Liquidator appointed for People’s Leasing | The Daily Star
12:00 AM, July 15, 2019 / LAST MODIFIED: 12:50 AM, July 15, 2019

Liquidator appointed for People’s Leasing

The High Court yesterday gave the go-ahead to the central bank to appoint a liquidator for People’s Leasing and Financial Services (PLFS), a non-bank financial institution (NBFI).

The bench of Justice Muhammad Khurshid Alam Sarkar also ordered the Bangladesh Bank to freeze the accounts of those who were in PLFS’s board until 2015, Tanjib-ul Alam, a lawyer of the central bank, told The Daily Star.

Md Asaduzzaman Khan, deputy general manager of the BB’s financial institutions department, has been appointed as the liquidator.

“The High Court has ordered the liquidator to submit his report to the court,” Alam said.

Asked whether a deadline has been given for submission of the report, the lawyer said: “Liquidation is a complex process and this is the first ever case in the country. So, the court did not set any specific timeframe for the liquidator.”

Sami Huda, managing director of PLFS, told The Daily Star that he has heard about the court’s order to appoint a liquidator.

Earlier on June 27, the finance ministry instructed the central bank to shutter the NBFI for its failure to improve its conditions, in a first for Bangladesh’s financial sector.

Previously, two banks -- Bank of Credit and Commerce International and Oriental -- that were on their last legs were restructured but not liquidated.

Liquidation of PLFS means closing its operations permanently and the BB with court’s permission will take actions to settle liabilities by selling off its assets.

The NBFI has failed to repay the depositors’ money despite maturity of the funds, found a BB investigating. Default loans and net losses have recently escalated as well.

The problems of PLFS began in earnest in 2013-14, when some of its directors made off with more than Tk 1,000 crore by way of submitting fake documents, according to a central bank inspection report then.

In 2015, the central bank had removed five directors for their involvement in the financial scandal.

But it was not enough. Since then the NBFI has been on a downward spiral. For instance, in the first nine months of last year PLFS’s operating expenses stood at Tk 22.48 crore against the operating income of Tk 2.05 crore. PLFS sometimes failed to pay the wages to its employees because of the severe liquidity crunch, some officials informed The Daily Star upon condition of anonymity.

Meanwhile, the Dhaka Stock Exchange yesterday suspended trading of PLFS in line with the BB’s liquidation decision. As of May 31, retail investors held 68 percent of the NBFI’s stock and they stand to lose about Tk 193.52 crore -- and institutional investors Tk 25.75 crore -- if the liquidation goes through.

Some 15 banks and NBFIs have Tk 850 crore stuck in PLFS. In the event of liquidation external creditors are paid off first and then the depositors, debenture holders and preferential shareholders in that sequence, according to Mohammad Mohiuddin Ahmed, executive director of Financial Reports Monitoring Division at Financial Reporting Council. But given the dire position of PLFS, there is unlikely to be much to salvage from liquidation.

The general shareholders’ turn comes in the end, once all parties have been paid off. They get a sum if the net asset value per share is positive.

But in PLFS’s case its net asset value or NAV is Tk 67.66 in the negative as of March 31. “There is no possibility of the shareholders getting anything as PLFS’s NAV per share is so negative,” Ahmed said. 


Stay updated on the go with The Daily Star Android & iOS News App. Click here to download it for your device.

Type START <space> BR and send SMS it to 22222

Type START <space> BR and send SMS it to 2222

Type START <space> BR and send SMS it to 2225

Leave your comments

Top News

Top News