Bank Liquidation in Seychelles

In recent years, Seychelles has become an attractive destination for international banking and financial services. As a foreigner with personal or business interests in Seychelles, understanding the framework and procedures surrounding bank liquidation is crucial to ensure the safety of your assets in the unlikely event of a bank failure. This article will explore the general framework of bank liquidation in the Seychelles, with a focus on the claim filing process and protection provided by the local banking laws.

General Framework for Bank Liquidation in Seychelles

The Central Bank of Seychelles (CBS) is the primary regulatory authority overseeing the banking sector in Seychelles. The CBS is responsible for ensuring the stability and soundness of the financial system and has the authority to initiate and supervise the liquidation and dissolution of a failed bank.

The Banking Act 2004, as amended in 2014, provides the legal framework for the liquidation of banks in Seychelles. In the absence of a traditional deposit protection scheme, the Act includes provisions to safeguard depositors and other stakeholders while favoring private market solutions to continue the operations of a failed bank. The Act outlines the grounds for bank liquidation, the appointment of a liquidator, and the claims process.

Grounds for Liquidation

Under the Banking Act, the CBS may revoke a bank’s license and initiate liquidation proceedings in the following circumstances:

  • The bank has failed to comply with the provisions of the Act or any other applicable laws and regulations.
  • The bank’s financial condition has deteriorated to a point where it poses a risk to the financial system.
  • The bank’s management has engaged in fraudulent or criminal activities.
  • The bank is unable to meet its obligations to depositors and other creditors.

Appointment of a Liquidator

Upon revocation of a bank’s license, the CBS will appoint a liquidator who is responsible for winding up the bank’s affairs. The liquidator must be an independent, qualified, and experienced professional, such as a chartered accountant or an insolvency practitioner.

The liquidator’s responsibilities include:

  • Taking control of the bank’s assets and safeguarding them.
  • Evaluating the bank’s financial position and preparing a statement of affairs.
  • Identifying and verifying the claims of depositors, creditors, and other stakeholders.
  • Disposing of the bank’s assets and distributing the proceeds according to the priorities set out in the Act.
  • Reporting periodically to the CBS on the progress of the liquidation.

Claims Process during Bank Liquidation

The claims process is a crucial aspect of the bank liquidation procedure in Seychelles. The liquidator will notify depositors, creditors, and other stakeholders of the liquidation and invite them to submit their claims. The notice will be published in local newspapers and on the bank’s website, and it will specify the deadline for submitting claims, which is usually 60 days from the date of publication.

To file a claim, depositors and other stakeholders must submit a written statement to the liquidator, providing the necessary information and supporting documents, such as:

  • Proof of identity (e.g., passport, national ID card)
  • Account details (e.g., account number, type of account, balance)
  • Proof of deposit (e.g., bank statements, deposit certificates)
  • Details of any outstanding loans or other liabilities

The liquidator will review and verify the claims and determine their validity based on the available information and documentation. If the liquidator rejects a claim, the claimant may appeal to the CBS within

30 days from the date of rejection. The CBS will review the appeal and make a final decision on the validity of the claim.

Distribution of Assets and Priorities

Once the liquidator has verified the claims, they will proceed to dispose of the bank’s assets and distribute the proceeds to the claimants in accordance with the priorities set out in the Banking Act. The order of priority is as follows:

  • Liquidation expenses, including the fees and expenses of the liquidator and any legal or professional costs incurred during the liquidation process.
  • Claims of secured creditors, up to the value of their security.
  • Wages and salaries of bank employees for a period not exceeding three months.
  • Depositor claims, prioritized according to the type of account and the amount of the deposit.
  • Unsecured claims of other creditors.
  • Subordinated debt.
  • Shareholder claims.

It is important to note that in the absence of a deposit protection scheme, there is no guarantee that depositors will recover the full amount of their deposits. The recovery rate will depend on the proceeds from the disposal of the bank’s assets and the distribution of those proceeds among the various classes of claimants.

Termination of Liquidation and Dissolution

The liquidation process ends when the liquidator has completed the disposal of the bank’s assets and the distribution of the proceeds to the claimants. The liquidator will then prepare a final report and submit it to the CBS for approval. Upon approval, the CBS will issue a certificate of dissolution, officially terminating the bank’s existence and ending the liquidation process.

Private Market Solutions for Continuation of Operations

While the liquidation of a bank is generally seen as a last resort, the Banking Act encourages private market solutions to resolve the issues faced by a failing bank and continue its operations. Such solutions may include:

  • Mergers and acquisitions: A financially sound bank may acquire the failing bank, assuming its assets and liabilities, and continuing its operations.
  • Bridge bank: A temporary bank, created and capitalized by the CBS, may take over the failing bank’s operations until a suitable buyer is found.
  • Capital injection: Shareholders or other investors may provide additional capital to restore the bank’s financial health and enable it to continue its operations.

Bank liquidation in Seychelles is a structured process aimed at safeguarding the interests of depositors, creditors, and other stakeholders in the event of a bank failure. The Central Bank of Seychelles plays a crucial role in overseeing the liquidation process and ensuring compliance with the Banking Act. As a foreigner with personal or business accounts in Seychelles, understanding the framework and procedures surrounding bank liquidation can help you better protect your assets and navigate the claims process should the need arise.