It is always worth-while to speak to a legal expert before establishing or joining a stokvel - you have a right to know your rights
WITH “stokvel season” in full swing, Legal Aid South Africa has urged Northern Cape residents to report instances of stokvel fraud.
One of the most popular forms of investment in South Africa, stokvels are a communal investment where members make a joint financial contribution into a common account or savings for the purpose of sharing amongst themselves at a predetermined time.
In essence, all contributing members expect to receive their share, proportionate to their contributions, at the end of the year or at any other time as may be agreed between the members. In some instances, members agree to make a monthly payment to each member on a rotation basis.
Matimba Hlungwane, corporate attorney at Legal Aid South Africa, said yesterday that despite being tremendously popular, many people did not know how to handle conflict that can arise when the trust inherent to a stokvel is broken.
“Because of the simplicity of the model, stokvels rarely have a formal document that regulates the members’ relationship, nor are they regulated by any statute. This leaves members vulnerable and exposed to various risks. Members may default with their contributions or misappropriate the stokvel monies,” Hlungwane said, adding that members were advised to have a stokvel constitution.
“This constitution will set out the specific terms which should regulate the relationship amongst the members of the stokvel. Where there is a constitution, members can easily refer to it in the event of a conflict amongst themselves, e.g. default by a member or misappropriation of the stokvel funds. The members may agree to put a clause in the constitution that prescribes a process to recover the money from a member who is in default, or who may misappropriate its monies. It is important to indicate that the clauses in the stokvel’s constitution should not be in conflict with public morals. The stokvel’s constitution cannot trample on the members’ Constitutional rights as prescribed in the Bill of Rights,” he stated.
Hlungwane added that in the absence of a constitution, the members could only rely on the law of general application.
“This means that in the event of fraud committed by a member in respect of the funds of the stokvel, the innocent members will have to report that fraud to the South African Police Service (SAPS). The SAPS will investigate the complaint and thereafter make a decision on whether to charge the member responsible or not. Where the member is charged, the case will be referred to the National Prosecuting Authority for prosecution. The member may either plead guilty or not guilty to the charges. In the event that the member is found guilty by the court, the innocent members may make an application to the court, in terms of section 300 of the Criminal Procedure Act, for an order that the guilty member be ordered to repay the money. An order of the court in that regard has the same effect as a civil judgment.
“Alternatively, the innocent members may choose to institute a civil action against the member for the recovery of the monies in question. This process requires the issuing of a summons. It is advisable for the innocent members to get the assistance of a legal practitioner. Unlike the first option, the claim against the member will prescribe if summons is not served on the member within a three-year period, and the innocent members will no longer have recourse.”
Hlungwane added that in instances where a member did not receive the full or expected contributions he or she made to the stokvel, the member will have recourse against the stokvel – not against its individual members.
“The member has to follow a civil route, unless the member’s claim will be that the other members unlawfully misappropriated the stokvel’s monies. Should that not be the claim, the member shall proceed by way of a civil action, through the issuing of summons,” he stated.
Hlungwane continued by saying that another scenario would be if a contributing member passed away before he or she receives the contribution.
“The question that arises from this scenario will be whether there will be a claim against the stokvel, the nature of such claim and who will have a right to institute such a claim. Ordinarily, the beneficiaries of the deceased member’s estate will have a claim for the monies which the member would have been entitled to had he or she not died. However, the question as to whether the beneficiaries can claim against the stokvel or not shall depend on the terms of the stokvel. There is no hard and fast legal solution to that extent. The prospective claimant will be guided by what the terms of the stokvel provides.”
Hlungwane concluded by saying that there were very limited legal options available to the members of a stokvel in instances where there was no constitution.
“Even where there is a constitution, there may be costs involved in recovering the money from the guilty party. It is always worthwhile to speak to a legal expert before establishing or joining a stokvel – you have a right to know your rights.”