Co-operatives Act, 2005 (Act No. 14 of 2005)Chapter 6 : Capital Structure45. Prohibited and permitted loans and security |
| (1) | A co-operative may give financial assistance by means of a loan or the provision of security to— |
| (a) | any person in the ordinary course of business if the lending of money is part of the ordinary business of the co-operative; |
| (b) | any person on account of expenditures incurred or to be incurred on behalf of the co-operative; |
| (c) | employees of the co-operative or of any of its members— |
| (i) | to enable or assist them to purchase or erect living accommodation for their own occupation; or |
| (ii) | in accordance with a plan for shares of the co–operative or any of its members to be held by a trustee; and |
| (d) | members, if the financial assistance is available to all members on substantially the same terms. |
| (2) | A co-operative may not give financial assistance in terms of subsection (1) whether directly or indirectly if there are reasonable grounds to believe that— |
| (a) | the co-operative, after giving the financial assistance, will be unable to pay its liabilities as they become due; or |
| (b) | the realisable value of the co-operative's assets, after giving the financial assistance, will be less than the aggregate of its liabilities, share capital and reserves. |
| (3) | In determining the realisable value of the co-operative's assets contemplated in subsection (2)(b), the amount of any financial assistance in the form of a loan and in the form of assets pledged or encumbered to secure a guarantee must be excluded. |