TONGA

FINANCIAL INSTITUTIONS ACT 2004

Act 17 of 2004

Arrangement of Sections

Section
PART I – PRELIMINARY

1 Short title and commencement
2 Interpretation

PART II - LICENSING OF FINANCIAL INSTITUTIONS

3 Licence for banking business
4 "Bank" name restriction
5 Existing financial institutions deemed licensed
6 Application
7 Consideration of application
8 Determination of application
9 Requirements and limits on licence
10 Revocation of licence
11 Reserve Bank to be notified of changes

PART III - CAPITAL AND RESERVES

12 Minimum capital
13 Restrictions on dividends
14 Transfer of control

PART IV - SUPERVISION OF LICENSED
FINANCIAL INSTITUTIONS

15 Reserve Bank to supervise licensed financial institutions
16 Information to be supplied to Reserve Bank
17 Power to impose Penalty 
18 Administrative fines 
19 Objection to penalty 
20 Confidentiality and exemptions 
21 Offence 
22 Disclosure by Reserve Bank 
23 Auditing of information 
24 Publication of financial statements
25 Inspection 
26 Barred from management
27 Permitted banking activities 
28 Fixed restrictions 
29 Exemptions
30 Further restrictions 
31 Restriction on shareholding
32 Operation of a new branch 
33 Penalties 

PART V - CONTROLLERSHIP AND RECEIVERSHIP

34 References to affiliates, subsidiary and associated persons 
35 Preservation of assets 
36 Grounds for Reserve Bank to consider
37 Powers of the Reserve Bank
38 Power to publish
39 Further powers of Reserve Bank
40 Management of licensed financial institution 
41 Expenses of controller
42 Advances for expenses 
43 Duty to deliver books and property to controller 
44 Offence to destroy, alter, conceal or send documents 
45 Termination of controllership
46 Appointment and termination of appointment of controller 
47 Notice of termination 
48 Indemnity 
49 Controller to comply with directions of Reserve Bank 
50 Considerations affecting exercise of powers by Controller 
51 Moratorium 
52 Exemption to moratorium 
53 Controller may incorporate company under Companies Act 
54 Vesting of property subject to security
55 Proof of vesting 
56 Prohibition against removal of assets 
57 Controller may suspend payment 
58 Sale of financial institution 
59 Consent not required under, other Acts 
60 Sale of property or assets subject to security 
61 Proof of transactions 
62 Bases for initiation of receivership 
63 Appointment of receiver 
64 Expenses owed to receiver and experts
65 Notice and registration of receivership 
66 Powers of receiver 
67 Receiver's access to records 
68 Merger
69 Duties of receiver
70 New Balance Sheets
71 Inventory of assets and property 
72 Withdrawal and payments
73 Shareholder's rights
74 Procedure for claims 
75 Unsold assets
76 Receiver's monthly report
77 Priorities in payment of claims 
78 Appeals from receiver's decisions on claims, 
79 Final reporting to the Reserve Bank 

PART VI – MISCELLANEOUS

80 Retention of cheques for 7 years
81 Notice of unclaimed moneys 
82 Unclaimed moneys paid to. Reserve Bank 
83 Collection of penalties 
84 Winding up of licensed financial institution 
85 Non-applicability to credit unions 
86 Indemnity of Reserve Bank 
87 Operation of Companies Act 
88 Regulations 

PART VII – REPEAL

89 Repeal and transition 

SCHEDULE

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FINANCIAL INSTITUTIONS ACT 2004

Act 17 of 2004

AN ACT TO REGULATE THE LICENSING AND SUPERVISION OF LICENSED FINANCIAL INSTITUTIONS IN TONGA AND FOR PURPOSES CONNECTED THERETO

I assent,

TAUFA'AHAU TUPOU IV,
8th July, 2005

[14th October 2004]

BE IT ENACTED by the King and Legislative Assembly of Tonga in the Legislature of the Kingdom as follows:

PART I-PRELIMINARY

1 Short title and commencement

(1) This Act may be cited as the Financial Institutions Act 2004.

(2) This Act shall come into force on a day to be proclaimed by His Majesty in Council.

2 Interpretation

In this Act, unless the context otherwise requires-

"affiliate" means a company wherein another company's shareholding is at least 20% but not more than 50% of the issued shares or where that other company has the power to exercise influence over the policies of management of the company;

"associated person" means a person in a licensed financial institution who-

(a) directly or indirectly controls the management;

(b) owns directly or indirectly 20 percent or more in nominal value of the equity share capital, as defined in the Companies Act 1995;

(c) is directly or indirectly controlled by the licensed financial institution; or

(d) owns directly or indirectly 20 percent or more of the equity share capital, as defined in the Companies Act 1995;

"bank" is as defined in the National Reserve Bank of Tonga Act (Cap. 102);

"banking business" is as defined in the National Reserve Bank of Tonga Act (Cap. 102);

"Board" is as defined in the National Reserve Bank of Tonga Act (Cap. 102);

"credit institution" means a financial institution other than a bank;

"document" is as defined in the Evidence Act (Cap. 15);

"financial institution" is as defined in the National Reserve Bank of Tonga Act (Cap. 102);

"licensed financial institution" means a financial institution licensed under the provisions of this Act;

"Ministry" means the Ministry of Finance;

"Reserve Bank" means the National Reserve Bank of Tonga established under the National Reserve Bank of Tonga Act (Cap. 102);

"supervision" means to ascertain that regulations, rules, orders, directions, or prudential statements are complied with, investigating, inspecting or examining to determine whether an institution is conducting its business on a sound financial basis, and inquiring into the solvency and liquidity of the institution;

(2) Notwithstanding any provisions of the National Reserve Bank of Tonga Act (Cap. 102), a person who-

(a) advertises;

(b) solicits money;

(c) deposits; or

(d) offers to sell or place bonds, certificates, notes or other securities,

and uses or intends to use the funds so acquired, either in whole or in part, for advances, or investments or any other operation either authorised by law or by customary banking practice, shall be deemed to be conducting banking business.

PART II-LICENSING OF FINANCIAL INSTITUTIONS

3 Licence for banking business

(1) Subject to section 85, no person shall conduct banking business unless he has been issued with a licence under this Act.

(2) The Reserve Bank may require for examination, from any person, books, accounts and records if it has reason to believe he is in contravention of subsection (1).

(3) Any person who-

(a) contravenes the provision of subsection (1); or

(b) refuses, on request, to make available for examination the books, records referred to in subsection (2),

shall be liable to a penalty not exceeding $2,000 and an additional of $1,000 for each day of contravention.

(4) A person holding funds which he has obtained in contravention of subsection (1) shall repay such funds as directed by the Reserve Bank. Any person who fails to comply with any such direction is guilty of an offence and is liable on conviction to a fine not exceeding $25,000.

