Rwanda
Regulation on Shareholding in Banks
Regulation 10 of 2011
- Published in Official Gazette 29 on 18 July 2011
- Assented to on 20 June 2011
- Commenced on 18 July 2011
- [This is the version of this document from 18 July 2011.]
Chapter One
General provisions
Article One – Purpose
This regulation aims at establishing rules to diversify ownership of share capital of a bank to allow a wider base for capitalization and to prevent dominant shareholder from exerting undue influence on the management of a bank that may impend the continuing fulfillment of the criteria for licensing.Article 2 – Definitions
In this regulation, unless the context otherwise requires, the following words and expressions shall mean:1.“Qualifying holding” shareholding in a bank that, directly or indirectly, alone or in conjunction with others, represents at least five percent (5%) of the equity capital or voting rights, or that makes it possible to exercise a significant influence over the management of that bank.2.“Central Bank”: the National Bank of Rwanda.3.“Related party”: a natural or legal entity related in some way to the initial person and include a spouse, family member up to the second degree of a shareholder or a related company.4.“Reputable financial institution” a financial institution licensed to conduct banking or any other financial institution business under the laws of any state, country or territory and which meets such other criteria as may be prescribed by the Central Bank;5.“Reputable public company” a company that is financially strong which is of good public standing and meets such other criteria as may be prescribed by the Central Bank;Chapter II
Regulatory requirements
Article 3 – Supervisory thresholds and modalities of increasing a qualifying holding
It is established supervisory thresholds in the shareholding of a bank to allow the Central Bank to carry out a follow-up of the modification of the property structure of a bank.The supervisory thresholds of shareholding are respectively set at ten per cent (10%), twenty-five per cent (25%), thirty three per cent (33%) and fifty per cent (50%).Notwithstanding the provision of the companies law, where there is any natural person or legal entity intending to increase its qualifying holding in a bank so that the proportion of voting rights or of the capital held by that person or entity, directly or indirectly, would reach or exceed any of the supervisory threshold referred to in the preceding paragraph, the bank shall obtain prior permission from the Central Bank.Permission under paragraph (2) may be obtained from the Central Bank on application in writing.Permission under paragraph (2) for the acquisition, increase or alienation of shares in a bank shall not be granted unless the Central Bank is satisfied that the proposed acquisition, increase or alienation of shares:a)will not be contrary to the public interest;b)will not be contrary to the interests of the bank concerned or its depositors;c)will not be detrimental to the financial services industry in general.Article 4 – Restrictions on shareholding
To diversify ownership of a bank for the purpose of prudent management, a natural person including his or her related party or a body corporate including its related party owned or controlled by one natural person other than a reputable financial institution or a reputable public company authorized by the Central Bank shall not directly or indirectly own or acquire more than twenty five (25%) of the shares of a bank.Article 5 – Potential grounds for rejection of request for increase, acquisition or alienation of shares
The Central Bank may decline to approve any increase, acquisition or alienation of shares that would:a)Compromise the quality of the bank’s management or its financial soundness;b)Jeopardize the interests of the bank’s depositors;c)Hinder effective supervision of the bank.Article 6 – Bank application
A bank shall on behalf of a person who is seeking to increase, acquire or alienate shares equivalent to qualifying holdings, apply in writing to the Central Bank providing details on the nature of the increase, acquisition or alienation and any such information that may be requested by the Central Bank.A bank shall provide all information in respect of a person who is seeking to increase, acquire or alienate shares as specified in the Appendix 3, if corporate and Appendix 4, if a natural person of Regulation 3/2008 on Licensing conditions of Banks.The bank shall also provide details of the impact on its ownership and operational structure that will result from the proposed increase, acquisition or alienation of shares.The bank shall also provide the proof of financial strength and ability of the applicant to provide additional capital if needed.The submission of any untrue or misleading information shall render the applicant a person not fit and proper and shall constitute grounds for rejection of the application for the increase, acquisition or alienation of shares.Article 7 – Application procedures and requirements
Upon receipt of an application form and supporting documents, the Central Bank shall, within seven working days, send the applicant a formal letter of acknowledgement or a letter of deficiency as the case may be.A letter of acknowledgement shall constitute official notice that the documents submitted were found to be complete and that the processing or evaluation may commence.A letter of deficiency shall outline deficiencies in the application and shall provide a deadline for rectification of the deficiencies.No further action shall be taken by the Central Bank unless the deficiencies are rectified within the prescribed period.Article 8 – Processing applications
