Top financial lawyers have warned the Bank of Uganda that it could run into financial trouble if it goes ahead and liquidates the assets of Crane Bank in receivership.
The Central Bank yesterday published a notice on it’s social media platforms putting Crane Bank under liquidation.
“Bank of Uganda (BoU) took over management of Crane Bank Ltd (CBL) on October 20, 2016 and subsequently progressed it into receivership on January 24, 2017. In exercise of its powers under section 99 (1) & (2) of the Financial Institutions Act, 2004, BoU has now placed CBL under liquidation and ordered the winding up of its affairs. The Central Bank shall be the liquidator of CBL,” said the Central Bank in a notice signed by Prof. Emmanuel Tumusiime-Mutebile.
However,top financial lawyers have warned that the attempt to liquidate Crane Bank contravenes the Financial Intelligence Act,2015.
“The powers of the Central Bank in the management of commercial banks are spelt out in the Financial Intelligence Act. They are not arbitrary. Any attempts to liquidate Crane Bank would be a violation of that Act,”said one lawyer familiar with the processes of liquidating Banks.
Another lawyer also warned that any attempts to liquidate Crane Bank would be against the ruling of the Supreme Court.
“Crane Bank ceased being a financial institution under the FIA Act when it was taken over by the Central Bank. The Central Bank has since lost many cases in the Supreme Court. The Central Bank can not therefore try to liquidate it,”said the lawyer.
Lawyers also warned that the judgements of both the High Court and Court of Appeal stating that receivership is still in force are binding.
In wide-ranging interviews with experts in the Financial sector,it is clear that any attempts to liquidate Crane Bank would be a violation of the law.
Section 95 of the FIA permits BoU to close a bank (i.e. take away its banking license) and then place it under Receivership.
“On January 18th 2017, CBL was closed as a bank (and it ceased to be a licensed bank) and was placed into Receivership by the Central Bank. It ceased to be a licensed financial institution when it was placed in receivership. All of this was within BOU’s power under the FIA, which allowed it to close the bank and to place it into receivership. In both HCCS 493/2017 and Civil Appeal 252/2019, both filed by BoU to assert powers as Receiver of CBL, the High Court and the Court of Appeal both found that the Receivership of CBL ended 12 months after it commenced (i.e. January 2018),“ added another lawyer, that is familiar with the case.
“After this date when the courts of law determined that receivership had ended, BoU lost all legal authority over the affairs of CBL. It must be remembered that BoU’s authority is granted by the FIA and is limited by the FIA. Both the Commercial Court and Court of Appeal Courts found that under the FIA, BOU’s authority as Receiver of CBL ended in January 2018. This means that after that date, BoU has no authority to make any decisions of any kind for CBL. Like at the end of all receiverships, the company is returned to its Board of Directors and Shareholders. After January 2018, CBL by law was supposed to return to its Board of Directors and Shareholders,” the lawyer said.
“The Judgments of the High Court and the Court of Appeal which state that Receivership ended are still in force and binding on all parties. They have never been stayed or set aside. BoU tried to stay the enforcement of the Judgment of the High Court in the Court of Appeal and lost that application. BoU also tried to stay the enforcement of the Judgment of the Court of Appeal and lost that application in the Supreme Court. Both BoU’s attempts to stay were dismissed with costs against BoU. The current state of the law is that Receivership ended and BoU has no power or authority over the affairs of CBL,” the Commercial lawyers added.
Eagle Online has learnt that in trying to liquidate Crane Bank, it is part of the scheme of grabbing asserts of the bank including those of Meera Investment Limited which Crane Bank was renting from. Previously, Meera has had a protracted and successful legal battle with BoU and Dfcu bank over Meera properties which they had illegally occupied under the guise of CBL asserts.
However, other sources say having successfully exposed the ill intentions of top officials at BoU who used CBL takeover as a conduit to steal public funds to a tune of Shs400 billion, this liquidation could be a ploy to account for the money to stole.