Golden Sibanda  Harare Bureau
CREDITORS of closed Royal Bank could suffer substantial losses to their investments after it emerged that liabilities of the bank at $12,5 million far outweigh the bank’s assets total of $5,2 million.This comes amid allegations that directors caused the collapse of the bank due to persistent violation of proper banking practices, legal provisions and wanton disregard of governance principles.

Agent liquidator, Cecil Madondo of Tudor House Consultants, representing final liquidator, Deposit Protection Board, will soon assign forensic auditors to further ascertain what happened.

The outcome of the investigation could result in interrogation and prosecution of former directors, shareholders and employees who knowingly had input into actions that caused the collapse of the bank.

Madondo said “based on the information received from the RBZ, creditors and other stakeholders, it can be concluded that the creditors violated provisions of section 318 of the Companies Act”.

This was revealed during a creditors and members meeting in Harare held before the Master of High Court yesterday to prove claims ahead of auctioning of the bank’s assets tomorrow to settle liabilities.

The second creditors and members meeting is expected to be held next month with the first payments anticipated in March.

“Based on the sworn valuations, the assets and liabilities of Royal Bank Zimbabwe, the total net liability position of the bank as at 20 February 2013 amounted to $7,3 million,” said Madondo said.

“The estimated dividend to concurrent creditors is $0,02 (per dollar). This is attributable to the fact that liquidation costs are paid first and then the residue is distributed (accordingly among creditors),” he added. Concurrent creditors are paid after all other creditors have been paid.

Madondo said the amount remaining would be paid according to a criterion that prioritises secured creditors and preferential creditors while the balance would be paid to remaining creditors.

He said that “unsecured creditors are not likely to receive much” as they would only be paid from the residue of payments to the appointed liquidator of the bank, the secured investors and former employees.

Most of the payments will be met out of receipts from the disposal of immovable assets comprising 31 buildings. Madondo said all the assets were used as security against some investments.

A total of $95,774 was realised from the disposal of movable assets with some of the items yet to be sold.

The value of the immovable assets when the provisional liquidation order was granted in February 2013 was $3,6 million, but delays in confirmation of the order by court saw the value falling to $2,3 million.

Delays in confirmation of the provisional liquidation order was caused by a High Court application against liquidation filed by major shareholders that included Jeffrey Mzwimbi and Durajaji Simba. Mzwimbi held 25 percent, Simba 20 percent, Hardy Pemhiwa 20 percent and Royal Financial Holdings with 20 percent. According to the liquidator’s preliminary report the owner managers also violated banking laws that compel separation of ownership and management.

Further, the liquidation delays resulted from  reserved judgment on December 17, 2013 with the judgment handed only handed down with conformation of liquidation order in November last year.

Madondo said he had engaged legal practitioners to recover the loan book, which stands at $1,4 million. About $244, 529 of the amount has been recovered with the balance still outstanding.

But what could further prejudice the vulnerable creditors and depositors is the fact that lawyers tasked with recovery of loans have been facing challenges because of a number of factors.

These include the fact that certain debts that were not secured; non-viability of legal action to recover amounts under $500, debtors moving from known premises and cannot be located.

Royal Bank directors surrendered the bank’s licence in 2013 after the institution faced viability challenges stemming from gross under capitalisation. The bank had base capital of $1,9 million when it was relicensed in 2011 against regulatory minimum capital requirement of $12,5 million.

The capital comprised mainly revaluation reserves from land and buildings and insignificant liquid capital of $443,529 with negotiations to recapitalise the institution later failing to materialise. Due to viability problems, cumulative losses totalled $2,69 losses as at May 2012.

The bank had initially been placed under curatorship by RBZ in 2004 due to liquidity challenges before it was incorporated into Zimbabwe Allied Banking Group, a product of failed banks, but successfully contested the decision. It was re-registered in September 2010.

 

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