CHAPTER
345
GUARANTEE OF LOANS (SMALL BUSINESSES) |
ARRANGEMENT OF
SECTIONS |
SECTION |
|
|
Power of Government to guarantee loans for small
businesses. |
Minister to be a corporation sole. |
|
Application for guaranteed loan. |
Functions of approved lender. |
Conditions of a guaranteed loan. |
Loan guarantee premium fee. |
|
Minister to give directions to approved lender. |
Restriction on borrowing powers of the borrower
if guarantee outstanding. |
Limit on amount of guarantees to small
businesses. |
|
Borrower to repay to Government sums paid under
guarantee. |
|
Discharge of Government's liability as a
guarantor. |
Guaranteed loan settlement. |
Offences in respect of guarantee. |
|
CHAPTER 345 |
GUARANTEE OF LOANS
(SMALL BUSINESSES) |
An Act to
provide for the guarantee by the Government of the Commonwealth of The Bahamas
of loans by financial institutions to small business and for purposes connected
thereto. | 25 of 1998 |
[Assent 24th July,
1998]
[Commencement 14th August, 1998] |
1. This Act may be cited as the Guarantee of Loans
(Small Businesses) Act, 1998. | Short title. |
2. In this Act- | Interpretation. |
"agriculture"
includes fisheries, forestry, horticulture, and use of land for any purpose of
husbandry including the keeping or breeding of livestock, poultry and bees and
the growing of vegetables or fruits; |
"agricultural
enterprise" means an enterprise in The Bahamas in which is carried on the
business of agriculture; |
"approved
lender" means- |
(a) The Bahamas
Development Bank established under section 3 of The Bahamas Development Bank Act; |
(b) a domestic
bank licensed under the Banks
and Trust Companies Regulations Act; |
(c) an
insurance company registered under the Insurance Act; or |
(d) any other
financial institution approved by the Minister in accordance with the
provisions of section 5; |
"borrower"
has the meaning assigned to it in section 8(b); |
"company"
includes any body of persons whether corporate or unincorporate; |
"Fund"
means the Loan Guarantee Fund established under section 10; |
"guaranteed
loan" has the meaning assigned to it in section 3(1); |
"industrial
enterprise" means an enterprise in The Bahamas in which is carried on- |
(a) the
business of mining, manufacturing, processing, transforming, assembling,
installing, overhauling, reconditioning, altering, repairing, cleaning,
packaging, transporting or warehousing of goods; |
(b) the
operation of an air, sea or land public transport service; or |
(c) any service-oriented
business; |
"interest"
means simple interest calculated on the declining balance; |
"Minister"
means the Minister responsible for Loan Guarantee Schemes; |
"property"
means real and personal property; |
"small
business" means an agricultural enterprise, an industrial enterprise, a
tourist industry enterprise where the owner of such enterprise participates or
assists in the day to day management of the enterprise, which has the following
characteristics- |
(a) employs
less than twenty-five persons; or |
(b) the annual
gross revenue does not exceed one million dollars; |
"security"
or "collateral" means any personal guarantee or property pledged by a
borrower to protect the interest of the approved lender; |
"tourist
industry enterprise" means an enterprise in The Bahamas in which is
carried on the business of- |
(a) supplying
hotel accommodation or other tourist facilities; or |
(b) supplying
premises or equipment for any business referred to in paragraph (a) of this definition
under a lease contract or other arrangement whereby title to the premises or
equipment is retained by the supplier. |
3. (1) The Government may in such manner and on such
terms and subject to such conditions as may be agreed between it and an
approved lender- | Power of Government to guarantee loans for small
businesses. |
(a) guarantee
the discharge by a borrower of its obligations under any agreement (in this Act
referred to as a "guaranteed loan") which may be entered into by the
borrower with an approved lender in respect of any borrowing or under any bond,
promissory note or other instrument issued pursuant to any such agreement; and |
(b) assume such
other obligation as may be agreed between the Minister and an approved lender
in relation to or pursuant to any such agreement, bond, promissory note or
other instrument. |
(2) A guarantee or
undertaking given under this section shall be given in writing in the name of
the Government of the Commonwealth of The Bahamas and any guarantee or
undertaking or any endorsement or any bond, promissory note or other instrument
of guarantee or undertaking given under this section may be signed on behalf of
the Government of the Commonwealth of The Bahamas by the Minister or by any
person authorised in writing by the Minister on that behalf. |
(3) Section 17 of
the
Financial Administration and Audit Act shall not apply to any guarantee made by
the Minister under subsection (1). |
4. The Minister shall, as respects the functions assign
to him by or under this Act, be a corporation sole, with power to acquire,
hold, lease and dispose of property, to enter into contracts, to sue and be
sued and to do all things necessary for the purposes of this Act. | Minister to be a corporation sole. |
5. (1) The Minister may, subject to such conditions as
he sees fit, approve any financial institution as a lender for the purposes of
this Act. | Approval of lender. |
(2) The Minister
may at any time terminate the approval given to a lender under this section by
not less than six months' notice in writing. |
(3) No notice of
