Gone too soon
The High Court has placed the SME Bank under the control of the Master of the High Court for provisional liquidation.
In a landmark ruling yesterday, following an urgent application by the Bank of Namibia, the Windhoek High Court placed the SME Bank under provisional liquidation.
Judge Hannelie Prinsloo, after hearing arguments by counsel for the Bank of Namibia (BoN) and the SME Bank and its Zimbabwean shareholders, ruled that the bank be placed under the control of the Master of the High Court for provisional liquidation, adding that the respondents had until 15 September to show cause why the bank should not be liquidated.
Advocate Andrew Corbett (SC), appearing for BoN along with Advocate Deon Obbes, told the court that the SME Bank's capital base had so eroded that by Monday of this week, it only had a liquidity of N$3.8 million available to pay out the claims of N$500 million of two large account holders at the bank.
Corbett added that the bankruptcy of SME Bank would have serious implications for the Namibian economy.
With total liabilities of N$1.06 billion, bank regulations require that the bank should have at least 10% of that amount – N$106 million - in liquid assets. Corbett told the court that the National Energy Fund, which had deposited N$400 million into SME Bank, and GIPF, which had deposited N$100 million, had both claimed their money.
According to Corbett, the SME Bank is technically insolvent as its liabilities of N$1.16 billion exceed its assets of N$998 million by N$162 million.
“There is no doubt that the bank is bankrupt,” he said, adding that it found itself in a hopeless position. He added that there was a compelling reason for the liquidation of the bank because of the misuse of public funds sourced from taxpayers' money.
Sisa Namandje, counsel for the two Zimbabwean minority shareholders, opposed the application by BoN.
Namandje told the court that even if the SME Bank was bankrupt, it would be neither reasonable nor fair to grant an order for provisional liquidation, adding that the creditors of the bank should bring such an application and not the BoN.
The Bank of Namibia took control of SME Bank in March after allegations of the mismanagement of funds came to light. In his founding affidavit, the central bank governor Ipumbu Shiimi told the court that an investment of roughly N$175 million in South Africa by the SME Bank had placed it in a precarious financial position.
Supporting financial statements by a BoN director Romeo Nel indicated that the SME Bank would become bankrupt by 27 June even if the money lost in the South African investment were recovered.
Shiimi further added that SME Bank's majority shareholder, the government, had indicated that it would no longer invest in the bank and its minority shareholders had also not come forward with capital to save the institution.
Ian Mclaren and David Bruni have been appointed by the Master of the High Court to manage the affairs of the SME Bank in the interim.
JAQUELINE LOUW
Judge Hannelie Prinsloo, after hearing arguments by counsel for the Bank of Namibia (BoN) and the SME Bank and its Zimbabwean shareholders, ruled that the bank be placed under the control of the Master of the High Court for provisional liquidation, adding that the respondents had until 15 September to show cause why the bank should not be liquidated.
Advocate Andrew Corbett (SC), appearing for BoN along with Advocate Deon Obbes, told the court that the SME Bank's capital base had so eroded that by Monday of this week, it only had a liquidity of N$3.8 million available to pay out the claims of N$500 million of two large account holders at the bank.
Corbett added that the bankruptcy of SME Bank would have serious implications for the Namibian economy.
With total liabilities of N$1.06 billion, bank regulations require that the bank should have at least 10% of that amount – N$106 million - in liquid assets. Corbett told the court that the National Energy Fund, which had deposited N$400 million into SME Bank, and GIPF, which had deposited N$100 million, had both claimed their money.
According to Corbett, the SME Bank is technically insolvent as its liabilities of N$1.16 billion exceed its assets of N$998 million by N$162 million.
“There is no doubt that the bank is bankrupt,” he said, adding that it found itself in a hopeless position. He added that there was a compelling reason for the liquidation of the bank because of the misuse of public funds sourced from taxpayers' money.
Sisa Namandje, counsel for the two Zimbabwean minority shareholders, opposed the application by BoN.
Namandje told the court that even if the SME Bank was bankrupt, it would be neither reasonable nor fair to grant an order for provisional liquidation, adding that the creditors of the bank should bring such an application and not the BoN.
The Bank of Namibia took control of SME Bank in March after allegations of the mismanagement of funds came to light. In his founding affidavit, the central bank governor Ipumbu Shiimi told the court that an investment of roughly N$175 million in South Africa by the SME Bank had placed it in a precarious financial position.
Supporting financial statements by a BoN director Romeo Nel indicated that the SME Bank would become bankrupt by 27 June even if the money lost in the South African investment were recovered.
Shiimi further added that SME Bank's majority shareholder, the government, had indicated that it would no longer invest in the bank and its minority shareholders had also not come forward with capital to save the institution.
Ian Mclaren and David Bruni have been appointed by the Master of the High Court to manage the affairs of the SME Bank in the interim.
JAQUELINE LOUW
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