4 "Bank" name restriction

(1) Every licensed bank shall use as part of its name the word "bank" unless the Reserve Bank otherwise permits.

(2) The word "bank" or its derivative shall be used only by a bank licensed under this Act.

(3) Notwithstanding subsection (2), the Reserve Bank may approve the use of the word "bank"

(a) in the name of a foreign financial institution authorised by the Reserve Bank to establish a representative office in Tonga; or

(b) where its use is such that there is no risk of harm to the public from it.

(4) No bank shall be granted a licence under a name which so closely resembles the name of an existing bank and is likely, in the opinion of the Reserve Bank, to mislead the public.

(5) No licensed financial institution shall change its name or use a name other than that under which it was licensed, without the prior written consent of the Reserve Bank.

5 Existing financial institutions deemed licensed

(1) Notwithstanding the provisions of any other law, the financial institutions specified in the Schedule shall be:

(a) deemed to be licensed under section 8 of this Act; and

(b) issued with a licence.

(2) In the event of any inconsistency between the Westpac Bank of Tonga Act, the Tonga Development Bank Act and this Act, the provisions of this Act shall prevail.

6 Application

(1) Any person may apply for a licence to operate a banking business under this Act.

(2) An application for a licence under this section shall be

(a) made in writing to the Reserve Bank in the prescribed form; and

(b) accompanied by the prescribed application fee.

(3) Every person who makes an application under subsection (2)(a) shall furnish such information, and documents, as the Reserve Bank may specify.

(4) Any person who knowingly furnishes false or misleading information or document, in connection with an application under this Act, is guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000.

7 Consideration of application

The Reserve Bank shall, in considering any application for a licence made under section 6, have regard to-

(a) the adequacy, structure, sources, and proposed beneficial owners of the applicant's capital;

(b) the ability of the applicant to carry on the proposed business, the character and experience of its directors and management, and those persons who will own 10 percent or more of the voting shares of the applicant;

(c) the effectiveness of accounting, internal controls, audit and risk management systems that the applicant will put in place;

(d) where the applicant is a financial institution and an overseas company, evidence of

(i) incorporation in home country;

(ii) current financial institution licence in home country;

(iii) relevant law and regulatory requirements relating to licensing and supervision of financial institution in home country; and

(iv) being subject to comprehensive supervision and regulation on a consolidated basis by the appropriate authorities in home country and such authorities have no objection to the applicant carrying on banking business in Tonga; and

(e) such other matters as the Reserve Bank Considers relevant.

8 Determination of application

(1) The Reserve Bank shall, within three months of receipt consider the application and inform the applicant of its decision.

(2) The Reserve Bank shall, where the decision under subsection (i) is in favour of the applicant, issue to the applicant a licence subject to terms and conditions as may be specified in the licence.

(3) A copy of the licence issued under this section shall be displayed conspicuously in places of business of the licensed financial institution.

(4) The licence shall remain valid unless revoked under this Act.

9 Requirements and limits on licence

(1) No person other than a company shall be granted a licence to do banking business under this Act.

(2) Financial institutions shall be licensed either as banks or as credit institutions.

(3) A licence issued under this Act cannot be assigned or transferred and any purported assignment or transfer shall be null and void.

10 Revocation of licence

(1) The Reserve Bank may revoke a licence if the licensee:

(a) requests revocation of the licence;

(b) fails to commence business within one year following the issue of the licence;

(c) ceases to carry on banking business in Tonga;

(d) contravenes the terms and conditions of its licence or the provisions of this Act;

(e) is subject to voluntary or involuntary winding up proceedings or has a receiver appointed; or

(f) was licensed on the basis of any information or document which is false or misleading in any material particular.

(2)	(a) The Reserve Bank shall give the licensee:

(i) written notice of intention to revoke the licence; and

(ii) within 10 working days from the date of the notice an opportunity to submit reasons why the licence should not be revoked:

Provided that subject to section 37 a licence may be revoked without notice.

(b) The Reserve Bank may, after consideration of any submission under this subsection, either confirm its intention to revoke or withdraw the notice.

11 Reserve Bank to be notified of changes

(1) A licensed financial institution, which alters its constitution shall provide such alteration in writing to the Reserve Bank with certified details thereof and furnish any other information required by the Reserve Bank.

(2) The Chief Executive of a licensed financial institution shall, in the event of an application to the Court under the Companies Act proposing a compromise or arrangement involving that licensed financial institution, furnish the Reserve Bank with

(a) a notice of every meeting ordered by the Court; and

(b) a statement explaining the effect of the compromise or arrangement under the Companies Act.

(3) A licensed financial institution incorporated in Tonga may, with the written consent of the Reserve Bank-

(a) effect a merger;

(b) amalgamate;

(c) consolidate; or

(d) purchase and assume asset of, any other licensed financial institution.

(4) The applicants under subsection (1) shall furnish the Reserve Bank with any information required.

(5) The Reserve Bank shall consider whether:

(a) the proposal will result in a substantial lessening of competition, in financial services;

(b) the licensed financial institution will comply with this Act as a result of the transaction; and

(c) the transaction is consistent with the public interest.

(6) Any licensed financial institution, which acts in contravention of this section, is guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000.

PART III-CAPITAL AND RESERVES

12 Minimum capital

(1) Every financial institution licensed under this Act shall maintain-

(a) if incorporated in Tonga, paid up capital and reserves; and

(b) if incorporated abroad, assigned capital and reserves in Tonga;

in such minimum amount and proportion as the Reserve Bank may specify having regard to internationally accepted capital standards. Such proportion shall not be less than 8% of the total risk weighted assets for a licensee incorporated in Tonga.

(2) The minimum amount specified under subsection (1) for the issue of a licence under section 8 shall not be less than $2,000,000.

(3) The Reserve Bank may specify minimum capital standards for the consolidated group in the case of a licensed financial institution incorporated in Tonga.

13 Restrictions on dividends

(1) No licensed financial institution shall declare or pay any dividend or make any other transfer or remittance from profits-

(a) if this would contravene section 12 or section 28; and

(b) where the payments would exceed earnings in the year to which they relate without the prior approval of the Reserve Bank.

(2) Any licensed financial institution which contravenes subsection (1), is guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000.

14 Transfer of control

(1) Subject to subsection (2), a licensed financial institution may, with the prior written approval of the Reserve Bank, implement a transfer of control.

(2) The Reserve Bank shall determine a transfer of control under subsection (1) by considering the following:

(a) any agreed sale, transfer or other disposition of share capital, and issue or allotment of any new share capital;

(b) any proposed compromise or arrangement where application has been made to the Court under the Companies Act; and

(c) any other event or scheme which directly or indirectly affects transfer of ownership or powers exercisable over the paid up shares.

