While in receivership there remains some hope of the company recovering and resuming operations, now the liquidation means Crane Bank's complete and permanent closure, a move that will see the defunct lender's chapter closed for good.
The Central Bank as a liquidator issued a statement on Friday. A liquidator is an officer or entity who is appointed to wind up the affairs of a company when it is closing and this usually happens when the company has gone bankrupt.
Bank of Uganda Governor Emmanuel Tumusiime Mutebile appearing before COSASE.
Bank of Uganda (BoU) has
started process for complete closure of Crane Bank Limited, a move that will see
the defunct lender's chapter closed for good.
The Central Bank as a
liquidator issued a statement on Friday. A liquidator is an officer or entity
who is appointed to wind up the affairs of a company when it is closing and
this usually happens when the company has gone bankrupt.
Crane Bank was placed
under receivership since 2016 after it failed to
comply with a capital call on 1st July and some of its assets were sold to DFCU bank.
There are those assets
that remain in the hands of Bank of Uganda and these will now be disposed of
during the liquidation process.
The Central Bank will
also verify and pay claims that Crane Bank Limited owed to different people and
companies. In receivership, there is hope the company can resume normal
operations and now the liquidation means Crane Bank complete closure. It is akin to burial or cremation in case of death.
“Bank of Uganda took
over management of Crane Bank Ltd. (CBL) on October 20, 2016 and subsequently progressed
it into receivership on January 24, 2017," reads part of the public notice. "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.”
Prof. Emmanuel Tumusiime-Mutebile,
the Central Bank Governor further orders in the public notice that all borrowers
of Crane Bank whose loans were transferred to DFCU Bank under the purchase of
assets and assumption of liabilities agreement between Crane bank Limited and
DFCU Bank Limited, must continue to service their loan obligations with DFCU
“All other borrowers
of CBL, whose loans were not transferred to DFCU Bank, must service their loans
by paying into the designated collection accounts at Bank of Uganda. CBL
borrowers, whose loans were not transferred to DFCU Bank Ltd, can access a
statement of their indebtedness from the office of the Director Commercial
Banking at Bank of Uganda headquarters,” Mutebile orders.
He also indicates that
creditors of Crane Bank Limited will be notified of the procedure for
presentation of their claims to the liquidator.
The Governor’s notice dated 13th November
2020 follows a February 2019 report by Parliaments committee on Commissions, Statutory Authorities and State
Enterprises (COSASE) which said that the closure of Crane Bank by Bank of
Uganda was illegal.
The report indicated that an analysis of the Bank's liquidity
from January 1st to 24th, 2017 revealed that the
financial institution had recovered from liquidity distress from mid-January
2017 to the time it was disposed on January 25, 2017.
“In fact, Bank of Uganda had stopped injecting money on
January 9, 2017. Therefore the bank's liquidity position had stabilized,” the
report presented to Parliament by Bugweri County MP Abdu Katuntu, read.
Katuntu also told parliament that his committee observed that
BoU management did not provide a plan or assessment detailing efforts to return
the bank into compliance with prudential standards despite funding with Shillings
The committee recommended that in the process of taking a
decision to liquidate a financial institution, detailed plans for the revival
should be exhausted before taking the most extreme action of liquidating.
Earlier on, the former Crane Bank owner, Sudhir Ruparelia had
told Parliament that the agreement for the sale of Crane bank to DFCU was
shoddy and fraudulent. According to Sudhir, the Purchase of Assets
and Liabilities (P&A) agreement signed between BoU and DFCU did not have
details of all assets and liabilities that were being taken over.
Auditor General John
Muwanga also queried the failure by the Central Bank to prepare a plan to
revive Crane Bank and also questioned the consideration of 200 billion Shillings from the bad
books as the selling price for Crane Bank to DFCU Bank.