The Sunday Mail
CREDITORS of Royal Bank, which is under liquidation, will have to wait a little bit longer before they are reimbursed as the Deposit Protection Corporation battles to sell the institution’s immovable assets to meet obligations worth more than US$11,9 million.
Royal Bank surrendered its banking licence to the Reserve Bank of Zimbabwe on July 27, 2012 after realising it was no longer in a safe and sound financial position.
After the High Court granted a provisional liquidation order on February 20, 2013, the DPC was chosen as the final liquidator.
The Master of the High Court approved the first interim liquidation and distribution account on December 23, 2015.
DPC public relations manager Mr Allen Musadziruma told The Sunday Mail Business that only preferred creditors (bank employees) and secured creditors had been paid a combined US$765 024.
“Take note that preferred creditors were paid an amount of US$556 886 from the first liquidation and distribution account whilst secured creditors were paid US$208 138. There was no dividend to unsecured or concurrent creditors,” said Mr Musadziruma.
About 312 claims worth US$11,9 million were provisionally accepted after three creditors’ meetings last year, but, the estimated realisable value of the bank’s assets stands at US$3,3 million.
DPC will make the next round of payments within the next six months.
Unsecured and concurrent creditors will only be paid after preferred creditors such as the Zimbabwe Revenue Authority and the National Social Security Authority have been paid in full as is required by law.
It has also been established that unsecured creditors will be paid on a pro-rata basis depending on the rate of recoveries.
DPC chief executive officer Mr John Chikura noted in a March 4, 2016 update that disposal of loans had taken longer than expected.
“The disposal of immovable assets and recovery of outstanding loans has taken longer than initially anticipated.
“This is mainly attributed to external factors such as the illiquid market and legal processes which have to be followed in the litigation of clients who owe the bank.
“Furthermore, most of the facilities granted to debtors do not have security and this has negatively impacted on the rate of recoveries.
Royal Bank relaunched on February 21, 2011 after it was given a second lease of life by the RBZ having earlier lost its licence in the raft of bank failures in 2005-6.
It relapsed owing to management shortcomings, gross under-capitalisation, chronic liquidity challenges, persistent losses, abuse of depositors’ funds, high volumes of non-performing loans, poor management information systems, violation of laws and regulations and inadequate manning levels.
According to the March 2015 liquidator’s report by Tudor House Consultants, 2015, Royal Bank was “critically under-capitalised” with an adjusted core capital of US$1,85 million — far below the minimum capital requirement of US$12,5 million for commercial banks.
Royal Bank’s solvency was under threat from persistent poor earnings and cumulative losses amounting to US$6 million as at June 30, 2012.
The report also said the bank failed to penetrate the market and mobilise meaningful deposits. Surprisingly, all the deposits cannot be accounted for.
The bank also failed to pay statutory obligations, creditors and interests on deposits and by May 31, 2012 it had outstanding creditors of US$2,3 million, resulting in some of them instituting legal proceedings to recover what they were owed.
Massive and persistent losses were largely attributed to high operating costs incurred after the strategically imprudent decision to roll out 14 branches “without adequate capital to support that level of operation.”
There wasn’t sufficient board oversight.
In 2012, the board, which had last met in November 2011, did not meet formally save for two board briefings on capital raising initiatives in February and March.
The Tudor House report urged the liquidator to institute legal proceedings against directors as provided for by Sections 318 and 319 of the Companies Act (Chapter 24:03), as read in conjunction with Section 277(c) of the Companies Act (Chapter 24:030).
It was also recommended liquidation of any holding company, subsidiaries, associate or companies related to either Royal Bank or the former directors to recover funds owed to depositors and other creditors.
According to a CR2 form dated June 7, 2011, Mr Jeffrey Muzwimbi held 25 percent, Mr Durajadi Simba (20), Mr Hardy Pemhiwa (20), Royal Financial Holdings (20), Mr Victor Chando (five), Intermarket Unit Trust (four), Mr Michael Tapera (two), Mr Godfrey Chakanyuka Karase (two) and Ms Nomusa Sibusisiwe Yehudah.
