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 and micro, small and medium-sized enterprises (hereinafter — SME), as defined in the Law on Recovery and Resolution of Credit Institutions and Investment Brokerage Firms1.
    • Provisions of the law and the principles of determining the creditor's SME status

      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 creditor falls into the category of micro, small or medium-sized company, an annual financial report shall be used as a data source, and such report shall be obtained from public registers using the data of public persons (authorities); there shall be a confirmation from the tax authorities on the receipt of the report, or an evidence of submitting the report to the tax authorities in electronic form, or an opinion given by a sworn auditor meeting all the criteria listed below:

      • the auditor carries out the commercial activity in the creditor’s country of registration;  
      • the auditor’s duties and responsibility are set forth in effective laws;  
      • the auditor’s activity is supervised by a public person (authority) or a professional association to which the supervision function has been delegated by the government;  

      • the regulations on the prevention of money laundering and terrorism financing are applicable to the auditor, and the auditor’s duties are set forth therein;  
      • the auditor is responsible for the made opinion, inter alia, it is explicitly stated in the auditor’s opinion whether the financial statements contained in the annual report, including consolidated annual report, truly and fairly present the financial situation of the particular client, its profit or losses and the cash flow in accordance with the respective financial reporting principles (standards) and whether the same comply with the normative acts.  

      The information is to be provided on all upstream and downstream enterprises within the chain of owners of capital shares of affiliated enterprises down to the natural person who is the actual beneficiary. Please note that according to Article 3(3) of Annex I of Regulation No 651/2014 ‘enterprises which have one or other of such relationships through a natural person or group of natural persons acting jointly are also considered linked enterprises if they engage in their activity or in part of their activity in the same relevant market or in adjacent markets’.

      Annual financial reports (original or derived documents) shall be accepted in Latvian, Russian, or English only, or notarized translation of the document shall be supplied to the Company otherwise.

      To submit the documents, the creditor or the creditor’s representative should appear in person at the Company’s office during the working hours or should send the original documents or notarized copies of those by post.

      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 Q1 2019.