termination under subsection (2) shall affect the rights or obligations of any
person under any guarantee which is made or entered into before the date on
which such termination takes effect. |
6. (1) An approved lender desirous of obtaining a
guarantee for a loan under this Act shall apply to the Minister in the
prescribed form. | Application for guaranteed loan. |
(2) Before an
approved lender makes an application under subsection (1), it shall evaluate
the loan proposal of the borrower and indicate to the Minister, the terms and
conditions of its participation in granting the borrower a loan. |
7. (1) An approved lender shall- | Functions of approved lender. |
(a) obtain
proof of the eligibility of the borrower for the grant of a guaranteed loan; |
(b) at all
times exercise due diligence to ensure that the proceeds of the guaranteed loan
are being applied to the purposes for which the loan was made; |
(c) obtain the
approval of the Minister before modifying any guaranteed loan under this Act;
and |
(d) scrutinize
and check the application for the loan and the statements contained therein
with the care required by the approved lender in the conduct of its ordinary
business. |
(2) An approved
lender shall submit quarterly declarations to the Minister commencing from the
date on which such loan would have been approved, in such form as may be
prescribed and otherwise required under this Act, listing all guaranteed loans
administered by it and which are in arrears at the end of that quarter and
advising the Minister of the steps taken to recover such arrears. |
8. A loan may be guaranteed under this Act if all the
following conditions are satisfied, that is to say- | Conditions of a guaranteed loan. |
(a) the loan is
made by an approved lender; |
(b) the loan is
made to an individual or company (in this Act referred to as the
"borrower") who provides evidence satisfactory to the Minister that
such individual or persons forming the company are- |
(i) not
less than eighteen years of age; |
(ii) not
under any liability to an approved lender under any other loan previously made
by an approved lender and guaranteed under section 3; |
(c) the purpose
of such loan is to establish a small business or to undertake any project
relating to such business; |
(d) the loan
does not exceed two hundred and fifty thousand dollars; |
(e) the loan is
made on terms that all moneys borrowed under the loan shall be repaid within a
period of ten years following the date on which the first advance is made under
the loan or such other date as may be determined by the Minister; |
|
(i) to
an individual who provides evidence satisfactory to the Minister that there is
a valid policy of insurance on his life with an insurance company registered
under the Insurance Act for such an amount as is sufficient to cover the full
amount of the loan or to an individual who takes out a mortgage redemption
policy with an insurance company registered under the Insurance Act and undertakes to maintain
the policy by regular payment of premiums and assigns the benefits of the
policy to the approved lender and deposits it with the approved lender; |
(ii) to
a company which provides evidence satisfactory to the Minister that there is a
valid policy of insurance on the lives of the principal owners and manager of
the company, with an insurance company registered under the Insurance Act, the
aggregate of which is sufficient to cover the full amount of the loan or to a
company that has taken out a mortgage redemption policy with an insurance
company registered under the Insurance Act and undertakes to maintain the policy by regular
payment of premiums and assigns the benefit of the policy to the approved
lender and deposits it with the approved lender; and |
(g) the
aggregate amount guaranteed shall not exceed eighty per centum of the loan
amount; |
(h) the loan is
secured by a first legal mortgage on property or by a debenture in favour of
the approved lender and, where there is no property available, by any other
collateral or security which may be approved by the Minister; and |
(i) any
premises which is security for the loan is insured against all insurable risks
as defined in the Second Schedule to the Guarantee of Loans (Small Businesses)
Regulations for the full amount of the value of the property at the date of the
making of the loan, or for such greater or lesser amount, as the Minister may,
from time to time, having regard to any fluctuations in the cost of building,
require by notice in writing to the approved lender. |
9. (1) The approved lender shall pay a loan guarantee
premium fee to the Minister in respect of each loan guaranteed under this Act. | Loan guarantee premium fee. |
(2) The loan
guarantee premium fee mentioned in subsection (1) shall be in a sum equal to
two per centum of the amount guaranteed. |
10. (1) For the purposes of section 3, the Minister
shall establish a fund to be known as the Loan Guarantee Fund (in this Act
referred to as "the Fund") out of which all payments required to be
made by the Government pursuant to section 3 shall be made and into which all
loan guarantee premium fees received under this Act shall be paid. | Loan Guarantee Fund. |
(2) The fulfilment
of all the obligations of the Government under section 3 shall be guaranteed
out of the Consolidated Fund and accordingly, there shall be paid into the Fund
from time to time out of the Consolidated Fund by warrant under the hand of the
Minister of Finance such sums as may be necessary to increase the Fund to an
amount which will enable the Minister to discharge these obligations. |
