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<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"> <html xmlns="http://www.w3.org/1999/xhtml"> <head> </head> <body> <div style="font-family:Verdana, Geneva, sans-serif; font-size:12px; text-align:justify"> <table width="800" border="0" style="border:1px solid #ccc;padding:5px;" align="center" cellpadding="6" cellspacing="0"> <tr> <td align="left" valign="top"> Creditor and shareholder of holding company of insolvent insurer has no locus standi to seek curatorship of insurer under Section 54 of Insurance Act - (24 Oct 2022) </td> </tr> <tr> <td align="left" valign="top">Lebashe Financial Services (Pty) Ltd vs. The Prudential Authority and Others</td> </tr> <tr> <td align="left" valign="top" style="background-color:#FDEDCE">In present matter, on 6 November 2018, the Prudential Authority, a juristic person that operates within the administration of the South African Reserve Bank, obtained orders in the high court placing Bophelo Life Insurance Company Limited (Bophelo) and Nzalo Insurance Services Limited (Nzalo) (the Insurers) under provisional curatorship in terms of Section 54(1) of the Insurance Act, 2017. The Insurers are wholly owned by Bophelo Insurance Group Limited (BIG). While these orders were in force, and at the insistence of the Prudential Authority, both were also placed under provisional winding-up. Eventually, final liquidation orders were made in respect of both Bophelo and Nzalo. Lebashe Financial Services (Pty) Ltd. (Lebashe), an intervening party in the high court, appealed to this court seeking to have the liquidation orders overturned and the curatorships reinstated. 
Lebashe failed to satisfy the Court that it had sufficient interest in the matter to clothe it with the required locus standi. This Court accepted that Lebashe was a creditor and majority shareholder of BIG, but this was insufficient to establish a legal relationship between itself and the Insurers. Lebashe had no rights to a preferred legal process of dealing with undisputed insolvency of the Insurers. Creditor and shareholder of holding company of insolvent insurer has no locus standi to seek curatorship of insurer under Section 54 of Insurance Act. 
Since Section 54(5) of Act clearly prohibited the effecting of business rescue, it would make no sense to prohibit the coming into effect of business rescue whilst a curatorship is in place, but not the commencement of liquidation, which would have far more drastic consequences. Moreover, curatorship and liquidation cannot co-exist. It followed that by reason of Section 54(5) and the terms of the provisional curatorship orders, the provisional liquidation orders in respect of the insurers should not have been granted. The liquidation applications were not themselves rendered null and void. The provisional liquidation orders were incompetent, but the applications for liquidation not. By operation of law, they were stayed whilst the curatorships were in place. The liquidation applications could have been proceeded with once the curatorships came to an end and that, in effect, was what happened in the high court. 
Lebashe complained that the liquidation orders of the insurers were premature, as the curator had not yet reported on the steps taken to recapitalise them. The provisional curatorship orders conveyed that the curator had to take control of the businesses of the insurers, investigate their affairs and report to the high court. Nothing was required regarding seeking or obtaining capital injections or long-term financing for the insurers. The curator was not required to do anything of the sort. This accorded with the provisions of the Insurance Act which provided the curator with wide powers to manage and investigate. Thus, the curatorship of the insurer was only a means to an end; by its nature it would have been only a temporary measure and its purpose was never to rescue the business of the insurer. Had rescue proceedings been contemplated, the Prudential Authority could have followed that route. Appeal dismissed.</td> </tr> <tr> <td align="left" valign="top" ></td> </tr> <tr> <td align="left" valign="top" >Tags : Liquidation orders, Curatorship, Legality</td> </tr> <tr> <td align="left" valign="top">&nbsp;</td> </tr> <tr>  <td align="left" valign="top">Source : newsroom.manupatra.com</td> </tr> <tr> <td align="left" valign="top">&nbsp;</td> </tr> <tr> <td align="left" valign="top">Regards</td> </tr> <tr> <td align="left" valign="top">Team Manupatra</td> </tr> <tr> <td align="left" valign="top">&nbsp;</td> </tr> </table> </div> </body> </html>