(3) Any licensed financial institution which contravenes this section, is guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000 and any purported transfer or allotment may be declared null and void.

PART IV-SUPERVISION OF LICENSED FINANCIAL INSTITUTIONS

15 Reserve Bank to supervise licensed financial institutions

(1) The Reserve Bank shall undertake prudential supervision of licensed financial institutions in order to maintain public confidence in the operation and stability of the financial system and to protect the interests of depositors.

(2) The Reserve Bank may require licensed financial institutions and any affiliates or subsidiaries or associated persons to file with the Reserve Bank such returns, financial accounts or information relating to their business as may be specified by the Reserve Bank.

(3) The Reserve Bank may issue in writing prudential statements and guidelines including requirements for licensing, ownership and management of licensed financial institutions.

16 Information to be supplied to Reserve Bank

The Reserve Bank may require from a licensed financial institution for the purposes of section 15 in the specified form-

(a) not later than 10 working days after the last business day to which it relates, a monthly statement of assets and liabilities;

(b) not later than 15 working days after the last business day to which it relates, a quarterly statement of profit and loss;

(c) not later than three months after the end of each financial year of the licensed financial institution, a copy of its audited balance sheet and profit and loss account for that year;

(d) a certificate of compliance with section 26(1) and verification that no director or manager (or person specified by the Reserve Bank as employed in a management capacity), holds office contrary to section 26; and

(e) such other information as the Reserve Bank may require for the purposes of this Act.

(2) The Reserve Bank may require a certificate from the external auditor of a licensed financial institution, verifying the accuracy of any information supplied under this Act.

17 Power to impose Penalty

The Reserve Bank may impose penalties under this Act on a licensed financial institution, which has:

(a) delayed the submission of reports or returns or publication as required by law, regulation, orders, or other directives;

(b) refused to permit an examination into the affairs of the institution; or

(c) made a false statement in relation to any application or report required under this Act.

18 Administrative fines

The Reserve Bank may

(a) impose such administrative fmes not exceeding $5,000 for violation of section 17 as it may determine, and a further fine not exceeding $1,000 for each day of contravention; and

(b) direct the licensed financial institution by notice in writing to take any action specified.

19 Objection to penalty

Where a licensed financial institution objects to penalties imposed under this Act, it shall:

(a) within 14 days of the date of the notification of such penalty, submit reasons for its objections to the Reserve Bank; and

(b) after consideration of such submission the Reserve Bank may confirm, vary or rescind the penalty.

20 Confidentiality and exemptions

(1) No person who has acquired knowledge in his capacity as director, manager, officer, employee, auditor or agent of any licensed financial institution, or when exercising any function under this Act, shall disclose to any person any information in respect of a customer of that financial institution except-

(a) with the written authorisation of the customer or his legal personal representative;

(b) when lawfully required to do so by any court of competent jurisdiction in Tonga or under the provisions of this Act or the Money Laundering and Proceeds of Crime Act 2000;

(c) for the purpose of the performance of his duties under this Act; or

(d) with the written authorisation of the customer or his legal personal representative to provide a person, upon a legitimate business request, a general credit rating a copy of which shall be provided to the customer concerned upon his request.

(2) No person to whom any information is disclosed pursuant to subsection (1) shall disclose or use such information except according to law.

21 Offence

Any person who contravenes section 20 is guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000 or to imprisonment for a period not exceeding 10 years.

22 Disclosure by Reserve Bank

The Reserve Bank may disclose information relating to any licensed financial institution in confidence to a supervisory authority in any other country for the purposes of the exercise of functions similar to those conferred on the Reserve Bank under this Act.

23 Auditing of information

(1) A licensed financial institution shall, with the consent of the Reserve Bank appoint an external auditor for each financial year.

(2) The auditor of a licensed financial institution shall -

(a) carry out each year an audit of the accounts in accordance with international accounting and auditing standards;

(b) provide the Reserve Bank with a certificate, attached to the balance sheet and profit and loss accounts verifying that such balance sheet and profit and loss accounts give a true and fair view of the financial position;

(c) perform such other functions as are required under this Act, or any other Act and Regulations;

(d) disclose to the Reserve Bank any information relating to the affairs of the licensed financial institution, if in the opinion of the auditor the licensed financial institution is insolvent or is in serious financial difficulties or has breached any provisions of this Act or any other Act; and

(e) if requested by the Reserve Bank, discuss the audit directly and provide any additional information required.

(3) The Reserve Bank may, appoint an external auditor to perform a financial or operational audit on a licensed financial and any expense incurred shall be paid by that licensed financial institution.

(4) No civil, criminal or disciplinary proceedings shall lie against any auditor arising from the disclosure of information to the Reserve Bank under this Act.

24 Publication of financial statements

(1) A licensed financial institution shall:

(a) forward to the Reserve Bank 30 days prior to publication;

(b) publish in the Tonga Chronicle or any other newspaper published and circulated in Tonga for four consecutive weeks no later than 4 months after the end of each financial year; and

(c) make available in each branch in Tonga,

a copy of its audited balance sheet and profit and loss account.

(2) A licensed financial institution shall, for the purpose of this section, include the Tongan branch operations of a licensed financial institution incorporated outside Tonga.

(3) The Reserve Bank shall impose an administrative penalty not exceeding $10,000 on every director and every manager of a licensed financial institution who contravenes the provisions of this section.

25 Inspection

(1) The Reserve Bank may, from time to time, inspect or cause the inspection of the books, accounts and transactions of any licensed financial institution and any of its affiliate, subsidiaries or associated persons.

(2) The Reserve Bank may delegate its powers of inspection under this section.

(3) The Reserve Bank may:

(a) conduct the inspection with or without notice;

(b) require explanations and the production of books, accounts and documents and such information as may be required to conduct the inspection;

(c) make copies of and take any papers or electronically stored data from the licensed financial institution's premises; and

(d) require that copies of documents be certified as "true" copies of the originals retained by the licensed financial institution:

Provided that, for the purpose of this section, if there is need for entry into premises not under the control of the licensed financial institution, the Reserve Bank shall obtain a search warrant from the Court for that purpose.

(4) The Reserve Bank shall carry out inspection under this section if it has reason to believe that a licensed financial institution is:

(a) conducting its business in an unlawful or imprudent manner; or

(b) in danger of becoming insolvent or about to suspend payment.

(5) Every employee of a licensed financial institution, affiliate, subsidiary or associated person who contravenes the provisions of this section shall be liable to an administrative penalty not exceeding $1,000 for each day of contravention.

26 Barred from management

(1) No person shall be appointed or elected as a director or to the management of a licensed financial institution who-

(a) has acted in similar positions in a licensed financial institution in Tonga or elsewhere which has had its licence revoked or which has been wound up by a court;

(b) has been sentenced by a court in any country for an offence involving dishonesty; or

(c) is or becomes bankrupt or enters into a scheme of arrangement with his creditors.

