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n Tydskrif vir die Suid-Afrikaanse Reg - Die "effectenlease"
This article deals with a commercial instrument that was a very popular form of investment in the Netherlands at one stage. It is called the effectenlease in Dutch. It consists of the following: A bank or other financial institution lends money to a client. The purpose of the loan is to buy shares and other financial instruments such as bonds over a period of time. In this way the client builds up a portfolio. The loan attracts interest at a relatively high rate. The loan period could vary between five years and twenty years. The bank remains owner of the shares until the loan is repaid in full. The loan is repayable by means of instalments. These contracts were concluded on a large scale and huge amounts of euros were eventually involved. An important part of the contract between the parties was a term which provided that the client was obliged to repay the whole loan even if the value of the shares at the end of the term is less than the outstanding amount owed. Everything went fine for investors in a bullish market when the prices and values of shares and other instruments showed an upward trend. But things did not look as bright when prices started to fall and investors could not repay their loans.
The institution of the effectenlease and the responsibilities and obligations of the parties eventually landed in the hoge raad in the Netherlands. In a landmark decision, which had to serve as example for similar cases, the court decided that the clients had a duty to familiarise themselves with all the aspects and dangers involved in such contracts but that banks also had a duty to inform the clients of the risks that they are undertaking, in particular their duty to repay the loan even if the value of the shares was not satisfactory. The fact that these matters were pointed out in brochures and in the contracts themselves was not enough to satisfy the hoge raad. The court reduced the claim by the bank for the outstanding amount (and in effect similar claims in other cases) drastically. In this article the effectenlease is analysed and the question is put what type of an agreement it would constitute for purposes of the National Credit Act 34 of 2005 should banks or other institutions introduce a product such as the effectenlease onto the South African commercial landscape. The definitions in the National Credit Act are analysed, interpreted and applied and the conclusion is reached that the effectenlease will be treated as a secured loan. It is also pointed out that the reckless credit provisions in the National Credit Act will play an important role should a credit provider decide to operate a scheme akin to the effectenlease.
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