Information to investors regarding the situation of AB bank SNORAS
The Lithuanian Securities Commission (LSC) hereby presents the updated information to investors in regards to the situation concerning AB bank SNORAS. The information shall be accordingly updated in view of any new developments.
The Bank of Lithuania revoked the licence of AB bankas SNORAS and will apply to court regarding bankruptcy (Please click on the link to review full information).
The communication below constitutes the LSC's opinion only as currently the LSC does not have at its disposal the complete information regarding AB bank SNORAS, therefore the opinion of the LSC may be accordingly affected by any decisions taken by the Bank of Lithuania, Lithuanian law enforcement institutions, the temporary administrator of AB bank SNORAS or other authorities.
To minority shareholders of AB bank SNORAS:
As of 17 November 2011, trading in shares of AB bank SNORAS at the NASDAQ OMX Vilnius stock exchange and settlement and clearing operations at the Central Securities Depository of Lithuania have been suspended. As of coming into effect of Resolution of the Government of 16 November 2011 (the publication of the Resolution in mass media) to take over shares of AB bank SNORAS for public needs all securities account managers were obliged to immediately make appropriate entries in securities accounts on the transfer of the ownership of 100 % of shares of AB bank SNORAS to the State.
According to Article 8(1) and (2) of the Law on Financial Sustainability of the Republic of Lithuania in the event shares of a bank are taken over by the Government, for public needs further the share price shall be determined by the Government having regard to proposals of the audit company and/or the property valuation entity. The costs related to the valuation of the shares shall be borne by the State. When setting the price of the Bank’s shares, the measures to enhance financial stability already applied or likely to be applied to the bank under the Law on Financial Sustainability shall not be taken into account. The Bank must provide the persons setting the price of the Bank’s shares with the data required for the setting of the price of the Bank’s shares. Upon setting the price of the Bank’s shares, a written notice shall be given to former shareholders of the Bank in accordance with Article 8(5) of the Law on Financial Sustainability (a notice by registered mail to each former shareholder not later than within 5 days).
The same Law also provides that along with payment of the established price of shares for the shares being taken over, the former shareholders of a Bank shall also be paid an interest in the amount specified in paragraph 1 of Article 6.210 of the Civil Code (the annual interest of 5 %) from the price of shares payable to them for the shares being taken over for a period from the entry into force of the Resolution on the taking over of the shares until the date of the settlement with the former shareholders. Settlement with the former shareholders of the Bank who fail to notify of the accounts opened (held) with credit institutions shall be performed in accordance with the procedure laid down in Article 6.56 of the Civil Code.
To subscribers of registered ordinary shares of AB bank SNORAS issued according to the Resolution of shareholders of the Bank of 21 December 2010:
According to Article 41(5) of the Law on Banks of the Republic of Lithuania a decision of the general meeting of a Bank’s shareholders on the increase of the authorised capital, with the exception of a decision on the issuance of convertible debentures, shall be deemed to be void where amended Articles of Association of the Bank have not been submitted to the Register of Legal Entities within 12 months of the general meeting of the shareholders which had passed the decision on the increase of the authorised capital.
The authorised capital of a Bank shall be formed, increased and reduced according to the procedure set forth by the Republic of Lithuania Law on Companies, except where this Law provides otherwise (Article 41(1) of the Law on Banks). According to Article 49(7) of the Law on Companies of the Republic of Lithuania where the authorised capital of the Bank is not increased within the established term (in this case within 12 months) the contributions for the shares subscribed for must be immediately returned without any deductions at the written request of the subscriber. In this case all funds shall be refunded to subscribers to shares of the Bank. Essentially the same clause is included in the Terms of the issue of registered ordinary shares according to Resolution of 21 December 2010 of AB bank SNORAS – the funds for the shares subscribed shall be transferred to the accumulative account specified in the Share Subscription Agreement – the account at AB bank Finasta currently holding the shares. Where the amendments to the Articles of Association of the Bank have not been submitted to registration to the Register of Legal Entities in the manner specified by laws by 21 December 2011 all contributions shall be returned to the banks accounts designated by investors.
On 22 November 2011, the Bank of Lithuania refused to authorise the registration of the amendments to the Articles of Association of AB bank SNORAS regarding the registration of the new issue – more information available in the website of the Bank of Lithuania www.lb.lt (click the link to open the text of the Resolution).
As provided for in the Resolution of the Bank of Lithuania, persons who have paid for shares of the Bank became entitled to require AB bank SNORAS to return the funds paid for the subscribed shares. The claim to return the funds should be submitted to AB bank SNORAS (to its temporary administrator).
It should be noted that the funds paid for shares of the Bank are accumulated in the credit institution authorised to provide financial services in the Republic of Lithuania opened specifically for the purpose (in Finasta bank in this case). The Bank shall have the right to use the funds only provided the Bank is incorporated or upon the registration of the relevant amendments to the Articles of Association related to the increase of the authorised capital of the Bank (Article 41(8) of the Law on Banks. This means that the Bank shall have no right to use the funds accumulated until the amendments to its Articles of Association regarding the increase of the authorised capital are properly registered.