(2) Any person who accepts an appointment in contravention of subsection (1) is guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000 or imprisonment for a period not exceeding 10 years.

(3) Any person appointed or elected as a director or to the management of a licensed financial institution shall cease to hold such office if he is disqualified under subsection (1).

27 Permitted banking activities

(1) Licensed financial institutions may only engage in the following activities-

(a) receiving deposits of money or other repayable funds, bearing interest or not which are withdrawable or transferable by cheque or other means of payment;

(b) including but not limited to extending credits, consumer and mortgage credit and financing of commercial transactions;

(c) buying and selling for its own account or customers' account money market instruments and debt securities;

(d) providing money transmission services;

(e) with the prior approval of the Reserve Bank, buying and selling foreign currencies, including contracts for the future purchase or delivery of foreign currencies;

(f) issuing and administering means of payment, such as credit cards, travellers' cheques or bank drafts;

(g) safekeeping and administration of valuables, including securities;

(h) providing credit reference services; and

(i) any other activities approved by the Reserve Bank.

(2)	(a) A licensed financial institution shall apply to the Reserve Bank to own subsidiaries that engage in other activities of a financial nature.

(b) The Reserve Bank in considering an application under paragraph (a) shall consider the following:

(i) whether the applicant has the financial and managerial resources to engage in the activities applied for in a manner consistent with the public interest; and

(ii) the risks which the activity would pose to the licensed financial institution.

(3) The Reserve Bank may authorise any prudential requirements and safeguards required under this Act.

28 Fixed restrictions

(1) For the purposes of this section-

(a) "unsecured" means without security or

(i) the value of any advance or other facility granted against collateral, not readily marketable, exceeds 4/5 of the value of such collateral as determined by the Reserve Bank; or

(ii) the value of any advance or other facility granted against readily marketable collateral, exceeds 4/5 of the market value of such collateral; and

(b) "connected parties" includes:

(i) affiliates, directors, employees, shareholders owning or exercising power over 10 percent of the shares of the licensed financial institution; and

(ii) close relatives of such directors and shareholders including spouses, parents and children.

(2) Any licensed financial institution or its subsidiary shall not

(a) grant to any person or company, any advance, credit facility, financial guarantee or incur any other risk exposure or liability, which in total exceeds 25 percent of the licensed financial institution's capital as determined by the Reserve Bank; or

(b) in the case of unsecured facility, 10 percent of the licensed financial institution's capital as determined by the Reserve Bank.

29 Exemptions

The following transactions shall be exempted from the provisions of subsection 28(2):

(a) between licensed financial institutions and their branches;

(b) between licensed financial institutions and financial institutions incorporated abroad;

(c) between licensed financial institutions and the Reserve Bank;

(d) licensed financial institutions and any other financial institutions approved by the Reserve Bank;

(e) related to purchases of telegraphic transfers;

(f) related to the purchase of bills of exchange accompanied by documents of title to goods if the holder of those bills is entitled to payment on those bills outside Tonga for exports from Tonga; or

(g) granted to, or guaranteed by, the Government of Tonga.

30 Further restrictions

The licensed financial institution or its subsidiary shall not:

(a) lend for the purchase of, or against the security of, its own shares;

(b) grant to any of its connected parties-

(i) any advance, credit facility or guarantee unless granted on substantially the same terms, including interest rates and security, as those prevailing at the time for comparable transactions by the financial institution with members of the general public; and

(ii) the total amount of credits extended to all connected parties shall not exceed the amount of the financial institution's capital as determined by the Reserve Bank;

(c) permit unsecured advances or credit facilities to its employees in excess of one year's salary;

(d) engage, whether on its own account or on a commission basis, in the wholesale or retail trade, including import or export trade, or have a direct interest in any non financial undertaking:

Provided that a licensed financial institution may acquire such direct interest in course of the satisfaction of debts due to it. All such interests shall be disposed of within a reasonable time as determined by the Reserve Bank.

31 Restriction on shareholding

(1) The licensed financial institution or its subsidiary shall not

(a) acquire or hold share capital for its own account in an undertaking that would result in the combined value of all such share capital exceeding 10 percent of the licensed financial institution's capital as determined by the Reserve Bank, unless:

(i) it is share capital, approved in writing by the Reserve Bank, in a subsidiary financial institution or in a subsidiary company formed for the execution of nominee, executor or trustee functions or other functions incidental to banking business;

(ii) the share capital is held as trustee or nominee, or is related to the purchase or sale upon the order of and for the account of a customer; or

(iii) the share capital is acquired in the course of satisfaction of debts due to it and any such acquisition must be disposed of within such reasonable time as determined by the Reserve Bank;

(b) acquire, operate or permit a subsidiary company, to carry out business in any capacity, without the prior written approval of the Reserve Bank under this Act.

(2) Any licensed financial institution which contravenes sections 28, 30 and 31 shall rectify the contravention within six months, or any further period as the Reserve Bank may approve in writing.

32 Operation of a new branch

(1) A licensed financial institution shall not open a new branch in Tonga without obtaining the written approval of the Reserve Bank.

(2) A licensed financial institution incorporated in Tonga shall, obtain written approval from the Reserve Bank to operate a branch office or subsidiary outside Tonga.

(3) The Reserve Bank shall not grant approval under subsection (2) unless it is satisfied that-

(a) the Reserve Bank has the ability and resources to adequately supervise the branch or subsidiary situated outside Tonga; and

(b) the licensed financial institution has the administrative and financial capacity to conduct banking business at a branch or subsidiary outside Tonga, without affecting the stability of the financial system and the safety of the interests of depositors both within and outside Tonga.

33 Penalties

Where no specific penalty is imposed, the Reserve Bank may impose any of the following where a licensed financial institution or any of its officers, directors or shareholders violates any provision of this Act:

(a) issue written warnings;

(b) enter into a written agreement with the board of directors of the licensed financial institution providing for a program of remedial action;

(c) issue written orders to cease and desist such infractions and require them to undertake remedial action;

(d) impose penalties not exceeding $1,000 for each day during which the infraction continues;

(e) impose restrictions on its operations;

(f) revoke its licence and order it to dissolve under applicable law; or

(g) revoke its licence and appoint a receiver for it under the receivership provisions of this Act.

PART V-CONTROLLERSHIP AND RECEIVERSHIP

34 References to affiliates, subsidiary and associated persons

In this Part of the Act, all references to a licensed financial institution shall also refer to its affiliate, subsidiary or associated person.

35 Preservation of assets

(1) Where a licensed financial institution is:

(a) unable to meet its obligations or suspending payment; and

(b) incorporated outside Tonga, in the event of its liquidation,

(c) bankruptcy or dissolution in its country of incorporation,

the assets of the licensed financial institution in Tonga shall be applied to meet its deposit liabilities in Tonga in priority to all other liabilities.