(3) Whenever any
sum is paid out of the Consolidated Fund under subsection (2) of this section,
the Minister shall prepare a statement and lay it before the House of Assembly. |
(4) Without
prejudice to the provisions of subsection (2) of this section, where the Fund
at the end of any financial year exceeds ten per cent of the total amount of
guaranteed loans in force, the Minister shall apply the surplus towards
repaying to the Consolidated Fund all sums paid therefrom into the Fund in accordance
with subsection (2) of this section. |
(5) The Minister
may from time to time invest any of the liquid assets of the Fund in securities
which are obligations of the Government, as well as securities approved by the
Governor-General. |
(6) No payment shall
be made out of the Fund except such payments as are authorized to be made by
this Act. |
11. The Minister may give directions in writing to the
approved lender as may from time to time be necessary or desirable for the
purpose of administering the Fund and the approved lender shall comply with the
directions. | Minister to give directions to approved lender. |
12. So long as the Government shall continue to be
liable is under any guarantee or other undertaking given in exercise of the
powers under section 3(1) in respect of any borrowing, the borrower shall not,
without the consent of the approved lender and the Minister, exercise any other
power to borrow additional funds for the project except the power to borrow by
way of overdraft for a period not exceeding twelve months. | Restriction on borrowing powers of the borrower if
guarantee outstanding. |
13. The aggregate amount of all borrowings by small
businesses that are guaranteed by the Government under this Act shall not
exceed ten million dollars or such greater sum as may from time to time be
specified by resolution of the House of Assembly. | Limit on amount of guarantees to small businesses. |
14. (1) The Minister shall cause to be kept proper
accounts and other records relating to the Fund and shall prepare in respect of
each financial year a statement of the accounts of the Fund in compliance with
generally accepted accounting principles. | Audit and accounts. |
(2) The accounts
of the Fund shall be audited annually under such arrangements and in such
manner as may be approved by the Minister. |
(3) The Minister
shall cause a copy of the annual statement of accounts and the auditor's report
thereon to be laid on the table of both Houses of Parliament not later than six
months after the end of each financial year. |
(4) Copies of the
annual statements of accounts and the auditor's report on those statements of
accounts of the Fund shall be published in such manner as the Minister may
direct and shall be made available to the public at a reasonable price. |
15. If any sum is paid out of the Consolidated Fund or
other Fund referred to in section 10(1) in respect of any liability incurred by
the Government under a guarantee or other undertaking given in exercise of the
powers conferred by section 3(1), the borrower shall repay such sum (together
with interest whereon at such rate as the Minister may prescribe) to the
Consolidated Fund or to the Fund referred to in section 10(1), as the case may
be, in such manner and at such time as the Minister may direct. | Borrower to repay to Government sums paid under
guarantee. |
16. Where an approved lender discovers that any
statement in an application for a loan is false in any material respect or that
a borrower has used or is using the proceeds of a loan otherwise than for a
purpose specified in the application of a loan, the approved lender may take
any action it considers proper in the circumstances and shall immediately make
a full report in respect of the matter to the Minister. | Misrepresentation. |
17. Without prejudice to any other rights or remedies
of the Government as a guarantor, the Government shall be discharged from all
liability in respect of a guaranteed loan under this Act- | Discharge of Government's liability as a guarantor. |
(a) if the
approved lender fails to disclose any fact known to the approved lender which
may reasonably have affected the decision of the Minister in granting the
guaranteed loan; |
(b) if the
approved lender fails to disclose to the Minister any defect in the title of
the borrower to collateral or security for the loan; being a defect which the
approved lender has discovered or ought with reasonable diligence to have
discovered, and if the defect is one which might reasonably have affected the
decision of the Minister in granting the guaranteed loan; |
(c) if the
approved lender assigns or conveys, otherwise than with the approval of the
Minister to another approved lender, any of the rights of the approved lender
under the loan or any other charge or lien by which the loan is secured; |
(d) if the
approved lender varies or waives any of the obligations of the borrower under
the loan without the approval of the Minister; |
(e) if the
approved lender, otherwise than in accordance with the terms of the loan,
releases any security or collateral taken as a security for the loan without
the approval of the Minister; or |
(f) if the
approved lender has failed to comply with any provision of section 7. |
18. (1) Subject to the provisions of this section, an
approved lender, who is the creditor in respect of a guaranteed loan which is
secured by a mortgage on premises or chattels may, where default has occurred
under the mortgage, realise its security by selling those premises or chattels in
accordance with the provisions of this section. | Guaranteed loan settlement. |
