forth in paragraph (a) of this proviso and in section 6 (6) (b) (iii), such money shall be invested for a period of not less than five years in a participation bond or participation bonds included in the scheme and that in the event of the debt secured by a participation bond being repaid in whole or in part by the mortgagor before the expiry of a period of five years from the date of investment, money so repaid shall be reinvested for not less than the unexpired portion of the said period of five years by the manager on behalf of such person upon the security of another participation bond or of other participation bonds included in the scheme and acceptable to such person.
(2) A manager may offer to any person, or itself or himself hold as a participant, a participation in any participation bond : Provided that -
(a) where a person has paid money to a manager in terms of subsection (1) such manager may, without first making such offer, grant to such person such participation or participations in any such bond as fall within the scope of any written authority given by such person to such manager ;
(b) the manager shall not offer, grant or hold such participations in sums the aggregate of which exceeds the total sum secured under such bond, or, in any case where the mortgagor has repaid part of the debt secured under the bond, exceeds the amount owing by the mortgagor under such bond at the time when the participation is granted ; and
(c) the manager shall not offer to any person a participation of less than R1 000 in any participation bond registered after 28 June 1972.
(3) An offer in terms of subsection (2) shall -
(a) set forth the particulars of the bond in which the participation is offered ;
(b) set forth the extent of the participation offered ;
(c) be accompanied by a copy of the rules of the scheme in which the bond is included, except where the investor is already a participant in the scheme ; and
(d) be made on the specific condition that, except in the circumstances set forth in paragraph (a) of the proviso to subsection (1) and in section 6 (6) (b) (iii), money invested upon the security of a participation bond included in the scheme shall remain invested for a period of not less than five years in the participation offered and accepted or on the security of another participation bond or of other participation bonds included in the scheme, and that in the event of the debt secured by the participation bond in which the participation is granted being repaid in whole or in part by the mortgagor before the expiry of a period of five years from the date on which the participation was granted, the amount to be invested in the participation so offered shall be reinvested for not less than the unexpired portion of the said period of five years by the manager on behalf of such person upon the security of another participation bond or of other participation bonds included in the scheme and acceptable to such person.
(4) The extent of any participation offered, granted or held in terms of subsection (2) shall be expressed as a sum of money.
(5) Upon the acceptance of an offer made in terms of subsection (2) by the person to whom it is made, the manager shall grant to such person a participation in terms of such offer.
(6) The provisions of this section shall apply mutatis mutandis to any money or any part of such sum paid to a manager after the expiry of the period of five years referred to in paragraph (b) (ii) of the proviso to subsection (1) and in subsection (3) (d), in reduction of the principal debt and where such money or any part of such sum is to be reinvested on behalf of an investor upon the security of another participation bond or of other participation bonds included in the scheme.
Section 11 Collateral security in respect of participation bonds
(1) Any collateral security, including a surety mortgage bond, collateral mortgage bond, notarial bond, suretyship, guarantee, cession, pledge and a lien, accepted by a manager in addition to a participation bond in order to secure the debt referred to in section 6 (1) or to secure the due performance by a mortgagor of his obligations under a participation bond or to secure the due performance by a surety of his obligations under a contract of suretyship relating to such debt or to the obligations of the mortgagor, shall be registered in the name of the nominee company as nominee for or representative of the participants therein, and any contract relating to such security shall be drawn and executed in favour of the nominee company as nominee for or representative of the participants from time to time in the participation bond to which the security relates.
(2) Notwithstanding anything to the contrary in any law contained, a contract of suretyship relating to a debt secured by any participation bond or securing the due performance by the mortgagor of his obligations under such a bond or securing the due performance by a surety of his obligations under a contract relating to such debt or to the obligations of the mortgagor and drawn and executed in favour of a nominee company, shall be as valid and enforceable by the nominee company in its own name against the surety on behalf of participants in the bond concerned, as if the contract had been drawn and executed in favour of every participant from time to time in the bond.
(3) The provisions of sections 2 (2), 6, 7, 8, 9 (1) and 10 (3) shall apply mutatis mutandis, in so far as such provisions can be applied, with reference to and in respect of any collateral security accepted by a nominee company for any of the purposes set forth in subsection (1), and in the application thereof a reference therein to a participation bond or bond shall be construed as a reference to a participation bond and collateral security, and a reference to a mortgagor as a reference to a mortgagor and the grantor of collateral security.
(4) The provisions of this section shall apply mutatis mutandis with reference to any collateral security accepted before 21 June 1978 by the nominee company for the manager or any of the purposes referred to in subsection (1) and in respect of which the contract or arrangement or other document containing the terms and conditions thereof was of full force and effect at that date.