However, according to Article 14(3) of the Law on Financial Sustainability where the State acquires the shares of a bank or takes them over for public needs, provisions of paragraphs 2-8 of Article 5, paragraph 1 of Article 23, Articles 24, 25 and paragraphs 4 and 8 of Article 41 of the Law on Banks shall not apply. It follows that the in the actual situation, after AB bank SNORAS has been taken over by the State for public needs, the Bank (in this case the temporary administrator) has a right to use the funds accumulated in the account of the credit institution.
Please note that no legal acts define the procedure for the use of the funds by a nationalised bank, i.e., whether or not the Bank is obliged to repay the funds to share subscribers disregarding the interests of other creditors; therefore the issue concerning the return of the funds paid for the shares to investors, along with other issues regarding claims of the Bank's creditors are expected to be dealt with having regard to the specific situation of the Bank and the restrictions imposed upon its operations and the appointment of the temporary administrator.
In the opinion of the Commission the decision regarding the mode or the procedure for returning of the funds to share subscribers should be taken by the temporary administrator; furthermore, the decision concerning the return of the funds may be affected by decisions of the relevant law enforcement authorities.
Holders of debentures of AB bank SNORAS:
As provided in Article 55(1) of the Law on Companies a debenture of a company shall be a fixed-term non equity security under which the company which is the issuer of the debenture becomes the debtor of the debenture holder and assumes obligations for the benefit of the debenture holder. The obligations concerned shall be specified in the decision to issue the debentures and in the debenture subscription agreement. Debenture holders shall have the same rights as other creditors of a company (Article 55(5) of the Law on Companies). This means that debenture holders are considered to be creditors and all obligations in respect of them shall be discharged in the same manner as to other creditors of the company (the Bank in this case). The operations of AB bank SNORAS have been suspended and the Bank has been subjected to temporary injunction measures.
According to Article 76(7) of the Law on Banks As of the day of submission to a Bank of a decision on the announcement of a moratorium on activities of the Bank and the appointment of the temporary administrator of the Bank the Bank shall be prohibited from performing payment obligations or transfer assets of the bank, where these obligations result from the transactions concluded or other legal facts arising prior to the announcement of the moratorium on the activities of the Bank, except for the payments necessary to ensure activities of the Bank during the moratorium. During the moratorium on the activities of the Bank, penalties for nonfeasance or misfeasance of an obligation of the bank shall not be calculated or paid. Interest on the Bank’s obligations shall be calculated, but shall be paid only after the expiry of the time limit for the moratorium on the activities of the Bank. Also the discharge of all obligations arising from the agreements on debenture subscription agreement shall be suspended.
In this particular case provisions of the Law on Insurance of Deposits and Liabilities of the Republic of Lithuania also are relevant. According to this Law all obligations to investors (i.e., funds and / or securities transferred by an investor and owned thereby) shall be insured. Investors shall be entitled to insurance benefits only in the event where the policyholder has transferred the funds and/or securities owned by the investor without the a consent of the investor(in most cases this could constitute dishonest conduct, i.e., misappropriation of the funds or securities owned by the investor, etc.).
Therefore, should the Bank transfer and / or use without a consent of the investor the investor shall be entitled to 100 % of the amount invested provided it did not exceed EUR 3,000, and 90 % of the amount invested where the amount did not exceed 22,000 EUR (Article 2(12) and Article 9(3)(5) of the Law).
It should be noted that the debentures are not insured (contrary to deposits), therefore, should the Bank be unable to redeem the debentures, in an extreme scenario investors may lose the entire amount invested into debentures.
The duty to defend the rights of debenture holders rests with the securities trading intermediary with which the Bank has signed the agreement. The securities trading intermediary is obliged to defend the rights and legitimate interests of debenture holders in the same way as it would defend its rights and legitimate interests being a holder of all debentures of the issue. Also intermediaries of public trading in securities shall have a right to apply to court with a view to protecting the rights of debenture holders (Article 55(6) of the Law on Companies). We hereby notify the debenture holder that AB bank SNORAS has concluded the agreement with UAB FM DV INVEST (address: Konstitucijos pr. 23B-609, Vilnius, tel.: 8 5 273 5806; mobile tel.: 8 685 70 545.
To buyers and sellers of shares of AB bank SNORAS on 14-16 November (regulated market):
Having regard to the fact that the settlement term for the deals concluded on 14 November (Monday), i.e., the settlement is effected on the third day following the conclusion of the deal, also in accordance with Article 8 of the Law on Financial Sustainability providing that the title to the shares taken over is transferred to the State upon the coming into effect of the Resolution of the Government to take over the shares for public needs, and account managers, upon the receipt of the effective Resolution of the Government shall forthwith make the appropriate entries in securities accounts on the change of the ownership, it should be concluded on the evening of 16 November (Wednesday evening) the Government acquired the title to all (100 %) of the shares of AB bank SNORAS; therefore where a deal was not concluded by 16 November 2011 (Wednesday evening) the Government is to be considered to have taken over the shares from sellers of shares of AB bank SNORAS, as according to Article 64 of the Law on Financial Sustainability the buyers have not yet acquired the right of ownership in respect the shares of AB bank SNORAS, as no appropriate entries have been made in their personal accounts by the time the State acquired the right of ownership in respect of 100 % of shares of AB bank SNORAS.
Market Services Department
tel. +370 5 272 14 06
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