The Central Bank shall, within one month after receipt of a complete application form, investigate and prepare a detailed report in respect of each application.The report shall indicate the decision of the Central Bank to:a)grant the authorization if it is satisfied that the application satisfies the requirements of the Banking Law and this Regulationb)grant the authorization subject to the fulfillment of certain conditions that it may deem necessary;c)refuse to grant the authorization for reasons that shall be stated in the notice of decision or letter of refusal.Article 9 – Notice of decision
The Central Bank shall inform the bank, in writing, of its decision to grant or refuse to grant the authorization.A notice communicating the decision not to grant an authorization shall state the grounds upon which it is based.Article 10 – Prohibitions to have qualifying holdings
A person or group of related persons who do not satisfy the criteria for the fit and proper test as stipulated by the regulation no 03/2008 on licensing conditions of banks shall not be eligible to have qualifying holdings in a bank.Chapter III
Specific requirements
Article 11 – Prohibitions on allotment, issue, registration or transfer of shares
No bank shall allot, issue, register, or transfer shares exceeding five percent of the shares of a bank to any person or group of related persons, if that person or group of related persons has not obtained a notice of no objection from the Central Bank.The registrar of companies shall not register any transfer of shares of a bank referred to in paragraph (1) without receiving a notice of no objection from the Central Bank.Article 12 – Registration of shares in the names of nominees
No bank or controlling company shall without the written approval of the Central Bank:a)allot or issue any of its shares to, or register any of its shares in the name of any person other than the stated beneficial shareholder;b)transfer any of its shares in the name of a person other than the stated beneficial shareholder;c)allow any of its shares to remain registered in the name of a person other than the stated beneficial shareholder at any time after thirty days after the commencement of this regulation.Paragraph (1) shall not affect the allotment or issue or the registration of the transfer of shares in a bank:a)in the name of any executor, administrator, trustee, curator, guardian or liquidatorb)for a period of not more than six months, in the name of a stockbroker or a company established by him or her for the purposes of the Capital Markets laws, except that the Central Bank shall require to be satisfied that the shares are allotted, issued or registered in such a manner in order to facilitate delivery of the shares to the purchaser of the shares.The bank shall on issue or allotment, transfer or registration of any shares under paragraph (2) provide the Central Bank in writing with the full particulars of the transaction relating to the allotment, issue, registration or transfer of the shares under that paragraph.The voting rights attached to the shares registered under paragraph (2) shall, unless otherwise determined by the Central Bank, not be more than twenty percent of the aggregate of the voting rights attached to all the issued shares of the bank concerned.Any person who contravenes paragraph (1) of this article commits an offence and is liable on conviction to a fine equal to twice the nominal value of the shares registered or transferred for each day on which the shares remain so registered.Article 13 – Registration of shares contrary to this regulation
No person shall:a)either personally or by proxy granted to any other person, cast a voting attached to;b)receive a dividend payable on, any share in a bank allotted or issued to him or her or registered in his or her name in contravention of this regulation.The validity of any resolution adopted by a bank shall not be affected by a vote being cast in contravention of proviso (a) of paragraph (1), if that resolution was adopted by the requisite majority of votes which were validly cast.A dividend referred to in proviso (b) of paragraph (1) shall accrue to the bank concerned.Article 14 – Shareholders register and disclosure of interest in shares
A bank shall maintain a register of the current beneficial holders of all shares in the bank in such form and manner as the Central Bank may approve.A bank shall every year provide the Central Bank with the most up to-date returns of the register referred to in paragraph (1).No transfer of shares of a bank shall be valid unless the transfer is recorded in the register.Any person or group of related persons who acquire a qualifying holding of shares compromised in the bank’s share capital or ceases to be interested in shares so compromised whether or not retaining an interest in other shares so compromised, shall within thirty days after the acquisition or censure of holding that interest, notify the bank of the interest so acquired or ceased to be held.Chapter IV
Final provisions
Article 15 – Penalties for breaching provisions of this regulation
Where a person or bank fails to satisfy any of the requirements of this regulation, the Central Bank may apply any sanctions established under Articles 65, 68 and 69 of the banking Law.Article 16 – Repealing provision
All prior provisions contrary to this Regulation are hereby repealed.Article 17 – Commencement
This regulation shall come into force on the day of its publication in the Official Gazette of the Republic of Rwanda.History of this document
18 July 2011 this version
Commenced
20 June 2011
Assented to