(2) Every licensed financial institution shall at all times hold assets in Tonga of a value not less than the total amount of its deposit liabilities in Tonga.

36 Grounds for Reserve Bank to consider

Where-

(a) a licensed financial institution informs the Reserve Bank that it is insolvent or likely to become so, or is likely to suspend payment;

(b) a licensed financial institution becomes unable to meet its obligations or suspends payment;

(c) the Reserve Bank is of the opinion, either as a result of an inspection carried out pursuant to section 25 or otherwise, that a licensed financial institution-

(i) is following unsound or unsafe practices in the conduct of its business such that it is likely to jeopardise its obligations to its depositors or other creditors, or adversely affect the operation or stability of the financial system;

(ii) is insolvent or is likely to become unable to meet its obligations or is about to suspend payment; or

(iii) has contravened or failed to comply with the terms and conditions of its licence or the provisions of this Act;

(d) the Reserve Bank has reasonable grounds to believe that any affiliate, subsidiary or associated person of a licensed financial institution is

(i) likely to become unable to meet its obligations;

(ii) insolvent or about to suspend payment; or

(iii) subject to conditions described in paragraphs (a), (b) or (c) of this subsection; or

(e) the Reserve Bank considers it necessary in the interests of the soundness of the financial system or to minimise detriment to the interests of depositors or creditors of the licensed financial institution,

the Reserve Bank shall exercise one or more of the powers specified in section 37.

37 Powers of the Reserve Bank

(1) The Reserve Bank shall have the power:

(a) to require the licensed financial institution forthwith to take whatever action in relation to its business as the Reserve Bank may specify;

(b) to appoint a person to advise the licensed financial institution on the proper conduct of its business, and to fix the remuneration to be paid by the licensed financial institution to any person so appointed;

(c) to issue a directive to the licensed financial institution to cease such practice, contravention or non-compliance; and take such action as may be specified in the directive to correct the conditions resulting from such practice, contravention or non-compliance;

(d) in cases of breach of any provisions or directives under this Act:

(i) to assume control of, or appoint a person to assume control of, the business of the licensed financial institution, or in the case of a subsidiary, it has been incorporated or acquired by the licensed financial institution prior to or subsequently to the assumption of control of the parent company; and

(ii) to fix the remuneration to be paid by the licensed financial institution;

(e) to present a petition to the Supreme Court for the winding up of the licensed financial institution; and

(f) revoke the licensed financial institution's licence.

(2) Where the Reserve Bank or person appointed has assumed control of the business of a licensed financial institution or branch thereof in Tonga under this section, the Reserve Bank or that person shall carry on the business of the licensed financial institution and may exercise all such powers, rights, and authorities as may be necessary to carry on that business.

38 Power to publish

The Reserve Bank shall publish in the Gazette, the Tonga Chronicle or any other newspaper published and circulated in Tonga for four consecutive weeks a notification of the assumption of control of the relevant licensed financial institution.

39 Further powers of Reserve Bank

Subject to Section 35, the Reserve Bank or the appointed person shall, for the purposes of carrying on the business of the licensed financial institution, have the power, to-

(a) pay, in whole or in part, any creditor or class of creditors of the licensed financial institution;

(b) make any compromise or arrangement with any creditor, or person claiming to be a creditor, of the licensed financial institution;

(c) compromise all calls, debts and claims subsisting, between the licensed financial institution and any other person and deal with all questions relating to the assets of the licensed financial institution, and give a complete or partial discharge.

(2) The Reserve Bank or the appointed person shall have all such powers, rights, and authorities as may be necessary for the purposes of control but not limited to-

(a) all the powers, rights, and privileges that the licensed financial institution has under any contract or otherwise; or

(b) in the case of a company in Tonga, all the powers of the members in general meeting and the Board of Directors of that company.

40 Management of licensed financial institution

(1) Where a licensed financial institution is declared to be subject to the control of the Reserve Bank or the appointed person, the management of the licensed financial institution, shall vest in the Reserve Bank or appointed person on the date specified in the order.

(2) Where a licensed financial institution is declared to be subject to the control of the Reserve Bank or the appointed person it shall not be lawful or competent for any director, manager, or other person to be engaged in the management or conduct of the business of the licensed financial institution, except with the permission of the Reserve Bank or the appointed person.

(3) Where a licensed financial institution is under a controller, its financial resources shall be available, subject to section 35, to discharge their debts and obligations.

41 Expenses of controller

(1) All remuneration and expenses incurred by the controller in the exercise of its functions and powers shall be payable out of the property of the licensed financial institution and shall have priority over all other claims.

(2) The controller shall disclose to creditors the amount of all remuneration and expenses, as are payable under subsection (1). The form and method of disclosure is subject to the Reserve Bank's approval.

42 Advances for expenses

(1) The Reserve Bank may advance such amounts for remuneration and expenses due to, or incurred by the controller.

(2) All money so advanced to the controller shall be refunded to the Reserve Bank, out of the property of the licensed financial institution.

43 Duty to deliver books and property to controller

(1) Every person who is in possession of any documents or other property belonging to any licensed financial institution under controllership shall forthwith deliver those documents or other property to the controller.

(2) Any person who fails to comply with the provisions of subsection (1) within 7 days, shall pay an administrative fine not exceeding $5,000 and an additional $1,000 for each day of non-compliance.

(3) It shall not be a defence to any proceedings under this section that the person in possession of such documents or other property is, or was, a trustee of the documents or other property for the licensed financial institution, or entitled to a lien or other charge over the property, or was a receiver or manager of the property.

44 Offence to destroy, alter, conceal or send documents

Every person who-

(a) destroys, alters, conceals or sends out of Tonga any document or other property relating to, a licensed financial institution under controllership; or

(b) fails to answer or wilfully gives a false answer to any question asked by the controller in relation to any such document or other property,

is guilty of an offence and shall be liable upon conviction to a fine not exceeding $30,000.

45 Termination of controllership

(1) The Reserve Bank may order that any licensed financial institution under a controller shall cease to be subject to controllership.

(2) The controller may apply to the Reserve Bank to make an order terminating the controllership if a winding up order is made in respect of any licensed financial institution.

(3) Any person aggrieved by the placing into controllership of a licensed financial institution may request the Reserve Bank to make an order under subsection (1).

(4) Where an order is made, under subsection (1), or a winding up order is made in respect of a licensed financial institution the controllership shall cease on the date specified in the order; and the appointment of any controller shall terminate on the date specified in the order.

46 Appointment and termination of appointment of controller

(1) The Reserve Bank may appoint a controller to assume control of any licensed financial institution.

