The Central Bank of Uganda has placed Crane Bank Limited (CBL) under liquidation and ordered the winding up of it’s affairs, Chimp Corps report.
Liquidation is the process of permanently closing a bank and its branches, selling off any assets and using the proceeds to settle as many of the bank’s remaining liabilities as possible.
The development means Crane Bank will never be revived as its previous owners hoped.
“In exercise of it’s powers under section 99(1) and 2 of the Financial Institutions Act, 2004, BOU (Bank of Uganda) has now placed CBL (Crane Bank Limited) under liquidation and ordered the winding up of it’s affairs,” said Governor Emmanuel Tumusiime-Mutebile in a statement on Friday.
“All borrowers of CBL whose loans were transferred to DFCU Bank under the purchase of assets and assumption of liabilities agreement between CBL (in receivership) and DFCU Bank Limited, must continue to service their loan obligations with DFCU Bank,” he added.
The Central Bank took over management of Crane Bank on October 20, 2016 and subsequently progressed it into receivership on January 24, 2017.
After the BoU had intervened in Crane Bank and taken it over in October 2016, an inventory of its assets and liabilities was commissioned and carried out by a reputable accounting firm.
This inventory, according to BoU, found that Crane Bank was “massively insolvent, with core capital of negative Shs. 240 billion, as a result of mismanagement and fraud.”
The bank was owned by businessman Sudhir Rupaleria, who doubles as Nepal’s Honorary Consul to Uganda, and his cronies.
Mutebile said then the notion that this bank “could have been rehabilitated by its owners – the same people who were responsible for its failure – if only the BoU had provided more liquidity support and allowed the owners to remain in control, is not tenable.”
In a statement on Friday, Mutebile said “all borrowers of Crane Bank whose loans were not transferred to DFCU Bank, must service their loans by paying into the designated collection accounts at Bank of Uganda.”
Furthermore, the Governor stressed that Crane Bank borrowers whose loans were not transferred to DFCU Bank, can access a statement of their indebtedness from the office of the Director Commerical Banking at Bank of Uganda headquarters.
Crane Bank, he said, will be notified of the procedure for presentation of their claims to the liquidator.
The intervention in Crane Bank, was the most difficult and the one which was potentially the most problematic, because it was a large bank of systemic importance, and because of the huge magnitude of the losses it had incurred.
Nevertheless, the BoU was able to resolve Crane Bank.
Crane Bank remained open under statutory management until most of its assets and liabilities could be transferred through a P&A to a suitable acquiring bank, DFCU Bank, thereby avoiding disruption to its customers. None of its depositors lost the money.
On June 30, 2017, Crane Bank Limited (in Receivership) took Mr. Sudhir Ruparelia and his Meera Investments Ltd. to court for causing financial loss amounting to Shs 397 billion to Crane Bank in fraudulent transactions and land title transfers.
Crane Bank (in receivership) in its Civil Suit No. 493 of 2017 sought High Court to compel Mr. Ruparelia to pay back the US$80,000,000, US$9,270,172.00, US $ 3,560,000.00, US$990,000.00 and Shs 52,083,995.00 as compensation for breach of fiduciary duty.
While Hon. Justice Wangutusi dismissed the Shs 397 billion case against Mr. Ruperalia on a technicality, alleging that Crane Bank (in Receivership) lost its powers to “sue” and to “be sued”, thus rendering its suit a nullity, Crane Bank (in Receivership) appealed, maintaining that receivership is a management situation, and hence no legal change as to capacity of a company to sue and be sued.