Attorney General Asks BOU to Explain “Illegal” Sale of Co-operative Bank Assets

The Bank of Uganda – BOU has been tasked to explain how it seized and sold off assets of the Co-operative Bank of Uganda, without liquidating the institution.

According to the records available, the Co-operative Bank was registered in 1964 under the Cooperatives Act and has never been liquidated or abolished.

Following the turbulent economic and political times, its operations were disrupted and it virtually collapsed with the collapse of the Cooperative Movement, as privatization and economic liberalization took root.

In 1997, an attempt to revive the bank, which was mainly benefiting farmers, resulted in the formation of the Uganda Cooperative Bank Ltd, a limited liability company, under the Companies Act.

However, this lasted just two years and allegations of mismanagement and corruption led to its closure by the Bank of Uganda in 1999 under the then Governor Nyonyintono Kigonyogo.

The Attorney General has given the Bank of Uganda up to January 23, 2023, to explain which of the two companies was closed.

In an email statement, the Bank of Uganda insisted that it closed Cooperative Bank which was formed in 1997 under the Companies Act, replacing the old bank.

“The Cooperative Bank was established under the law in 1963 and was transformed into a corporate entity in 1997 under the Company Act, as a precondition to receiving USAID funding. This transformed entity is what was closed in 1999 and whose liquidation was concluded on 25th July 2020,” says the statement mailed by Charity Mugumya, Director of Communications at BOU.

It is not clear then, how the new company’s liabilities extended to the 1964 bank that the BOU got the mandate to sell them off, yet the bank has never been deregistered.

The Minister of Trade, Industry, and Cooperatives, Francis Mwebesa’s petition to the Attorney General says by the time the 1997 Cooperative Bank was closed, “the process of turning the bank into a company had not been completed, neither had the ‘original’ Cooperative Bank’ been deregistered.”

“Which cooperative bank did BOU close? If it was the latter bank, why were the assets of the former seized and sold instead?” the letter signed by JBR Suuza on behalf of the Solicitor General reads in part.

The letter also asks for “any other relevant information on the subject” pertaining to the winding up of the Cooperative Bank.

“We will appreciate your response, preferably by Monday 23rd January 2023,” says the letter to BOU’s Legal Counsel. The Bank was closed on May 1999.

The matter also came up in the 2018/19 parliamentary probe into the closure of seven banks by BOU.

One of the contentious issues was the price paid for the assets of the bank.  The report by the Committee on Statutory Agencies and State Enterprises, COSASE, noted that the assets were sold at a discount of 93 percent, which was described as a giveaway.

Ivan Asiimwe, a former shareholder said the bank at the time had 25 branches and dive agencies around the country. “The committee in the course of interaction with the Uganda Co-operative Alliance (representing the cooperators that formed the Cooperative B in 1964), established that in 1992, the Government together with USAID made attempts to recapitalize the distressed Co-operative Bank,” says the COSASE report.

They complained that in the process a new company (the Cooperative Bank Ltd) was incorporated with the same name with a set of directors and subscribers.

“This was done without deregistering or liquidating the previous co-operative Bank Ltd of 1964 registered under the Cooperative Societies Act.”

Registering a new bank with the same name without liquidating/winding up the first resulted in having two banks duly registered, according to COSASE.

“The committee, therefore, recommends that BoU, the Ministry of Trade, Industry and Co-operatives, and the Ministry of Finance, Planning and Economic Development resolve the concerns of the Uganda Co-operative Alliance and assets of the Co-operative Bank. It is further recommended that Government reports on the matter to this House within six months,” the committee led by MP Abdu Katuntu recommended.

“As far as we, the cooperators, the Cooperative Bank formed in 1964 still exists, we just want it revived,” said Asiimwe, the Uganda Co-operative Alliance chief executive.

He says the farmers, who are the main beneficiaries of a Cooperative Bank have been suffering under the current banking regime which offers no tailored products for them.

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