(2) The appointment of a controller shall be terminated upon-

(a) disability, bankruptcy, neglect of duty or misconduct;

(b) the Reserve Bank being satisfied that it is in the interests of effective conduct of the affairs of the licensed financial institution or maintaining of confidence in the financial system;

(c) resignation; or

(d) death.

47 Notice of termination

The Reserve Bank shall publish in the Gazette, the Tonga Chronicle or any other newspaper published and circulated in Tonga for four consecutive weeks a notification of cessation of controllership and termination of appointment of the controller.

48 Indemnity

A controller shall not incur any personal liability as a result of anything done in the exercise of his powers and duties under this Act.

49 Controller to comply with directions of Reserve Bank

Every controller shall comply with any directions given in writing by the Reserve Bank relating to the exercise of his powers under this Act.

50 Considerations affecting exercise of powers by Controller

(1) A controller of a licensed financial institution shall in exercise of its powers have regard to-

(a) maintaining public confidence in the operation and soundness of the financial system; and minimise detriment to the depositors;

(b) avoiding significant damage to the financial system;

(c) resolving the difficulties of that institution within 30 working days; and

(d) preserving the position of depositors and maintaining the ranking of claims of depositors.

(2) Every controller shall:

(a) consult with the Reserve Bank, as to the exercise of his powers; and

(b) provide such reports which the Reserve Bank may require relating to the licensed financial institution.

51 Moratorium

No person shall, where a licensed financial institution is declared to be under controllership-

(a) bring any action or other proceedings, including proceedings by way of counterclaim in respect of any contract entered into by, that licensed financial institution before the controllership commenced;

(b) issue any execution, attach any debt, or otherwise enforce any judgment or order obtained against that licensed financial institution;

(c) petition or resolve to wind up that licensed financial institution;

(d) foreclose, enter into possession, sell, or appoint a receiver of the property of that licensed financial institution or property in which the licensed financial institution has an equity or redemption;

(e) claim or exercise any power or rights under, any mortgage, charge, debenture, instrument, or other security over the property of that licensed financial institution;

(f) exercise any power or rights under any lease, against that licensed financial institution; or

(g) exercise any right of set-off acquired prior to controllership against that licensed financial institution.

52 Exemption to moratorium

(1) Notwithstanding section 51, an action with the leave of the controller or the Supreme Court may be commenced or continued against a licensed financial institution.

(2) A controller may waive the application of section 51 in whole or in part except section 51(c) to any claim made by a depositor or class of depositors.

(3) Section 51 shall not affect the existence of any security over the property of any licensed financial institution or its priority over other debts.

(4) Notwithstanding section 51 (b) a person may commence an action to issue any execution or attachment order or enforce any judgment or in respect of any contract or obligation incurred by the licensed financial institution after the date the controllership commenced.

53 Controller may incorporate company under Companies Act

(1) Where a licensed financial institution which is a branch of a company incorporated outside Tonga is declared under controllership, the controller may:

(a) form and register a company under the Companies Act 1995;

(b) subscribe as trustee for that company for all or any shares of the company; and

(c) allot all or any of the shares in that company as fully or partly paid up to the value, after deducting the value of any liabilities vested, of any property, rights, and assets vested in that company under subsection (2).

(2) The Reserve Bank may order that the whole or any part of any property, rights, assets, and liabilities of any such branch shall vest in that company on a date specified in the order.

(3) Nothing in subsection (2) shall reduce, extinguish, or affect any obligation or liability of a company incorporated outside Tonga.

(4) Every company formed and registered under subsection (1) shall, for the purposes of this Act, be deemed to be a licensed financial institution under controllership and the controller shall be the controller of that company.

54 Vesting of property subject to security

(1) The Reserve Bank may make an order under section 53(2) notwithstanding the existence, or the terms and conditions, of any security over that property, or those rights or assets in favour of any other person.

(2) Subject to section 35, any property, rights or assets which are the subject of an order made under section 53(2) which are subject to a security in favour of any other person, shall continue to be subject to that security.

55 Proof of vesting

(1) No registrar, or any other person charged with the keeping of any books or registers, shall be obliged solely by reason of section 53 to change the name of any company referred to in that section.

(2) The presentation by the company to any registrar or any other person charged with the keeping of any books or registers of instruments, whether or not comprising an instrument of transfer:

(a) executed or purporting to be executed by the company;

(b) relating to any property held before controllership by that company; and

(c) containing a recital that the property has become vested in the company, by virtue of controllership,

shall, in the absence of evidence to the contrary, be sufficient proof that the property is vested in the company.

56 Prohibition against removal of assets

(1) No person shall transfer or remove from Tonga any property or assets of any licensed financial institution under controllership, except with the consent of the controller.

(2) Every person who contravenes subsection (1) shall be guilty of an offence and shall be liable on conviction-

(a) in the case of an individual, to imprisonment for a term not exceeding 5 years or to a fine not exceeding $50,000 or to both; or

(b) in the case of a company, to a fine not exceeding $250,000.

(3) Nothing in subsection (2) shall prevent the issue of an injunction order to prevent any property or assets being removed from Tonga.

57 Controller may suspend payment

Notwithstanding the terms of any contract, the controller of a licensed financial institution may suspend in whole or in part the:

(a) repayment of any deposit;

(b) payment of any debt; or

(c) discharge of any obligation to any person.

58 Sale of financial institution

(1) Subject to this Part, the controller of a licensed financial institution may, with the written consent of the Reserve Bank, sell the whole or any part of the business of the licensed financial institution to such person and upon such terms and conditions as the controller deems fit.

(2) Without limiting any other powers of the controller for the purposes of subsection (1), the controller shall have power to-

(a) form and register a company under the Companies Act;

(b) subscribe for all or any of the shares of that company;

(c) transfer to that company the whole or any part of the business of the licensed financial institution; and

(d) allot all or any of the shares in that company to any person, credited as fully or partly paid, up to the value of the business transferred to that company.

(3) The controller shall not sell:

(a) the whole or any substantial part of the business of a licensed financial institution pursuant to subsection (1);

(b) any of the shares of any body corporate formed and registered pursuant to subsection (2)(a); and

(c) the whole or any substantial part of the business of any body corporate formed and registered pursuant to subsection (2)(a),

unless the Reserve Bank has given approval in writing.

59 Consent not required under other Acts

The provisions of any enactment or agreement requiring any consent, licence, permission, clearance or other authority shall not have any application in respect of the sale or disposition of:

(a) the whole or any part of the business of a licensed financial institution under to section 58;

(b) any of the shares of any body corporate formed and registered under section 58; and

(c) the whole or any part of the business of that body corporate, being a sale or disposition to which the Reserve Bank has given its approval under section 58:

Provided that this section shall not apply to any consent, permission, clearance, or other authority required under the provisions of the Land Act (Cap. 132).

