Shareholders should have the right to dispose of the property of the bank being liquidated after all creditors' claims have been satisfied. In this regard, Ukrainian legislation should be brought in line with European standards. This opinion was expressed in an exclusive commentary to UNN by Dmytro Kasyanenko, attorney at law at Kasyanenko & Partners.
In my opinion, shareholders, as one of the owners of a bank, should have certain rights in the process of liquidation of their asset. However, these rights should be clearly limited and regulated in accordance with Ukrainian law and European Union standards to ensure that the interests of all creditors are protected and that the principles of transparency and fairness are respected
He emphasized that during the liquidation of a bank that is not bankrupt, it is important to preserve the procedure for satisfying creditors' claims, which is set out in the law.
"The shareholders have the right to dispose of the bank's property only after the creditors' claims have been fully satisfied, which is a key principle of bank liquidation," the lawyer added.
At the same time, he said, to regulate these relations, it may be necessary to amend the current legislation, which will require not only a legal analysis of the current situation, but also a deep understanding of the potential economic consequences.
"Legislative changes should take into account the interests of all stakeholders, including creditors and shareholders, and ensure the stability and predictability of the banking system. Political will plays a significant role in this process, as it can facilitate or hinder the adoption of the necessary reforms. Effective implementation of changes requires a consensus between the legislative and executive branches, as well as support from the business community and the public," added Kasyanenko.
According to him, in any case, legal initiatives should be balanced, thoughtful and aimed at ensuring the stability of the financial system, protecting the rights of creditors and investors, and supporting the healthy functioning of the economy
Kasyanenko added that in the context of the liquidation procedure of a solvent bank, it is important to understand that compliance with European standards depends on several factors, including compliance with the principles of transparency, fairness and efficiency in the liquidation process.
According to European standards, which are reflected, in particular, in the EU Directive on the Resolution and Winding-up of Credit Institutions, the Directive of the European Parliament and of the Council of 4 April 2001 on the Restructuring and Winding-up of Credit Institutions, the liquidation procedure should ensure the maximum possible satisfaction of creditors' claims and shareholders' interests. The priority is to ensure the stability of the financial system and protect deposits.
As an example, Kasyanenko cited the law "On Amendments to Certain Legislative Acts of Ukraine on Improving the Procedure for Withdrawing a Bank from the Market under Martial Law," which, in his opinion, introduces important changes to the process of withdrawing a bank from the market during martial law, as well as the attitude of European standards to this.
According to him, this law, which regulates important aspects of the banking system in times of crisis, includes an important provision on guarantees of individual deposits, in particular, it sets a maximum compensation amount of UAH 200 thousand. However, the document provides for an exception to this guarantee for deposits of persons subject to international sanctions, except for aggressor states. This decision is quite controversial and may affect the stability of the banking system.
In terms of European standards, such measures may be considered insufficient, as they may deviate from the principles laid down in the EU Deposit Guarantee Scheme Directive. In addition, European practice requires that any restriction of property rights be accompanied by adequate compensation measures that meet the principles of legality and proportionality.
"It should also be noted that the European approach to compensation for losses during bank liquidation requires alternative sources of compensation. This ensures that shareholders have the opportunity to receive compensation in various forms, which is important to ensure their rights. Given the above, it can be assumed that our legislative process requires additional harmonization with European norms and practices to ensure effective protection of the rights and interests of all participants in the financial system, including depositors, shareholders and other stakeholders," Kasyanenko said.
Ideally, the process of liquidation of a solvent bank, according to Kasyanenko, should provide for a clear definition of the procedure and conditions for the sale of assets and the settlement of liabilities.
"After all obligations to creditors have been fully satisfied, shareholders should have the right to dispose of the residual property, as this is in line with the basic principles of ownership and corporate governance. In view of this, there may be a need to amend Ukrainian legislation regarding shareholder rights in the course of bank liquidation, but any changes should be balanced and compatible with international standards and practices. Such changes should be aimed at improving the efficiency of the liquidation process, while at the same time ensuring the protection of the rights of all parties, including minority shareholders," emphasized Kasyanenko.
Recall
Despite the war in Ukraine, the process of removing banks from the market has not stopped. Thus, as of February 24, 2022, the liquidation process was initiated in respect of 8 banks. This year, for the first time in Ukraine, not only bankrupt banks but also profitable institutions were subject to liquidation and license revocation, including Concord Bank. The process of depriving a banking institution of its license takes place without a court. Of course, owners and shareholders of banks can appeal against the NBU's decision after it has made a decision to liquidate the bank, but in general, the process of removing a banking institution from the market, once it has been launched, is irreversible. In addition, Ukraine does not regulate the liquidation of a profitable bank. According to Olena Sosedka, co-owner of Concord Bank, when the regulator announced the decision to liquidate the bank, the financial institution had enough highly liquid assets to make all the necessary payments in 2-3 weeks. But the process of bank liquidation is strictly regulated by law and can generally take up to three years.