ROYAL Bank of Zimbabwe (Royal) creditors are pushing for a forensic investigation targeting the beleaguered bank’s CEO Jeffrey Mzwimbi, top executives and other directors amid allegations the financial institution’s top brass flouted regulations.
Depositors who attended the first liquidation meeting at the High Court on Wednesday pushed for the liquidator, Cecil Madondo, to probe directors and shareholders amid allegations of recklessness and negligence.
This comes as Madondo, in his preliminary report, sought direction over how to proceed in the face of possible violation of provisions of the Companies Act by directors.
The bank’s top management and directors might have to answer to allegations of false reporting and converting depositors funds into shareholder’s loans as witnessed in the case of one Andreas Kloppers whose US$736 000 worth of investments in Royal was reported as shareholder loans.
The bank’s books also look messy as its levels of loan exposures amounting to US$1,3 million mostly fall under related part transactions.
“Based on the information received from the RBZ, creditors and other stakeholders, it can be concluded that the directors violated the provisions of Section 318 of the Companies Act….” wrote Madondo.
The Companies Act states that if at any time it appears that any business of a company is being carried out recklessly, with gross negligence or with intent to defraud any person for any fraudulent purpose; the court may, on the application of the master, or liquidator or judicial manager or any creditor of or contributory to the company, if it thinks it proper to do so, declare that any of the past or present directors of the company or any other persons who were knowingly parties to the carrying out of the business in the manner or circumstances aforesaid shall be personally responsible, without limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct.
Madondo said it is trite law that every director of a company has a fiduciary duty to exercise such powers and perform the functions of a director in good faith and for a proper purpose; in the best interest of the company and with the degree of care, skill and diligence that may be reasonably expected of a person.
Royal in July 2012 surrendered its banking licence to the central bank after realising it was no longer in a safe and sound financial position after experiencing deteriorating financial performance and results. It was closed by the Reserve Bank of Zimbabwe (RBZ) in the same month before the central bank started winding up the bank in January 2013.
In February 2013, a provisional liquidation order was granted by the High Court of Zimbabwe.
Shareholders of the bank challenged the liquidation order, but the High Court confirmed the liquidation in November 2014.
Creditors’ hopes of recovering their funds are fast fading amid indications the liquidator is struggling to recover funds from the bank’s debtors.
Out of the US$1,4 million loan book, a total US$244 529 has been recovered while the balance of US$1,1 million is still outstanding from debtors, according to the liquidator’s report.
Initial assessments by the liquidator indicate there is no likelihood of any contribution from creditors and contributories.
Madondo said lawyers tasked to recover the debts indicate that there were challenges in collecting the debts because of unsecured debts, lack of proper record keeping, debtors moving from their last known addresses and that a number of corporate debtors could not be located. It is presumed that with the prevailing economic conditions, many of them have folded and are no longer operational.
He also said some files do not have source documents or offer letters.
“Some former employees of the bank who are privy to certain transactions are declining to testify; those former employees who have co-operated all say the former CEO is the one placed to assist on what actually transpired on the accounts in contention (and) it is our view that the money potentially due to the bank could be written off,” reads the report.
According to a statement of assets and liabilities as at June 2012, Royal’s Total assets amounted to US$5,3 million, comprising mostly of land and buildings and improvements worth US$3,6 million while its total liabilities ran into US$12, 6 million.
However, the value of the immovable assets has since fallen to US$2,3 million due to the delay in confirming the provisional liquidation.
The bank’s net liability position at the reporting period stood at US$7,3 million.
At the time of closing the bank, total deposits amounted to US$5,4 million. Of the deposits, 60% was accounted by seven clients, translating to US$3,5 million.
Sedco had US$4,1 million, followed by NSSA and Andreas Kloppers who had US$760 000 and US$736 000 respectively.
Madondo said a second meeting will be held in February 2015 with payments to creditors to commence in March.