(2) A sale of
premises or chattels in accordance with the provisions of this subsection
shall, whether or not in exercise of the powers of sale conferred on a
mortgagee by any written law, be effected by public auction or otherwise, and
such sale shall only take place at a price which shall not be less than a sum
equal to eighty per cent of the following sums (hereinafter referred to as the
"settlement value")- |
(a) the balance
of the principal sum of the loan owing on the date when the security is
realised; |
(b) the
interest owing on the said date under the loan in respect of the period of
twelve months immediately preceding the said date; |
(c) such
reasonable costs of realising the security and of selling the premises as are
incurred by the approved lender as the Minister may approve or as the Minister
may have agreed as a term of the guaranteed loan. |
(3) If a sale
shall not take place in accordance with subsection (2), the approved lender
shall forthwith notify the Minister and the Minister shall either- |
(a) authorise
the approved lender to sell the property at the best price reasonably
obtainable (whether by public auction or otherwise) and if upon sale such price
is less than the settlement value of the loan, the Minister shall pay to the
approved lender a sum equal to the settlement value after deducting there-from
the price at which the premises or chattels were sold; or |
(b) require the
approved lender to transfer to him or his nominee, all rights to and in respect
of the guaranteed loan and all collateral or other securities therefor on
payment of the settlement value of the property by the Minister to the approved
lender calculated in accordance with subsection (2); or |
(c) require the
approved lender to sell the property to the Minister or his nominee at the
settlement value and to convey title to the Minister or his nominee free and
discharged from all liability to the approved lender or the borrower. |
(4) If the
Minister shall authorise the sale of the property under paragraph (a) of
subsection (3) and such sale shall not take place in accordance with that
paragraph, the Minister shall give further directions in accordance with either
paragraph (b) or (c) of subsection (3). |
(5) The payment by
the Minister to an approved lender in respect of a guaranteed loan of the sum
provided for in subsection (3)(a) shall discharge the Government from all
liability to the approved lender in respect of the guaranteed loan. |
(6) In every sale
of mortgaged premises or chattels in accordance with the provisions of
subsection (2)- |
(a) such
premises or chattels shall be sold for the same estate or interest as the
mortgagor would have therein but for the mortgage, and subject only to such
conditions respecting title or evidence of title, or other matters, as it is
necessary or proper to impose on the sale of such premises or chattels as the
Minister may permit to be imposed; and |
(b) in the case
of sale by public auction, notice of intention to sell the mortgaged premises
or chattels by public auction and of the time, date and place of such auction,
shall be published in two issues of any newspaper published and circulating in
The Bahamas at intervals of not less than two days. |
(7) Where, in
addition to being secured by a mortgage on any premises or any chattel, a
guaranteed loan is secured by a mortgage or charge on other premises or
chattels, subsection (1), shall have effect as if references to a security
included references to all securities for the guaranteed loan, and as if
references to premises and chattels included references to all premises and
chattels on which the loan is secured. |
(8) For the
purposes of this section default occurs where ninety days has elapsed after the
amount of the loan becomes due and payable. |
19. (1) Any person who- | Offences in respect of guarantee. |
(a) wilfully
applies any proceeds of a guaranteed loan to any purpose other than the purpose
for which the loan was made; or |
(b) having
obtained a guaranteed loan, wilfully destroys or misappropriates any security
given in relation to such guaranteed loan, |
shall be
guilty of an offence and shall be liable on summary conviction to a fine of
five thousand dollars, or to imprisonment for a term of twelve months or to
both such fine and imprisonment. |
(2) If any person,
in giving any information, making any application or claim for the purposes of
this Act, makes any statement which he knows to be false in a material
particular, or recklessly makes any statement which is false in a material
particular, that person shall be liable on summary conviction to imprisonment
for a term of six months or to a fine of two thousand five hundred dollars or
to both such fine and imprisonment. |
(3) Where an
offence under this section has been committed by a body corporate, every person
who at the time of the commission of the offence was a director, general
manager, secretary of the company or other similar officer of the body
corporate, or was purporting to act in any such capacity, shall be deemed to be
guilty of that offence, unless he proves that the offence was committed without
his consent or connivance and that he exercised all such diligence to prevent
the commission of the offence as he ought to have exercised having regard to
the nature of his functions in that capacity and to all the circumstances. |
20. The Minister may make regulations for the purpose
of giving effect to this Act, and in particular for prescribing anything by
this Act required to be prescribed. | Regulations. |