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Battling companies must apply for business rescue, says PFA

06 May 2015 Muvhango Lukhaimane, PFA
Pension Funds Adjudicator, Muvhango Lukhaimane.

Pension Funds Adjudicator, Muvhango Lukhaimane.

A company under financial stress and having difficulty meeting its obligations, including payment of provident fund contributions, would do well to apply to be placed under business rescue, says Pension Funds Adjudicator Muvhango Lukhaimane.

She was commenting in a ruling against a company that had failed to pay over provident fund contributions to the fund because it was experiencing financial problems.

The complainant A Solani said his employer On Par Erection Works CC (third respondent) had failed to transmit all provident fund contributions to Metal Industries Provident Fund (first respondent), administered by Metal Industries Benefit Funds Administrator (second respondent).

The third respondent deducted contributions from the complainant’s salary for onward transmission to the first respondent in respect of his retirement funding. Since 2012 the third respondent ceased making provident fund deductions from the complainant’s salary and subsequently ceased transmitting provident fund contributions to the first respondent.

In its response to the complaint, the second respondent confirmed that contributions were received for the period 9 March 2009 to 31 July 2012. The first respondent had not received the complainant’s contributions from the third respondent from August 2012.

The third respondent said that it stopped all provident fund contributions since late 2012. It submitted it had 44 employees and at the time of stopping the contributions it was on the verge of retrenching its employees due to financial pressures.

It had to take drastic measures to ensure that none of its employees were in fact retrenched. It had a discussion with the first respondent’s Bargaining Council and decided to place all contributions on hold.

The third respondent said it explained the situation to all the parties involved, including the complainant, and added it would resume with the contributions when it was financially stable.

In her determination, Ms Lukhaimane said the third respondent had a duty placed on it by the provisions of section 13A(1)(a) of the Pension Funds Act and the rules of the first respondent to pay provident fund contributions and provide contribution schedules.

“It is imperative to state that, in instances of financial stress, it is prudent for the third respondent to make an application to be placed under business rescue, thereby halting some of its financial obligations, including payment of contributions.

“On the other hand, the first respondent uses the Bargaining Council to collect contributions and, therefore, needs to advise it of instances that are lawful to excuse payment of contributions and not abdicate its responsibilities to collect and ensure compliance.”

Ms Lukhaimane noted the discussions and investigations between the first respondent’s Bargaining Council and the third respondent.

However, the abovementioned process had not resulted in an arbitration award which would have resulted in her not having jurisdiction to adjudicate upon the matter.

She ordered the third respondent to submit all outstanding contribution schedules in order to facilitate the computation of the complainant’s fund credit.

The first respondent was ordered to compute the complainant’s fund credit, together with late payment interest owed by the third respondent.

The third respondent was ordered to pay to the first respondent, the complainant’s outstanding contributions plus late payment interest.

The first respondent was also ordered to deliver to the complainant a copy of his latest benefit statement.

 

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