Financial companies seeking to wind up their operations voluntarily yet are unable to meet their debt and other obligations in full within a year, risk imprisonment.
That is but one of the cautions the Bank of Ghana has issued in its latest directive on voluntary winding up of banks and specialized deposit taking institutions.
The directive also forms part of regulatory processes to sanitise the financial sector.
The caution by the central bank is to protect the stability of the banking system.
By this, depositors and other interested parties should be able to access their money despite the decision by the financial institution in question to seize operations.
“The objectives of the Directives on voluntary winding up is to provide an overview of the procedures for voluntary winding up and subsequent revocation of operating licence of a bank or SDI; ensure that there is an orderly exit of a bank or SDI seeking to voluntarily wind up its operations/activities and as well, ensure that the voluntary winding up of operations of a regulated financial institution does not threaten the stability of the banking system,” the draft Directives stated.
Aside the imprisonment, a Director who is unable to determine ahead, the inability of the company to offset debts within a year, could be subject to a fine equivalent to five hundred pounds or to both.
Before the central bank could grant permission for voluntary winding up, the institution must be solvent, have sufficient liquid assets to meet fees, costs and expenses of the liquidation.
Again, majority representing 75 percent of the Board, must admit to the institution’s ability to pay all debts within twelve months.
Of the seven local banks that have had their licenses revoked over the past one year, the Construction bank is the only one that opted to voluntarily, wind up its operations.
In all, the process of liquidating a bank or SDI through a voluntary wind-up shall not exceed a period of twelve (12) months.
Meanwhile the central bank is seeking comments for the exposure draft of the Directives on voluntary winding up of financial institutions.
Source: citibusinessnews
