What is banking law?

Banking Law governs banking institutions, the business of commercial banking, currency, and exchange control, money laundering and financial and advisory services. In addition, banking law involves the contractual relationship between banks and their customers.

Which legislation is important in Banking Law?

The fundamental pieces of legislation are the Banks Act, 94 of 1990, the Bills of Exchange Act, 34 of 1964, the National Credit Act 35, 2005, the Consumer Protection Act 68 of 2008 and the Electronic Communications and Transactions Act, 25 of 2002, the Financial Intelligence Centre Act 38 of 2001, and the Regulation of Interception of Communication and provision of Communication – Related Information Act, 2002.

What lending is subject to the National Credit Act?

The Act covers a wide variety of Credit Agreements. A Credit Agreement has two main elements, firstly credit is granted and, secondly, a fee, charge or interest is imposed in respect of the deferred payment of the amount of credit advanced. The Act does not apply to:
• a credit agreement in which the consumer is a juristic person whose asset value or annual turnover equals or exceeds R1 million;
• a large credit agreement, being one in which the principal debt equals or exceeds R250 000.00, concluded by credit provider with a juristic person whose asset value or annual turnover is less than R1 million.

What is a reckless lending agreement?
A credit agreement is reckless if the credit provider failed to conduct a credit assessment or, having conducted an assessment, entered into the credit agreement with the consumer despite the fact that the available information indicated that the consumer did not understand what he was doing or that the agreement would cause him to be over-indebted.

May a reckless credit agreement be suspended or set aside?
Yes, the court may declare the credit agreement reckless and either suspend it or set it aside in whole or in part.

May the Bank demand immediate payment of an overdraft?
The general proposition is that in the absence of an agreement that an overdraft will be operative for a fixed period of time the Bank retains the right to claim repayment on demand.

• – Creditor relationships
• – Confidentiality
• – The mandate
• – Overdraft facilities
• – Interest rates and more

What is the difference between sequestration and liquidation?

An individual’s estate is sequestrated. A company and close corporation are liquidated. For insolvency purposes, a trust in insolvency is deemed to be an individual and is liable to be sequestrated and not liquidated. The Insolvency Act, 24 of 1936 applies to sequestration proceedings. Insofar as the winding-up of an insolvent company is concerned, the Companies Act, 61 of 1973 is currently the primary Act as read with the Insolvency Act. The Close Corporations Act, 69 of 1984 is the primary Act applying to the winding-up of insolvent corporations, as read with the Companies Act 71, of 2008 and the Insolvency Act.

Who may bring a sequestration application?

A creditor may bring a sequestration application against his debtor if he has a liquidated claim against the debtor of at least R100.00. A liquidated claim is a claim for an amount of money which is fixed, either by agreement or by an order of court or otherwise.

Can an insolvent be rehabilitated?

An insolvent is deemed to be rehabilitated on the expiry of a period of ten years from the date of sequestration of his estate, unless before the expiry of such period, the court orders otherwise upon any interested persons application.

Who may bring a liquidation application?
A creditor may bring a liquidation application against its debtor who owes the creditor not less than R100.00. However, the company may itself by special resolution resolve to liquidate itself or the shareholders may resolve to liquidate the company.

May a director or manager be held personally liable for the debts of a company?

In terms of section 424 of the Companies Act, 61 of 1973, if any business of the company was or is being carried on recklessly or within the intent to defraud creditors of the company, the court may, on the application of the Master, any creditor, shareholder or contributory of the company, declare that any person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct. Similar provisions, albeit more stringent, are found in section 77 of the Companies Act, 71 of 2008. Such persons may also be liable for criminal prosecution.

What happens at an insolvency enquiry?

The insolvent individual and the directors, management, professional advisors and other related persons may be interrogated at an insolvency enquiry constituted in terms of the Insolvency Act or the Companies Act, 61 of 1973. The general purpose of such an enquiry is, amongst other things to determine the cause of the inability to pay creditors, to establish the whereabouts of the insolvents assets and if any person can be held personally liable to pay the debts of the insolvent.

When is a lawful contract formed?

When two or more persons within the limits of their contractual capacity, with the serious intention of creating a legal obligation, communicates such intention, without vagueness, each to the other, and being of the same mind as to the subject matter, to perform positive or negative acts which are possible of performance. Such conscious agreement is normally reached when one party accepts an offer made by the other and informs the other that his or her offer has been accepted.

Does an agreement have to be in writing?

An agreement may be concluded by words or conducts and, unless required by law does not have to be reduced to writing. If the agreement is made by words, it is an “express” agreement and if made by conduct, a “tacit” agreement.

Which contracts must be in writing?
The most common agreement that must be in writing is the sale of land. Those agreements that require registration in terms of the Deeds Registries Act, 47 of 1937 are required to be in writing, the most common being a sale of land agreement, mortgage bonds and ante-nuptial agreements. A last will and testament also requires to be reduced to writing. Save for these types of exceptions, agreements may be oral or constituted by the parties’ conduct.

What is a suspensive condition?
A contract subject to a suspensive condition is a valid contract from the moment of its execution but it is dependent on the fulfilment of the suspensive condition, normally within an agreed time period.

What is a resolutive condition?

A contract subject to a resolutive condition is of full force and effect from the date of its execution, but on the happening of the uncertain future event [i.e. the resolutive condition] the contract automatically terminates. The uncertain future event is usually a negative.

What consequences flow from a breach of contract?

If a party commits a breach of a contract, the innocent party may either require performance by the party in default or the innocent party may cancel the contract. The innocent party may in either case claim damages for any foreseeable loss suffered as a result of the breach.