Cosase: GTB directors seek Shs 315bn compensation

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Former directors and shareholders of the defunct Global Trust bank are seeking Shs 315.7 billion in compensation for the alleged illegal closure of their bank.

They are demanding full compensation equal to the direct cash equity investments of $35.3 million with interest at the rate of 10 per cent per annum compound from July 25, 2014. They also want payment of $50 million in loss of goodwill inflicted on the directors and shareholders on account of the wrongful closure of their bank.

The officials led by Bayo Folayan the former managing director and Olusegun Oyeyemi a former shareholder, on Thursday appeared before parliamentary committee on Commissions, Statutory Authorities and State Enterprises (Cosase).

The committee is currently investigating circumstances under which the central bank closed and sold seven commercial banks between 1993 and 2016 as highlighted in the 2017 forensic audit report by the auditor general.

Among the banks closed is Global Trust bank (GTB) which license was revoked in July 2014 allegedly due to poor performance which, according to the central bank, resulted from under-capitalization and corporate governance weaknesses. BoU says that Global Trust bank, which had built a network of 23 branches at the time of its closure, had accumulated losses to a tune of Shs 60 billion. The bank which was valued at Shs 75 billion was then handed over to Dfcu bank.

But a forensic audit report by the auditor general pointed to a number of irregularities and procedural lapses in the transaction. The audit found that there were no guidelines and regulations to guide the identification of the entity that assumed the assets and liabilities of Global Trust bank.

The central bank earlier indicated to Cosase that at the time of GTB’s closure, there were no prospects of the bank making any profits in the future. The former shareholders insisted that they complied with all the capital requirements as demanded by the Bank of Uganda (BoU).

“Our total direct cash equity investment as at July 25th, 2014 was $35.2 million or Shs 132 billion at today’s exchange rate. The committee is kindly requested to note that we injected over $10.5 million (about Shs 39.5 billion) between January 2013 and 31st May 2014. It is also important to note that the last equity capital investments were made on May 8, 2014,” said Bayo Folayan, the former managing director of GTB.

He, however, said that they were compelled by BoU to invest the new equity capital injection strictly in treasury bills although they could have used part of the equity funds to create new loan assets with higher returns or pay off expensive term deposits.

Olusegun Oyeyemi, a former shareholder in GTB said that the opinion by the central bank that they could not make profits in future was extremely speculative. He told Cosase chairperson Abdu Katuntu that the bank had met all capitalization schedules from the regulator and continued to pump money into the bank.

Elias Edu, the former company secretary told the committee that following a demand on the 4th of July 2014 to recapitalize the bank, the shareholders were not given time to comply and the Bank was shut on the 25th.

They accused the central bank of selling Global Trust bank 15 days before they closed it. Edu termed the actions of the BoU as highhanded, reckless and ill-motivated.

The GTB officials requested the committee to come up with a resolution requesting BoU to release 4 land titles for the properties bought by them from borrowers of GTB.

The land in question includes 18 acres on Plot 43 and 45, Block 421, Ziru Entebbe, 0.118 acres on plot 13 B, Folio 17, Bugolobi, 4.36 acres on Plot 37, Block 171, Lugala, Gayaza and 0.413 acres on Plot 116, Kogero, Block 443, Entebbe.

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