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Medical Schemes Act, 1998 (Act No. 131 of 1998)

Chapter 7 : Financial Matters

35. Financial arrangements


(1) A medical scheme shall at all times maintain its business in a financially sound condition by—
(a) having assets as contemplated in subsection (3);
(b) providing for its liabilities; and
(c) generally conducting its business so as to be in a position to meet its liabilities at all times.


(2) A medical scheme shall be deemed to have failed to comply with the provisions of subsection (1) if it does not comply with subsection (3), (4), (5), (6) or (7).


(3) A medical scheme shall have assets, the aggregate value of which, on any day, is not less than the aggregate of—
(a) the aggregate value on that day of its liabilities; and
(b) the nett assets as may be prescribed


(4) A medical scheme shall not be deemed to hold an asset for the purposes of this Act to the extent to which such asset is encumbered.


(5) A medical scheme shall have such assets in the Republic in the particular kinds or categories as may be prescribed.


(6) A medical scheme shall not—
(a) encumber its assets;
(b) allow its assets to be held by another person on its behalf;
(c) directly or indirectly borrow money; or
(d) by means of suretyship or any other form of personal security, whether under a primary or accessory obligation, give security in relation to obligations between other persons, without the prior approval of the Council.

without the prior approval of the council or subject to such directives as the Council may issue.


(7) Subject to the provisions of this section a medical scheme may invest its funds in any manner provided for by its rules.


(8) A medical scheme shall not invest any of its assets in the business of or grant loans to—
(a) an employer who participates in the medical scheme or any administrator or any arrangement associated with the medical scheme;
(c) any other medical scheme;
(c) any administrator; and
(d) any person associated with any of the abovementioned.


(9) For the purposes of this Act, the liabilities of a medical scheme shall include—
(a) the amount which the medical scheme estimates will be payable in respect of claims which have been submitted and assessed but not yet paid;
(b) the amount which the medical scheme estimates will become payable in respect of claims which have been incurred but not yet submitted; and
(c) the amount standing to the credit of a member's personal savings account.


(10) A medical scheme which fails to comply with subsection (1) shall, within 30 days after becoming aware of it, notify the Registrar of such failure and state the reasons for it.


(11) The Registrar may, if a medical scheme gives notice to the Registrar in terms of subsection (10), or if the Registrar is satisfied that a medical scheme is failing, or is likely to fail within a reasonable period, to comply with subsection (1), (2), (3), (4), (5), (6) or (7) direct that the medical scheme by notice, submit to him or her, within a specified period—
(a) specified information relating to the nature and causes of the failure; and
(b) its proposals as to the course of action that it should adopt to ensure compliance therewith.


(12) The Registrar may, when he or she has received the information referred to in subsection (11), and in concurrence with the Council—
(a) authorise the medical scheme concerned, by notice, to adopt a course of action, approved by him or her after having considered those proposals and which he or she is satisfied will reasonably ensure that the medical scheme complies with subsection (1), (2), (3), (4), (5), (6) or (7) within a specified time and he or she may at the same time, or at any time thereafter, by notice authorise the modification of that course of action to the extent he or she deems appropriate in the circumstances; or
(b) if he or she is satisfied that it is necessary to do s i in the interest of the beneficiaries of the medical scheme, at the same time, or at any time thereafter, and notwithstanding any steps already taken by him or her under paragraph (a), act in terms of any other provision of this Act.


(13) If a medical scheme fails to comply with any provision of this section, every officer of the medical scheme who is a party to the failure, shall be guilty of an offence.