September 24, 2020
Clickongh

Receiver traces assets of collapsed Microfinance & S&Ls to settle outstanding claims

The Receiver of the defunct 347 Micro Finance Companies, 23 Savings and Loans and Finance House Companies, Eric Nana Nipah, says he is undertaking a detailed asset tracing of the owners of the collapsed financial institutions.

This is to enable him have access to more liquidity in settling outstanding claims following the collapse of the companies.

The assurance by the Receiver comes on the back of an announcement by the Bank of Ghana that it will pre-finance payments to former workers of these entities.

The Central bank says the decision was taken to mitigate the economic impact of COVID-19 on the ex-staff.

The negotiations towards the full payment of the outstanding salaries and negotiated and exit packages is expected to start on Monday, July 13, 2020.

The Receiver further noted that he will only fully settle outstanding salaries and exit packages of former employees which have been duly validated, agreed and in the resolution process.

“To ameliorate the economic impact of the resolution exercise on former employees of these affected companies particularly in these times of COVID, Bank of Ghana has agreed to pre-finance the full settlement of employee related claims which otherwise rank as Unsecured claims in the receiverships of these companies.

“The Receiver will in the week commencing Monday, 13 July 2020, engage with the authorized representatives of the ex-staff to agree on modalities for the payment of outstanding salaries and exit packages to ex-staff of these resolved institutions,” the statement said.

“In line with the hierarchy of creditor claims set out under Act 930, other creditors of the failed institutions will be settled by the Receiver upon validation of their claims and to the extent that the Receiver is able to realize value from the remaining assets of these institutions,” he said.

It would be recalled that following the revocation of the licences of the 347 microfinance companies and and 23 savings and loans companies, a validation of the affected customers commenced on November 18, 2019, with the aim of repayment..

Accordingly, the Receiver is compelled to undertake a detailed assets tracing and forensics exercise in collaboration with the Economic and Organised Crime Organisation (“EOCO”) to locate and recover the assets of the insolvent companies to auction and accrue funds for settlement.

But the receiver in the statement explains that though they are at the asset realization stage of the receiverships, “poor quality of assets of some of these institutions, asset diversion and misstatement of a significant number of assets of some of these companies in the financial records of these resolved companies are slowing the pace of recovery.”

“The consequence in pursuing this recovery route is that creditor claims including employee related claims in the resolution of the affected MFCs and S&Ls are not likely to be settled any time soon,” he added.

On a number of occasions, the Receiver has also appealed to individuals, groups and institutions who took loan facilities from these firms to repay the loans immediately to aid in the recovery process.

Background

The Bank of Ghana, between 2017 and 2019, revoked the licenses of nine local commercial banks and over four hundred financial institutions comprising Micro-finance, Savings and Loans as well Finance Houses, for violating various regulations guiding their operations.

This affected about 4.6 million depositors whose monies could have been lost completely had the regulators not taken the action.

It all began in August 2017, when the Bank of Ghana (BoG) gave GCB Bank Ltd the green light to acquire two local banks UT and Capital bank due to severe impairment of their capital.

Later in August 2018, the Bank of Ghana consolidated five other local banks into the Consolidated Bank Ghana Limited.

Then in May, 2019, 347 microfinance companies also had their licenses revoked by the Bank of Ghana.

The Bank of Ghana later in August 2019 again revoked the licences of twenty-three (23) insolvent savings and loans companies and finance houses, whiles the Securities and Exchange Commission revoked the licenses of over 50 Fund Management Companies.

 

Source: Business