The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Creditors of the now-defunct Gulf Union Bank (Bahamas) and Suisse Security Bank & Trust are “pretty upset” there has been further delay in recovering what they are owed, a Bahamian attorney yesterday describing this as “totally unnecessary”.

Dr Peter Maynard told Tribune Business that the liquidator’s concerns over how both winding-ups might be impacted by last year’s changes to the Companies Liquidation Rules were misplaced.

Raymond Winder, the Deloitte & Touche (Bahamas) managing partner, has last week told this newspaper that he planned to apply to the Supreme Court for directions on whether, and how, the legal amendments applied to the liquidation of both banks.

Until the court clarifies the situation, Mr Winder has delayed planned distributions of recovered funds to creditors of both Gulf Union Bank (Bahamas) and Suisse Security.

Dr Maynard, though, who represents creditors of both insolvent banks, yesterday argued that it was not necessary for Mr Winder to seek the Supreme Court’s guidance.

He takes the position that the law is “unambiguous”, and that the ‘saving provisions’ of the Companies (Winding Up Amendment) Act 2011 apply to both liquidations.

Citing section 7 (2) (a) of that Act, Dr Maynard told Tribune Business this allowed liquidations either partially or wholly completed under the previous law to continue as if that legislation was still in force.

This meant that the Gulf Union and Suisse Security liquidations could continue under the Act that existed prior to 2011, he added.

Arguing that seeking the Supreme Court’s directions on this issue would only cost more time and money, thus further reducing the total recovery for all creditors, Dr Maynard told Tribune Business: “It’s totally unnecessary.

“It’s an unnecessary cost, and the creditors I represent are pretty upset. There’s additional delay, and additional cost added on to the return to them.”

Dr Maynard said Gulf Union Bank (Bahamas) went into court-supervised liquidation in 1999, with Suisse Security ultimately following later, after first being placed into provisional liquidation in 2001.

“They’re getting older and are not able to enjoy the fruits of their labour, as more delay and expense is incurred unnecessarily,” he added of his clients.

“There’s no need to re-wind the clock. There’s no need to make an application. I don’t see the point he’s covering. If there was some sort of ambiguity I could see it, but there’s none.”

Dr Maynard said he had written to Mr Winder to set out his rationale as to why any Supreme Court application was unnecessary, and to express his concerns.

It is understood that the liquidator, though, and his attorney intend to proceed with seeking the court’s directions.

As a result, Mr Winder has been forced to suspend plans to pay Suisse Security creditors their first-ever dividend,and Gulf Union depositors/creditors their fourth.

“We had previously advised that we anticipated paying a.... distribution by the end of 201,” Mr Winder wrote to both sets of creditors.

“However, as a result of the possible implication of the Companies Liquidation Rules 2012, enacted on 31 July 2012, our attorneys have advised that we seek the Court’s direction on certain matters before proceeding with this distribution.

“We had hoped that this would have been resolved by the end of 2012. However, it was not, and therefore, we are pressing our attorneys to have this dealt with as soon as possible.”

As revealed by Tribune Business last week, Mr Winder and his legal counsel are trying to determine whether both liquidations have to “fall in line” with changes that impact creditor dividends and calculating how much it would cost to wind-up insolvent institutions.

Emphasising that these changes only impacted deposit-taking institutions, primarily licensed banks such as Suisse Security and Gulf Union, Mr Winder said their depositors were now “automatically considered” to be creditors without having to submit ‘proof of debt’ owed to them first.

Under Order 16, Rule 7, the only time depositors at insolvent Bahamas-based banks will now be required to submit a ‘proof of debt’ is if the liquidator believes the institution’s account records are “unreliable”. That conclusion, too, would have to be affirmed by the Supreme Court.

Explaining the two scenarios that now followed from this, Mr Winder told Tribune Business that in cases where account records/statements were reliable, “when you [the liquidator] issue a dividend, you have to set aside an amount for depositors that have not claimed yet.

“In the case of Gulf Union Bank, if someone comes in on the fourth dividend, pops up only then and wants to receive a dividend, before I pay anyone else I have to make him whole for the previous three dividends.”

In the other scenario, Mr Winder added: “If the court decides the financial records can’t be relied upon, and must be admitted to proof, for those individuals that have not claimed, the liquidator has got to set aside a sum in a trust fund, separate and apart from the corpus (body) of the liquidation.”

Those trust funds had to be placed in an interest-bearing account, he explained, and could not be used to finance the liquidator’s work in winding-up a bank or other deposit-taking institution.

While the liquidator would earn fees for administering the trust, Mr Winder said these would either be determined by the Supreme Court or based on the value of its assets - calculated as a percentage of this sum.

Another major change, he added, was that these trust funds will no longer be available to other depositors once the liquidation is completed.

Given that no ‘proof of debt’ will be needed, Mr Winder said monies not claimed by some depositors would no longer be available in previous dividend distributions.

“Previously you could have improved the yield of depositors who have claimed by making distributions, but now those funds must be set aside immediately once you have made the first dividend,” the top accountant told Tribune Business.

Nor would these funds be available to cover the liquidator’s expenses, and Mr Winder said that if they remained unclaimed by the winding-up end, they would now go to the Public Treasury.

“The big deal is that where other depositors previously received some of that distribution, under the new Rules that distribution will more than likely end up with the Treasury. That’s a shift from depositors to the Government,” Mr Winder said.