60 Sale of property or assets subject to security

(1) Pursuant to section 58, the controller may dispose of:

(a) any property or assets of a licensed financial institution;

(b) property or assets of a licensed financial institution to any company formed and registered under section 58; or

(c) any shares, or property or assets of a company formed and registered under section 58,

notwithstanding the existence, or the terms and conditions, of any security over the property or those assets in favour of any other person.

(2) Subject to section 35, where the controller of a licensed financial institution disposes of any:

(a) property or assets subject to a fixed charge, the person entitled to the charge shall be paid out of the proceeds of disposition in priority to all other claims other than the costs of the controller in disposing of the property or assets;

(b) property or assets to any company formed and registered under section 58, the property or assets, which are subject to security in favour of any person shall still continue to be subject to that security;

(c) shares in a company formed and registered under section 58, the shares which are subject to a fixed charge in favour of any person, the person entitled to the charge shall be paid out of the proceeds of disposition in priority to all other claims other than the costs of the controller in disposing of the shares; and

(d) property or assets of a company formed and registered under section 58, the property or assets subject to a fixed charge in favour of any person, the person entitled to the charge shall be paid out of the proceeds of disposition in priority to all other claims other than the costs of the controller in disposing of the property or assets.

61 Proof of transactions

(1) The presentation to any registrar, or any other person charged with the keeping of any books or registers, of any instrument transferring or otherwise disposing of any property or assets of a licensed financial institution or any shares in, or property or assets of any company incorporated under section 58-

(a) executed or purporting to be executed by or on behalf of the licensed financial institution or company; and

(b) containing a recital that the transfer or other disposition of the property or assets of the licensed financial institution, or the shares in, or property or assets of, the company, is made under section 58,

shall, in the absence of evidence to the contrary, be sufficient proof that the transfer or other disposition is made under the authority of that section.

(2) The presentation to any registrar, or any other person charged with the keeping of any books or registers of a certificate signed by the controller that the amount secured by a charge over any property or assets of a licensed financial institution or any company formed and registered under section 58 has been paid or otherwise dealt with in terms of this Act shall, in the absence of evidence to the contrary, be sufficient proof that the amount secured by the charge has been appropriately dealt with.

62 Bases for initiation of receivership

(1) Where the Reserve Bank determines that a licensed financial institution is insolvent, it may petition the Supreme Court for an order to-

(a) revoke the licence of the financial institution; and

(b) take immediate possession and control of the financial institution through a receiver appointed by the Reserve Bank.

(2) For the purposes of this Act:

(a) a licensed financial institution shall be deemed to be insolvent if:

(i) the licensed financial institution is not paying its obligations in full as they fall due;

(ii) the value of the liabilities of the licensed financial institution exceeds the value of the assets of the financial institution; or

(iii) the licensed financial institution has regulatory capital less than one-quarter of the required minimum regulatory capital; and

(b) the value of a licensed financial institution's assets, liabilities and regulatory capital shall be determined in accordance with valuation standards and procedures approved by the Reserve Bank.

63 Appointment of receiver

The Reserve Bank shall appoint a person to be receiver for the purposes of section 62(1)(b).

64 Expenses owed to receiver and experts

(1) A licensed financial institution shall pay from its assets expenses of the receiver, any experts engaged by the controller and the Reserve Bank in execution of this Part of the Act.

(2) Payments to the receiver shall be made on a current basis if there are sufficient liquid assets. Provided that the receiver shall not receive in any calendar month a pro rata share in payment of their claims for fees and expenses that exceeds the payments made under section 77(1)(a).

(3) Any moneys owing to the receiver at the end of the term of receivership shall be paid from proceeds of sales of the licensed financial institution's assets in accordance with section 77.

65 Notice and registration of receivership

Where a receiver is appointed, the receiver shall within 2 days of such appointment-

(a) post in each office of the licensed financial institution a notice of his appointment, the effective date and time of possession by the receiver and specifying that-

(i) authorisation of the directors, officers and employees of the licensed financial institution to commit the financial responsibility of the licensed financial institution in transactions with customers has been cancelled; and

(ii) authorisation of persons to give instructions on behalf of the licensed financial institution with respect to payment or transfer of assets have been cancelled; and

(b) publish the notice in the Tonga Chronicle or in any other newspaper published and circulated in Tonga for four consecutive weeks.

66 Powers of receiver

(1) Subject to subsection (2) a receiver shall have all the powers of the officers, directors and shareholders of the licensed financial institution.

(2) A receiver may:

(a) operate the licensed financial institution in its own name;

(b) sell the licensed financial institution or its assets to satisfy its liabilities to depositors within one year; provided that the Reserve Bank may extend such period;

(c) continue any operation except the taking of deposits and extending of credit to customers other than existing customers in relation to outstanding assets;

(d) discontinue any operations;

(e) borrow money on an unsecured basis or secured;

(f) limit the payment of any obligation;

(g) employ or dismiss any officer or professional advisor;

(h) execute any instrument, initiate or defend and conduct any action or legal proceeding; and

(i) exercise lawful rights of set-off and reduce the amounts owing to depositors and other creditors of the licensed financial institution.

67 Receiver's access to records

(1) The receiver shall have unrestricted access to and control over the offices, books of accounts, other records and other assets of the licensed financial institution and its subsidiaries.

(2) Any person who wilfully interferes with a receiver's power under this section is guilty of an offence and shall be liable upon conviction to imprisonment for a period not exceeding 3 years or a fine not exceeding $15,000 or both, and $1,000 for each day during which the offence continues.

68 Merger

Any proposal from the receiver for a merger of the licensed financial institution with another licensed financial institution, or sale of substantially all the licensed financial institution's assets to any one licensed financial institution, shall be subject to section 11(3).

69 Duties of receiver

The receiver shall upon his appointment secure the assets of the licensed financial institution by taking actions including, but not limited to the following:

(a) changing the locks and limiting access to the licensed financial institution's offices;

(b) changing or establishing access codes to the licensed financial institution's computers; and

(c) suspending the payment of capital distributions in general and payment of any kind to directors, officers and principal shareholders; provided that base compensation may be paid to directors and officers for services rendered.

70 New Balance Sheets

(1) The receiver shall, upon his appointment, establish a new balance sheet for the licensed financial institution, based on his determination of liquidation values of assets with corresponding reduction in the value of the licensed financial institution's liabilities in the reverse order of priority under section 77.

(2) Liabilities under subsection (1) shall be deemed due and payable and interest shall cease to accrue as of the date of the appointment of the receiver.

(3) Unmatured liabilities shall be discounted to present value at the discount rate determined by the Reserve Bank.

71 Inventory of assets and property

The receiver shall, within one month of taking possession of a financial institution, make an inventory of the assets and property of the licensed financial institution and submit a copy to the Reserve Bank.

