The Bank of Uganda (BoU) has been dealt a blow in the Supreme Court following the ruling On July 1, 2022. The ruling delivered by Justice Prof. Lillian Tibatemwa-Ekirikubinza stops BoU from being a manager or receiver of Crane Bank Limited (CBL) after receivership ended on January 20, 2018.
That ruling means management of CBL now reverts to its shareholders, even though BoU/Crane Bank in Receivership, had argued that under part IX of the Financial Institutions Act, BoU could still control CBL.
The judge stated: “The Appellant’s argument that even after receivership ended, amagement cannot revert to shareholders on the basis that part IX of the Financial Institutions Act still applies to the company, is to presume that the Appellant is still operating as a financial institution. And yet, the consequences of the Bank of Uganda placing Crane Bank under receivership and closing it, was that the company ceased operating as a financial institution. It lost its licence.
She added that: It is only when, and if, the Appellant Company commences operations as a financial institution that the supervisory role of the Central Bank would resume, with the consequences that Part IX can be applicable. And it is not lost on court that under Section 4(1) of the Financial Institutions ACT: A person shall not transact any deposit-taking or financial institution business in Uganda without a valid licence granted for that purpose under this Act.”
The ruling also meant that once a company is placed under receivership, it doesnt lose its legal existence.
The end of receivership means that the Assets and Liabilities of the Crane Bank reverted to its shareholders.
Management of Crane Bank reverted to its shareholders upon the end of receivership.
“The Decree in Civil Appeal No. 7 of 2020 is to be certified with a prayer that:
Receivership of Crane Bank ended on 20th January 2018 and consequently, the management of Crane Bank reverted to its shareholders.”
The degree means Bank of Uganda will pay the costs in terms found by the Court of Appeal, finally confirming that: “The Appellant’s receivership ended on 20th January 2018 and consequently its management reverted to the shareholders.”
The latest rulling, maintaining an earlier ruling by the Court of Appeal, is bad news to dfcu Bank that bought CBL in January 2017 for a paltry Shs200 billion paid in installments. It by half of 2027 earn huge profits out of the assets and liabilities of CBL, causing the public to wonder why BoU shut down CBL. Interestingly DFCU is now struggling to make profits and it performed poorly in the 2020/21 year.
It should be remembered that dfcu was illegally given other assets of shareholders of CBL. Now it has been confirmed they will have to forego them since they were decived by former BoU officials who handled the transaction-Justine Bagyende (executive director for supervision and Dr Louise Kasekende, the former Deputy Governor-BoU. Dfcu were given about 48 properties that CBL using as branches.
Remember also that BoU Crane Bank in Receivership tried to get Shs 397 billion from CBL shareholders on allegations of embezzlement of funds of CBL, but court dismissed the prayer on grounds that Crane Bank in Receivership had no locus operandi, and therefore it could not sue or be sued.
In the same vein the Auditor General John Muwanga in his audit report on the sale of commercial banks by BoU established that BoU failed to follow procedures and guidelines and that Shs 478 billion BoU claimed to have sunk in CBL In Receivership could not be explained in entirety as some of it went missing without documentation.
COSASE of the 10th parliament also faulted BoU on close of CBL which only needed about Shs 150bln to stay afloat. MPs on COSASE then said it would be a thing of corruption and unfairness for BoU to demand Shs 397 billion from CBL shareholders when it is BoU that was the Receiver who handled the money.