Bank of Uganda (BoU) has been tasked by the Solicitor General to explain the unclear circumstances surrounding Cooperative Bank Limited and its liquidation.
Cooperative Bank was closed in May 1999 by the BoU due to continued poor performance and non-compliance with regulatory capital adequacy requirements. It was one the six others closed between 1993 and 2016 by BoU majorly for being undercapitalised.
It was first registered in 1964 under the Cooperatives Act and according to records, it has never been liquidated or abolished. Following the tough economic times, its operations were disrupted and it virtually collapsed together with the Cooperative Movement, as privatization and economic liberalization took root.
In an attempt to revive the bank in 1997, it resulted into the formation of Uganda Cooperative Bank Ltd, a limited liability company, under the Companies Act. However, it lasted just two years and allegations of mismanagement and corruption led to its closure by the central bank in 1999.
A letter dated January 11, 2023 signed by JBR Suuza on behalf of the Solicitor General to BOU’s legal counsel Margaret Kasule reads “Which Cooperative bank did Bank of Uganda actually sell? If it is the latter, why were the assets of the former seized and sold instead?”
The letter also adds that it found it necessary to inquire “any other relevant information on the subject” pertaining to the winding up of the Cooperative bank.
BOU was given up to Monday January 23, 2023 to explain which of the two companies was closed.
This comes after the Minister of Trade, Industry and Cooperatives, Henry Mwebesa, sought legal opinion from the Solicitor General regarding the re-establishment of Uganda Cooperative bank.
Minister Mwebesa noted that the process of turning the Bank into a Company had not been completed by the time of closure neither had the “original” Cooperative bank been deregistered. He also demanded details of shareholders who borrowed money from the defunct Cooperative Bank.
In 2019, Ivan Asiimwe, the General Secretary of Uganda Cooperative Alliance Ltd, wrote to the Chairperson of the Committee on Commissions, Statutory Authorities and State Enterprises (COSASE), saying BoU was seemingly complicit or negligent in this whole process of transition as individual persons were allotted shares in the limited liability company instead of Unions and Societies.
He asked the committee to cause Bank of Uganda clarify on which bank was closed; “Is it the Cooperative Bank Ltd under the Cooperative Societies Act or the Cooperative Bank Ltd under the Company’s Act. And if the Cooperative Bank Ltd (the cooperative society) was not closed, why were its assets seized and sold during the liquidation of the Cooperative Bank Ltd (the company).”
Asiimwe also wanted Cooperatives to recover their investment and properties worth trillions of money that were lost during the liquidation process and compel the individual shareholders in the Company and/or Bank of Uganda to provide information regarding shareholding and how they came to own shares and the bank assets in their individual capacity.