Twenty-four (24) years, after Bank of Uganda, seized and sold the assets of the Co-operative Bank, the mystery of the ownership of the bank that was sold remains unresolved. This has led to another unresolved question of which Cooperative Bank was sold since it appears there were two Cooperative Banks- one, a cooperative society and the other a private limited liability company.
This is even as shareholders of seven banks, including Co-operative Bank which were found by a Parliamentary inquiry, to have been closed illegally and irregularly by the Bank of Uganda wait for the perpetrators to be brought to book.
Bank of Uganda seized and closed Co-operative Bank on May 20, 1999, but an unresolved shareholder dispute has re-emerged showing that there existed two Co-operative Banks- one a cooperative society and the other a limited liability company, leading to questions as to which of the two Co-operative banks was shut down by the Central Bank.
Cooperative Bank Ltd (the cooperative society) according to shareholders was established under the Cooperative Societies Statute of 1963 while Cooperative Bank Ltd (the company) was incorporated on 20th November 1997.
While the Central Bank seized and sold the assets of the latter (Cooperative Bank Ltd (the company)) the shareholders of the society contested the process of incorporating the latter and thereafter the transfer of the society’s assets to the newly formed entity. The cooperators led by the Uganda Co-operative Alliance (UCA) which held the majority shares in Cooperative Bank (the society) contend they were never allotted shares in the new company that also assumed the assets and liabilities of the society. They also accuse the Central Bank of negligence and or complicity in the transition process, which they maintain was a nullity.
“The process through which the assets of the society restructuring and eventual licensing of the Cooperative Bank Ltd, (registered under the cooperative societies act of 1963) into a limited liability company under the Company Act was unclear and tainted by injustices that dispossessed members (cooperators) of shares in the new company as well as property which was eventually seized and liquidated by Bank of Uganda. Bank of Uganda was seemingly complicit or negligent in this whole process of transition,” reads a 4th February 2019 letter by Charles Benon Bagamuhunda on behalf of the Chairman, Kigezi Cooperative Union and Ivan Asiimwe, General Secretary, Uganda Co-operative Alliance (UCA).
The Uganda Co-operative Alliance (UCA) is an umbrella body of Cooperatives in Uganda registered in 1961 under the Cooperative Ordinance 1946 (as amended).
The letter that has just resurfaced, was addressed to the then Chairman of Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) Parliament of the Republic of Uganda, Hon Abdu Katuntu at the height of the inquiry into the Bank of Uganda’s closure of 7 defunct banks.
The cooperators allege that the cooperatives who were the shareholders in the Cooperative Bank Ltd (the society) were not allotted shares in the new Co-operative Bank Ltd (the company) but instead, it was individual persons who were allotted shares in the limited liability company instead of Unions and Societies.
For example, the cooperators say, despite Uganda Cooperative Alliance Ltd (UCA) holding shares worth UGX2.53 billion in trust of the cooperatives and other cooperatives such as Banyankore Kweterana Cooperative Union holding shares worth UGX220 million and Kigezi District Growers Cooperative Union having UGX18 million worth of shares, there were not allotted even a single share in the Cooperative Bank Ltd (the company) that BOU liquidated. Neither were they compensated.
“The circumstances and process surrounding the transfer of property from the Cooperative Bank Ltd (the Society) to Cooperative Bank Ltd (the Company) if at all it was done are questionable,” Mr. Bagamuhunda wrote, adding: “Due to the absence of the liquidation report and other important documents, it is impossible to tell whether the property that was eventually liquidated actually belonged to the Society or the Company”.
Solicitor General inquires into the process of registering and disposing of Co-operative Bank
The issue of the ownership of the Co-operative Bank is now being revisited by the Solicitor General.
In an 11th January 2023 letter to The Legal Counsel for Bank of Uganda, J.B.R Suuza, writing on behalf of the Solicitor General, has asked the Central Bank to clarify the matter of which Co-operative Bank was sold.
The Solicitor General’s inquiry follows a request for a legal opinion from the Hon. Minister of Trade, Industry and Cooperatives, Mr. Francis Mwebesa regarding the re-establishment of the Uganda Cooperative Bank.
