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 following:
- 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board members and giving members the opportunity to elect board members; and (iii) in instances in which there are no longer active members, filling positions on the board with employer representatives only.
- 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 registration.
- 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).
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