NBC bank shareholders challenge Crane Bank sale

Nov 07, 2016

The shareholders have a court order stay the liquidation of NBC pending a court suit against Bank of Uganda

Crane Bank's fate has taken another twist after shareholders of the now defunct National Bank of Commerce (NBC) issued a statement warning prospective Crane Bank buyers to stay away. 

Since its closure and subsequent takeover by Crane Bank in 2012, shareholders in NBC have kept the courts busy with numerous requests. 

This time round, the shareholders, through their law firms M/S Mugisha & Co Advocates and M/S Twinobusingye Severino & Co Advocates alleged that they have $200m (about sh680b) held up within Crane Bank. 

The shareholders also noted that they have in their possession court orders to stay the liquidation of NBC pending a court suit against Bank of Uganda. 

The bank secured an injunctive order from the Constitutional court, registered as Misc application No 39 of 2012 on the 28th September, 2012 to stay further steps in the banks liquidation a day after the banks license was revoked. The case is still pending. 

As the application to stay further steps in the banks liquidation was being issued, Humphrey Nzeyi, the Uganda Manufacturers Association (UMA) chairman and major shareholder petitioned the Constitutional Court seeking orders requiring the Bank of Uganda to pay over sh5b in fines for defying court orders stopping it from liquidating NBC. 

Nzeyi is also seeking another sh500b from Bank of Uganda as exemplary and punitive damages for breach of the Financial Institutions Act (FIA) as provided for in the Constitution. 

He alleged that the Central Bank acted in bad faith and in an abuse of its powers.  He is also challenging the legality of FIA, which he says gives Bank of Uganda "sweeping or excessive powers which he claims are inconsistent with the Constitution. 

Stephen Kaboyo, the Alpha Capital Partners CEO pointed out that when dealing with failed or failing banks, the Central Bank as a regulator has a duty to maintain public confidence in the financial system. 

"It also chooses the best approach that minimizes the cost of resolving failed banks, without compromising the financial system and ensuring that there is very minimal interference with market mechanisms," he said. 

"It also helps when the Central Bank policies are clear to the public because this provides the banks and customers with more information on which to base their decisions. In whatever form, there will always be aggrieved parties because it is a painful process," Kaboyo added. 

NBC had paid up capital of about sh10b and required a fresh injection of capital which it failed to raise before its closure and takeover by the embattled Crane Bank.

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