72 Withdrawal and payments

(1) The receiver may, after one month from the date of his appointment, make available for withdrawal by depositors such amounts as in his opinion is appropriate.

(2) Creditors other than those under section 77(1)(a) and (b) shall receive no more than 50 percent of the amount of their allowed claims, before a general distribution of payments to creditors or the assumption of liabilities by another licensed financial institution.

73 Shareholder's rights

When a receiver has taken possession of a licensed financial institution-

(a) shareholders' rights shall be extinguished except for the right to receive dividends under section 77(4) and shall be subject to the licensed financial institution having positive net worth at the time of sale the right to receive any net payment from the sale of assets; and

(b) the receiver may issue new shares, sell assets or arrange for the assumption of liabilities of the licensed financial institution.

74 Procedure for claims

The Reserve Bank shall prescribe the procedures for determining the validity, priority of claims, liquidation of assets and return of customers' property.

75 Unsold assets

Any assets of the financial institution that have not been sold at the end of the term of the receivership may be abandoned by the receiver or given to a charitable institution and there shall be no claim against any such assets.

76 Receiver's monthly report

The receiver shall submit a monthly report to the Reserve Bank including:

(a) the most recent financial statements;

(b) statements of sources and uses of funds;

(c) information relating to the prospects of the sale of the licensed financial institution and its assets;

(d) projections of payment of liabilities; and

(e) any other relevant documents requested by the Reserve Bank.

77 Priorities in payment of claims

(1) Where a licensed financial institution is under liquidation, deposit liabilities in Tonga shall be paid in priority to all other claims apart from expenses incurred by the receiver and the Reserve Bank and where assets in Tonga are not sufficient to meet all deposit claims the available balance shall be distributed as follows:

(a) deposits up to an amount not exceeding $2,000 per depositor;

(b) the amount not paid on deposits under paragraph (a); and

(c) other claims of creditors against the licensed financial institution.

(2) If the amount available for payment for any class of claims listed under subsection (1) is insufficient to provide payment in full, such claims shall abate in equal proportions.

(3) After payment of all claims duly filed, any remaining allowable late claims may be paid.

(4) Any proceeds remaining after all claims by depositors and creditors have been paid shall be distributed among the shareholders of the licensed financial institution in accordance with their rights and interests.

78 Appeals from receiver's decisions on claims

(1) An appeal from a decision of the receiver with regard to a receivership or property claim may be made to the Reserve Bank within 30 days after the date on which the decision becomes final.

(2) The Reserve Bank shall review the decision made by the receiver and may, affirm, modify or reverse the receiver's decision within 30 days of receipt of the appeal.

(3) The decision of the Reserve Bank under this section shall be final.

79 Final reporting to the Reserve Bank

Once the proceeds for the sale of assets of a licensed financial institution have been distributed under section 77, the receiver shall submit a report to the Reserve Bank, including statement of income and expenses, and statement of sources and uses of funds.

PART VI-MISCELLANEOUS

80 Retention of cheques for 7 years

(1) All cheques and bank drafts in the possession of the licensed financial institution on which they are drawn and all bills of exchange or promissory notes in the possession of a licensed financial institution, made payable at that institution shall be retained by that institution until the expiration of the period of 7 years from the date in the case of documents payable on demand or from the due date thereof in the case of all other documents.

(2) Subsection (1) shall apply to cheques, drafts, bills and notes received by a licensed financial institution either before or after the commencement of this Act.

(3) No documents referred to in subsection (1) shall he destroyed at any time after a demand for the delivery of the document has been made to the licensed financial institution by the person entitled thereto.

(4) It shall be sufficient compliance with the duty to retain under subsection (1) if a copy of the document has been made by the licensed financial institution on microfilm, microfiche, tape, disc, or electronic or photographic storage media.

(5) Notwithstanding subsection (4), no document shall be destroyed at any time within 2 years after its date in the case of documents payable on demand or from its due date in the case of all other documents.

81 Notice of unclaimed moneys

(1) Every licensed financial institution shall, within 60 days after the end of each financial year, publish in the Tonga Chronicle or any other newspaper published weekly and circulated in Tonga for four consecutive weeks a statement showing all accounts payable by the licensed financial institution where no transaction has taken place and no statement of account has been requested by the creditor during the last 7 or more years.

(2) Every statement published under subsection (1) shall require the person to whom the account is payable, or his legal personal representative to submit a claim to the licensed financial institution within three months from the date of publication

82 Unclaimed moneys paid to Reserve Bank

(1) Unclaimed moneys included in the statement published under section 81 that remains unclaimed for a period of three months after publication, shall be paid to the Reserve Bank and credited to the government's general revenue account with the Reserve Bank, after deduction of the costs of publication.

(2) Subject to this section, a licensed financial institution is, upon payment to the Reserve Bank of any sums due under this section, discharged from further liability in respect of that amount.

(3) Where unclaimed moneys have been paid to the Rescue Bank under this section, a person may lodge a claim with the licensed financial institution for the return of the unclaimed money that has been paid to the government. Any claim made under this subsection shall be subject to the approval of the Minister of Finance.

83 Collection of penalties

(1) The Reserve Bank may levy and collect any administrative fine imposed under this Act.

(2) In the event of any administrative fine not being paid, the Reserve Bank may take civil action against the licensed financial institution to recover the amount due as a debt owed.

84 Winding up of licensed financial institution

Notwithstanding the provisions of any other law, a licensed financial institution may not be wound up voluntarily without the prior written approval of the Reserve Bank.

85 Non-applicability to credit unions

This Act shall not apply to credit unions and cooperative societies.

86 Indemnity of Reserve Bank

A director, officer or agent of the Reserve Bank, and a person appointed by the Reserve Bank to carry out functions on its behalf, shall not be held liable for damages, acts or omissions performed in the course of his duties under this Act.

87 Operation of Companies Act

Nothing in this Act shall exempt a licensed financial institution from the provisions of the Companies Act, save that where there is any conflict the provisions of this Act shall prevail.

88 Regulations

The Minister of Finance, with the consent of Privy Council may make regulations, not inconsistent with this Act, giving effect to this Act.

PART VII-REPEAL

89 Repeal and transition

(1) The Financial Institutions Act 1991 is hereby repealed.

(2) The Reserve Bank may within 6 months of the commencement of this Act add further conditions to any licence deemed to be issued under this Act.

(3) Regulations made under the Financial Institutions Act 1991, shall remain in full force and effect after enactment of this Act unless and until the same shall be modified or repealed.

__________________________

Schedule
(Section 5(1))

Westpac Bank of Tonga established under the Westpac Bank of Tonga Act 1972
Tonga Development Bank established under the Tonga Development Bank Act 1977
Australia New Zealand Banking Group Limited
MBF Bank Limited

Passed in the Legislative Assembly this 14 day of October, 2004.

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