Most Read Contributor in South Africa, September 2016
The Registrar of Pension Funds (the "Registrar")
published a draft circular for comment on 27 February 2015 titled
"The governance, winding-up and cancellation of the
registration of a shell fund or a dormant fund without a board or
liquidator" (the "Draft Circular"). When effective,
the Draft Circular will have significant implications for pension
funds without properly constituted boards of trustees, as well as
pension funds that were deregistered in certain circumstances,
including at the instance of so-called "authorised
representatives" or "section 26(2) trustees"
appointed by the Registrar.
Amongst other things, the Draft Circular provides for the
It proposes a new approach to be
followed by "dormant funds" (each a fund that is not an
active fund or a shell fund and which does not have a properly
constituted management board) to establish proper
boards in accordance with the Pension Funds Act, 1956 (the
"Act"). These methods include: (i) constituting a proper
board where possible; (ii) requesting a sponsor (e.g. employer) to
appoint board members and giving members the opportunity to elect
board members; and (iii) in instances in which there are no longer
active members, filling positions on the board with employer
Where a board cannot be properly
constituted and such a fund is left without a "directing mind
and will", the Draft Circular proposes that the Registrar
applies to court to appoint a curator for the fund. Such a curator
will be empowered to administer the relevant fund, place it into
liquidation and apply for the cancellation of its
It notes that the Registrar intends
to revisit and possibly reverse the prior cancellations of
registrations of dormant funds and "shell funds" (as
defined in the Draft Circular) in instances in which a risk of
"substantial prejudice" to specific funds or interested
parties exists. It will be in the Registrar's discretion to
investigate and determine whether such a situation exists.
The Draft Circular provides for certain restrictions in relation
to decisions that may be taken on behalf of a dormant fund prior to
the establishment of a properly constituted board. In particular,
it provides that a section 26(2) trustee may not dispose of any of
the assets of a fund other than in the normal course of business
(such as payment benefits that have accrued in terms of its rules)
and may not take any decisions that would result in the rights of
any of the fund's members or interested parties being
substantially altered (such as the appointment of a liquidator or
the amendment of its rules).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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