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The Consequences of Insolvency of Bank “Finance and Credit”


Oleksandr Vygovskyy, Attorney at Ilyashev & Partners Law Firm
Source: Ekonomichna Pravda

The head of the NBU Valery Gontareva said that the National Bank would apply to the courts of all necessary jurisdictions to implement personal guarantees of owners of insolvent banks that received stabilization loans.

In this regard it is also interesting what are the chances of the Deposit Guarantee Fund to receive compensation from the beneficiaries of banks and their companies.

Chances are really high. Provided that such a person is proven guilty of causing damage to the bank or its creditors.

It is known that the Deposit Guarantee Fund (FGVFL) or the authorized representative of the Fund in case of insufficiency of the bank property files a claim for compensation of damage caused to the bank to the person related to the bank. Or rather – to the person through whose fault the creditors or the bank have suffered damage, or to the related person who received property benefits as a result of such actions.

In case of refusal to meet such requirements of the Fund or their failure within the prescribed period the Fund refers such requirements to the court.

Liquidation of insolvent bank is not the basis for closing the court proceedings on the basis of a claim of the Fund. Liquidation is not the ground for release from liability of the person related to the bank that caused damage to the bank.

What can be the legal consequences of bankruptcy of a bank for its main beneficiary?

The Ukrainian banking laws stipulate that owners of substantial shareholding in the banks, i.e. the persons owning 10 and more percent of shares are obliged to take timely measures to prevent insolvency of the bank.

If it is established that the bank was brought to insolvency through the fault of the person related to the bank (the related persons include the bank inspectors and the owners of substantial shareholding), the person will bear civil and legal, administrative and criminal liability.

In particular, the person related to the bank, which actions or omissions resulted in causing damage to the Bank due to his fault, bears responsibility by his property.

However, if as a result of actions or omissions of the person related to the bank, the bank incurred damage, and the other person as a result of such actions received property benefits, such persons shall be jointly liable for the damage caused to the bank.

According to the Criminal Code of Ukraine, deliberate actions aimed at bringing the bank to insolvency are punishable by restriction or deprivation of liberty for one to five years with a fine in the amount from five to ten thousand of non-taxable minimum incomes of citizens, i.e. from 85 thousand to 170 thousand hryvnias.

The code provides for the guilty disqualification to hold certain positions or engage in certain activities for up to three years.

However, for bringing to criminal responsibility it is necessary to prove that such actions caused the large-scale material damage to the state or the creditor, which is defined as the amount in excess of 170 thousand hryvnias.

Such liability is only for those shareholders who belong to the category of persons related  to the bank.

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