The Minister and now the Solicitor General have asked the Central Bank to clarify which Co-operative Bank was closed and whose assets were sold.
“Whereas the Cooperative Bank had been formed under the Cooperative Societies Statute of 1963, another limited liability company under the Companies Act was formed in 1997. Bank of Uganda closed the latter Bank on May 20, 1999; and The process of turning the Bank into a Company had not been completed by the time of closure neither had the “original” Cooperative Bank been deregistered,” the Solicitor General writes.
On behalf of the Minister, the Solicitor General wants to find out, “Which Cooperative Bank did the Bank of Uganda actually sell? If it is the latter (the company), why were the assets of the former (the society) seized and sold instead?”
The letter is copied to the Attorney General, Hon. Minister of Trade, Industry and Cooperatives, Hon. Deputy Attorney General as well as The Permanent Secretary, Ministry of Trade, Industry and Cooperatives and the Deputy Solicitor General.
The Central Bank was to respond to the inquiry by January 23rd 2023. It is not yet clear if the Central Bank has responded.
The 24-year search for justice by cooperators continues
When the Central Bank responds- on record, it will provide clues to exactly what happened during the process to restructure the Cooperative Bank (society) into a bank and why the different unions that owned the society were never allotted shares in the new company that subsequently became the bank and who were the architects and beneficiaries of this artful fraud, 24 years ago.
Immediately after the closure of the bank, in 1999 the Uganda Cooperative Alliance Ltd. sought redress from the Parliament of Uganda.
The then Ayivu County Member of Parliament Dick Nyai moved a resolution that was seconded by Hon Major John Kazoora Parliament and adopted by Parliament, calling upon “Bank of Uganda to reconsider its decision of selling the Co-operative Bank with a view to having it reconstituted”.
The resolution was adopted by Parliament on 3rd August 1999
Parliament also resolved that “Parliament directs the Minister of Finance, Planning and Economic Development to immediately establish a Judicial Commission of Enquiry to examine the circumstances in which the Co-operative and other Banks have been operating, the circumstances under which some of them were subsequently closed, the procedure of the sale of the Co-operative Bank; and report with appropriate recommendations to the said Minister within a period of 3 months.”
Upon the receipt of the report of the said Judicial Commission of Enquiry, the Minister was to cause it to be expeditiously published and presented to Parliament for debate.
The Commission of inquiry was never established and the Central Bank declined to rescind the sale.
Shareholders of the new bank included John Muwanga (then a civil servant in the Ministry of Finance), Joseph Nsereko (a management consultant) and three farmers- Sancho M. Rugatsimbana, William Kalema and Anthony Sekweyama. The seven individuals were allotted shares when the Registrar of Companies registered the second bank on November 20, 1997.
This new bank didn’t however allot shares to 46 primary cooperative societies and 35 unions. Cooperators informed the committee that by 1997, Uganda Cooperative Alliance (UCA) had shares worth UGX2.53 billion in trust, while Banyankole Kweterana Cooperative Union had shares worth UGX220 million among other societies. The other members included Buggaga Maanyi Cooperative Society Ltd, Luwero Triangle Cooperative Society Ltd, Arua Transport Cooperative Society Ltd, Engangainos Cooperative Society Ltd, Lango Cooperative Union Ltd, Bugisu Cooperative Union, Busoga Growers Cooperative Union Ltd, and Uganda Enguli Cooperative Union Ltd.
During the COSASE probe, Hannington Wasswa, the Director of Commercial Banks in Bank of Uganda at the time told the parliament that the Cooperative Bank that was closed by Bank of Uganda had USAID, the Cooperative Movement and individuals as its shareholders.
When the Central Bank finally responds to the Solicitor General, cooperators could finally have closure on the matter, allowing them to chart the next course of action. UCA has previously said they are mulling over taking legal action legal action against government officials or offices involved in the incorporation of the 1997 Cooperative Bank, which acquired the assets and liabilities of their bank. These include the Bank of Uganda, Uganda Registration Services Bureau (URSB), the Registrar of Companies in particular, and the Registrar of Cooperatives as well as the seven individuals of the 1997 bank.