Order of Satisfying Claims of Creditors According to Law

Riga, Latvia, April 13, 2018, 11:00

On 5th March 2018, ABLV Bank, AS submitted bank’s application draft about voluntary liquidation to the Financial and Capital Market Commission (FCMC). The voluntary liquidation is aimed at satisfying all claims of clients and other creditors in full. On 12 June 2018, FCMC approved the decision of the shareholders’ meeting of the Bank about voluntary liquidation, which shall be deemed the day of the commencement of the voluntary liquidation of the Bank.

Within three days after the liquidation process is started, all creditors fitting creditor’s status in accordance with the bank’s accounting data will receive an official notification about the commencement of liquidation. In this announcement, creditors will be invited to submit claims within three months, indicating the grounds for claim and its amount, as well as providing updated identification documents.

After the term for submitting applications is over, the liquidators will compile a list of creditors, determining the procedure of settlement with the creditors in accordance with the provisions of Sections 191 to 195 of Credit Institutions Law.

According to the abovementioned requirements, the claims of the creditors will be satisfied as follows:

  1. Claimants with amounts up to EUR 100,000.
    Depositors, who under the provisions of law are eligible for guaranteed compensation from the Deposit Guarantee Fund, and who have lost their right of claim to ABLV Bank, AS in liquidation regarding that amount.
    Disbursement of guaranteed compensations was started on 3rd March 2018, and the bank has already transferred more than EUR 480 million to Deposit Guarantee Fund. These claims (first priority claims) are being disbursed by Citadele banka, AS and one will not need to apply for them during the three-month period after the commencement of voluntary liquidation of ABLV Bank.
  2. Depositors, whose deposits (principal amounts) exceed the guaranteed compensation received from the Deposit Guarantee Fund, i.e., after the compensation of first order (the guaranteed compensation) in the amount up to EUR 100 000 is received in Citadele banka, AS, and who still have positive balance in the accounts of ABLV Bank, AS in liquidation.
    Please note that this priority group includes individuals, micro, small and medium-sized enterprises in accordance with the provisions of Law on Recovery and Resolution of Credit Institutions and Investment Brokerage Firms1.
    • Summary of the law

      1 The said law provides that micro, small and medium-sized enterprise is a commercial company in accordance with the criterion used in Annex I of Commission Regulation (EU) No. 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty Text with EEA relevance regarding annual turnover arising from the company’s annual report (additional information here: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32014R0651&from=EN)

      Therefore in order to determine whether the creditors falls into the category of micro, small or medium-sized company, an annual report with a note about being submitted to the appropriate state institution shall be used as a data source:

      1. Enterprises registered in Latvia – annual report prepared in accordance with the applicable regulatory enactments;
      2. Enterprises registered in EEA and Organisation for Economic Cooperation and Development (OECD) member-states – annual reports prepared in accordance with the applicable regulatory enactments applicable in the appropriate country;
      3. Enterprises registered beyond EEA and OECD – annual report that is prepared according to the requirements of the jurisdiction in which the document should be submitted to the appropriate state authority, and contains a notification of submission of the annual report to this appropriate state authority.

      In order to prove that they belong to the category of micro-sized enterprises, enterprises registered in Latvia may use information from the state institutions about that the particular enterprise is registered as micro-sized company. If the creditor does not match the said requirements, then their claim will be satisfied along with other creditors (7th priority in the sequence).

  3. Possible claims of employees of ABLV Bank, AS in liquidation regarding remunerations, unpaid leave allowances, severance pays.
  4. Tax payments and other payments (debts) to state or municipality budgets, as well as transit credits.
  5. Debts to creditors accrued when the credit institution accepted for execution but did not execute client’s payment order about money transfer to state or municipality budget accounts.
  6. State claims regarding repayment of state guaranteed loans.
  7. Other creditors – principal amounts (e.g. depositors not falling in the second order; straight bonds, claims not related to receiving financial services (such as arising from a contract or invoice)).
  8. Interest payments arising from claims submitted in the set three-month period.
  9. Creditors who applied after the set three-month period, including interest payments for such claims.
  10. Claims about funds lent by creditors to the credit institution for a certain term upon a condition that premature redemption of funds can be requested only upon liquidation of the credit institution (subordinated liabilities).

Obligations against shareholders shall be covered after full settlement of all orders of creditors’ claims as provided by Section 195 of Credit Institutions Law.

The voluntary liquidation plan submitted to the FCMC implies covering obligations through quarterly payments by disbursing currently available funds partly, but in equal shares to cover claims of all creditors of the particular order. The draft plan provides that the first payments for covering claims of the creditors will be disbursed in Q4 2018.