Stalemate: Dfcu  Shareholder CDC Stuck With Shares Over Crane Bank Saga

Stalemate: Dfcu Shareholder CDC Stuck With Shares Over Crane Bank Saga

By Spy Uganda

Dfcu Bank has landed into yet another quagmire after its majority shareholder Commonwealth Development Corporation (CDC) Group, a British firm, failing to dispose off their shares because of the Crane Bank and Bank of Uganda impasse.

We have established that CDC Group  wanted to sale its 9.97 shares in Dfcu Bank but the earmarked buyer, Investment Fund for Development Countries (IFU), a Danish Development Finance Institution, has halted the deal, on grounds that it has  to inspect Bank of Uganda Board minutes regarding the purchase of Crane Bank by Dfcu Bank.

It should be noted Dfcu Ltd, the parent company of Dfcu Bank, on December 19, 2019 announced that CDC Group was to sell 74,580,276 shares which make up 9.97 per cent of the total 748, 144,033 ordinary shares in the company.

Unfortunately, the deal might not materialise after it  emerged that the demands by the prospective buyer IFU hav stalled the deal, with insiders saying the matter may come up again in Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) for revision.

It should be recalled that COSASE last year investigated the controversial sale of seven commercial banks between 1993 and October 20, 2016 by Bank of Uganda, with the acrimonious closure and sale of Crane Bank Ltd (CBL) owned by city tycoon Sudhir Ruparelia, dominating the headlines.

CBL was placed under statutory management from October 20, 2016, to January 20, 2017, before it was controversially sold to Dfcu Bank, a deal that has since backfired. The fallout in the aftermath of the sale led to a parliamentary inquiry, which later discovered that the BoU board did not hold meetings to approve the sale as per the procedures.

During the Parliamentary probe,  Justine Bagyenda, who was after the sale of Crane Bank retired as  BoU’s Executive Director for supervision, told Parliament that the sale of CBL to Dfcu Bank was done over telephone and that there was no any minutes written to that effect. The same was confirmed by MMKAS Advocates, the lawyers who were the transaction advisers acting on behalf of BoU.

In their report, legislators said BoU officials had acted recklessly  in the closure of Teefe Bank (1993), International Credit Bank Ltd (1998), Greenland Bank (1999), the Co-operative Bank (1999), National Bank of Commerce (2012), Global Trust Bank (2014) and Crane Bank Ltd (CBL). And, in none of the above cases did BoU officials follow the due process.

The COSASE also noted a number of inconsistencies, key among them being closure and sale of the defunct commercial Banks without any inventory or documentation and grossly undermining the legal procedures of bank closure by the Central Bank. 

COSASE found out that BoU officials were not transparent and didn’t follow good governance principles in their undertakings, which was made worse by their failure to conduct their dealings without records.

It is because of the negligence and recklessness that BoU officials exhibited during the sale of commercial banks, CBL inclusive, that IFU wants to peruse the Central Bank’s books of accounts and their transactions with with Dfcu Bank before they reach the decision to either buy CDC Group’s shares or not.

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