"primary share capital" means such percentage as the Registrar may determine from time to time by notice in the Gazette of capital obtained through the issue of permanent interest-bearing shares or other non-redeemable debt instruments;
"primary unimpaired reserve funds" means funds obtained—
| (c) | by way of premiums on the issue of permanent interest-bearing shares or debt instruments issued in accordance with the provisions of the definition of "secondary share capital", provided no interest is payable on such premiums; or |
| (d) | by way of a surplus on the realization of capital assets, and which have been set aside as a general or special reserve, are disclosed as such a reserve in the financial statements of the mutual bank concerned and are available for the purpose of meeting liabilities of or losses suffered by the mutual bank, but does not include any fund required to be maintained in terms of any other law; |
"secondary share capital" means loan capital obtained by way of the issue, with the prior written approval of the Registrar, of debt instruments issued subject to—
| (i) | the condition that the debt instruments are issued for a minimum period of five years; |
| (ii) | the condition that the debt instruments may be redeemed before maturity only at the option of the mutual bank concerned and with the prior written approval of the Registrar; |
| (iii) | the condition that, notwithstanding the provisions of any other law, in the event of the winding-up of the mutual bank concerned, the capital amount of the debt instruments shall not be repaid until the claims of |
| (iv) | such further conditions, if any, as may be prescribed; |
"secondary unimpaired reserve funds"
means funds obtained and set aside as contemplated in the definition of "primary unimpaired reserve funds" in this subsection (except such funds obtained by way of premiums referred to in paragraph (c) of that definition), and which are available for the purpose contemplated in that definition, but which are not disclosed as a general or special reserve in the financial statements of the mutual bank concerned, and includes—
| (a) | 50 per cent of the amount of any surplus resulting from a revaluation of assets and determined as prescribed in subsection (4); |
| (b) | general provisions held against unidentified and unforeseen losses; and |
| (c) | funds obtained by way of premiums (on which interest is payable) on the issue of permanent interest-bearing shares or debt instruments issued in accordance with the provisions of the definition of "secondary share capital", whether or not such funds are disclosed as a general or special reserve in the financial statements of the mutual bank concerned, but does not include any fund required to be maintained in terms of any other law. |
| (2) | Subject to the provisions of subsections (3), (5)(a) and (7), a mutual bank shall manage its affairs in such a way that the sum of its issued primary and secondary share capital and its primary and secondary unimpaired reserve funds in the Republic does not at any time amount to less than the greater of— |
| (a) | R10 000 000 or, in the case of a mutual bank that was registered as a permanent mutual building society prior to the date of commencement' of this Act and was reregistered as a mutual bank in terms of the provisions of section 30 of this Act, R1 000 000; or |
| (b) | an amount which represents a prescribed percentage of the sum of amounts calculated by multiplying the average of the amounts (as shown in the returns furnished to the Registrar in terms of section (53) of such different categories of |
| (ii) | other risk exposures in the conduct of its business, as may be prescribed, by the risk weights, expressed as percentages, prescribed in respect of such different categories of assets and other risk exposures. |
| (3) | Notwithstanding the provisions of subsection (2)— |
| (a) | the amount obtained by way of the issue, after 5 March 1993, of debt instruments and which may in terms of this section rank as secondary share capital shall (except in the case of such debt instruments that a to be converted into permanent interest-bearing shares or other non-redeemable debt instruments) during the fifth year preceding to maturity of such debt instruments be reduced by an amount equal to per cent of the amount so obtained and annually thereafter by an amount which in each successive year is increased by 20 per cent of the amount so obtained; and |
| (b) | the sum of a mutual bank's issued secondary share capital and secondary unimpaired reserve funds may, in the calculation of the aggregate amount which the mutual bank is in terms of subsection (2) required to maintain by way of issued primary and secondary share capital and primary and secondary unimpaired reserve funds, be taken into account to an amount not exceeding a percentage, determined from time to time by the Registrar by notice in the Gazette, of the above-mentioned, aggregate amount. |
| (4) | The determination of any surplus referred to in paragraph (a) of the definition of "secondary unimpaired reserve funds" in subsection (1) shall be effected— |
| (a) | at such times as may be prescribed; and |
| (b) | by comparing the book value of assets with their market value as at the time of such determination. |
| (a) | The sum of the issued primary and secondary share capital and primary and secondary unimpaired reserve funds of a mutual bank shall for the purposes of subsection (2) be calculated by deducting from the amount thereof— |
| (i) | depreciation of assets and bad or doubtful debts; |
| (ii) | operating and accumulated losses, including accumulated depreciation and bad debts not yet written off; |
| (iii) | establishment costs, costs in respect of organization and extension of business and the purchase of a business or goodwill, and underwriting commission; and |
| (iv) | the value of assets lodged or pledged to secure liabilities incurred under any other law where the effect of such lodging or pledging is that such assets are not available for the purpose of meeting the liabilities of the mutual bank in terms of this Act. |
| (b) | A mutual bank shall, in conformity with generally accepted accounting practice, make provision in its accounting records referred to in section 42 for the items specified in paragraph (a). |
| (a) | was registered as a permanent mutual building society prior to the date of commencement of this Act and is reregistered as a mutual bank in terms of the provisions of section 30 of this Act; and |
| (b) | does not, on the date of such reregistration, comply with the provisions of subsection (2), shall correct the shortfall within such period and in accordance with such conditions as the Registrar may determine. |
| (7) | Notwithstanding the provisions of subsection (2), the Registrar may, on the written application of a mutual bank, in writing exempt such mutual bank from the provisions of that subsection, subject to such conditions, including conditions relating to— |
| (a) | the expiration of the exemption; |
| (b) | the manner in which and sources from which capital or other funds may be obtained by the mutual bank; and |
| (c) | the utilisation by the mutual bank of the funds under its control, as the Registrar may determine: Provided that an exemption under this subsection— |
| (i) | may be granted only to a mutual bank that has obtained an undertaking, from a guardian bank as contemplated in section 11(1); and |
| (ii) | shall not be granted for a period exceeding two years. |
