BoU tasked to explain sale of Cooperative Bank assets
KAMPALA-The Office of the Solicitor General has asked the Bank of Uganda [ BoU ] to explain the process regarding the sale of assets belonging to the defunct Cooperative Bank established in 1964 under the Cooperative Societies Statute of 1963.
In Uganda, the Solicitor-General provides legal advice to the executive and represents the relevant government in court proceedings, particularly in constitutional matters.
In a letter dated January 11, and 2023, addressed to the Legal Counsel of BoU Margaret Kasule, the Solicitor General avers that the details of the sale of the assets of the bank were needed as the Minister of Trade, Industry and Cooperatives [MTIC] Francis Mwebesa, had sought legal opinion regarding the re-establishment of the so-much needed bank.
The letter asks why BoU seized and sold assets of Cooperative Bank that was established under the Cooperative Societies Statute of 1963, yet it closed a different Cooperative Bank established in 1997 under the Companies Act.
“The Hon. Minister proceeds to pose the following questions…“Which Cooperative Bank did the Bank of Uganda actually sell? If is the latter, why were the assets of the former [Cooperative Bank established in 1964] seized and sold instead?” The letter reads in part.
There is also concern that much as BoU closed the Cooperative Bank which was formed in 1997 for inadequate capitalisation and insolvency, there is nowhere it indicates that it closed the first Cooperative Bank, which was established to serve farmers under cooperatives.
According to the letter, Minister Mwebesa also wants to be furnished with details of shareholders who borrowed money from the defunct Cooperative Bank.
Auditor General report
The Auditor General’s Special Audit Report on the closure of seven commercial banks during the period 1993 to 2016, established that on May 19, 1999, BoU closed the Cooperative Bank which was established in 1997, and issued a report about the same in June 1999 as required by Section 32 [3] of the Financial Institutions Statute, 1993.
The special audit on closed banks such as Crane Bank Limited, Greenland Bank, National Bank of Commerce, and Cooperative Bank, was among other objectives, to establish whether proper inventory of the assets and liabilities of the banks was undertaken at the closure in line with the law.
It was also to establish whether the liquidator appropriately managed the sale of assets and accounted for the proceeds from the sale.
There is concern that shareholders in Cooperative Bank took loans that they never paid back.
Parliamentary probe
The 10th Parliament Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises [COSASE] in February 2019 faulted Uganda Registration Services Bureau [URSB] for failing to perform due diligence during the incorporation of the new Cooperative Bank in 1997.
The Cooperative Bank created in 1997 was meant to replace and take over the assets and liabilities of a previous Bank of the same name registered under the Cooperative Societies Statute of 1963.
During their investigations MPs on the then COSASE discovered that the original Cooperative Bank was never dissolved and the process and resolutions to transfer assets were never concluded when the new bank was shut down in 1999.
The MPs insisted then that the URSB did not carry out effective investigations and due diligence to ascertain the identity and legitimacy of the subscribers to the shares in the memorandum of association.
COSASE pointed out then that the names of the share subscribers were individuals instead of the names of the cooperative societies they were meant to represent.
The subscribers were Sam Magona, Anthony Sekweyama, Joseph Nsereko, Fred Nyakaana, and John Muwanga. Katuntu argued then that there were no resolutions showing whether these individuals had been authorised by the cooperatives to take over the shares.
He noted then that the magnitude of the situation when assets worth billions were at stake should have forced the registration bureau to take the matter more seriously than it did instead of quickly incorporating a new Cooperative Bank in 1997.
Uganda Co-operative Bank is now proposed for establishment to serve a large portion of the population engaged in the agricultural sector with cheaper loans and other services.
The process to re-establish the Cooperative Bank has been dragging for a couple of years amidst legal and procedural challenges with glowing anxiety for the same among the cooperative sector.
Apparently, MTIC is engaged in a consultation process on operations, mode of business, and recapitalisation of the bank to be revived, after a Cabinet approval for the same late last year.
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