Windhoek-Judge Hannelie Prinsloo will make her ruling today at 09h00 on the application by the Bank of Namibia (BoN) to provisionally wind up the SME Bank after hearing arguments on the merits of the application during marathon proceedings yesterday.
She heard the arguments after she dismissed an attempt by local lawyer Sisa Namandje to have the application struck from the roll yesterday in the Windhoek High Court, and ruled the matter “very urgent”.
Namandje, representing respondents in the case, questioned the urgency of the application after he failed to convince the judge that BoN acted unprocedurally when it filed the application.
In both rulings Judge Prinsloo did not give full reasons, but said reasons would be made available.
On the matter of urgency, the judge said the issue was of “national importance and thus very, very urgent”. As a matter of fact, the judge said, matters of a commercial nature are inherently urgent where creditors need protection.
While she said the claim of irreparable harm is not always a requisite in urgent applications, the SME Bank is a financial institution which is part of the backbone of the economy. According to the judge, she cannot find that BoN had any fault in the delay to bring the winding up application before court and there is evidence that BoN made extensive efforts to engage the various stakeholders.
In essence, she quoted senior counsel Andrew Corbett who said the BoN had the obligation to step in, as financial assets can be dissipated more speedily than fixed assets. Creditors can withdraw their funds as quickly as possible leaving the banking institution vulnerable with no redress in due course.
According to Judge Prinsloo, the whole banking sector can suffer as it can be taken if one bank is in trouble others might be too. She granted the applicant urgency and proceeded to hear the merits of the case.
Corbett argued that the SME Bank is factually and commercially insolvent and it is incumbent on the court to order the provisional winding up of the bank to preserve assets. Furthermore, Corbett said, the money the previous management of the bank misappropriated through dubious investments in South Africa is gone and seemingly irretrievable.
He said the economy depends on the banking system and if the regulator, BoN, fails to act when it notices failures on the part of a bank it will have huge ramifications for the country.
He said BoN had no choice to interfere in the running of the SME Bank as the issue received huge public interest.
He further contended that the liquidity of the bank is of such a nature that it will not be able to honour its obligations. According to him, the bank currently only has N$3.8 million in cash reserves from N$54 million in June, a drastic decline. He said there is a justifiable lack of confidence in the management of the bank, adding that BoN made out a case for the provincial winding up of the SME Bank with costs as the court see fit.
On his part Namandje argued the applicants made a fatal mistake when they did not call for a shareholders meeting when they realised the SME Bank needed recapitalisation.
According to him, they did not give the investments time to mature and be returned to the bank to bolster its equity level.
In fact, Namandje argued the action of BoN created the situation. They pushed the panic buttons, Namandje said, which resulted in the current situation. He did not deny the bank is insolvent, but argued that with time the situation could have been rectified.