Tailor-made solutions for victimized creditors in bank failure and investment fraud
When a bank closes its doors due to capital shortages or regulatory intervention, various stakeholders become part of prolonged administrative procedures to dismantle the bank, monetize the assets and distribute the available liquidity to the creditors. Liquidators are appointed by the court upon approval of the liquidation, and act on behalf and in the best interest of the company. The equitable and impartial duties of a liquidator are to take control of the properties of the bank, while protecting its assets. Creditors need to submit their proof of debt and ownership to the liquidator.
Once the liquidator realises the assets of the bank, distribution can commence. Intangible assets have a longer horizon and therefore liquidity is often paid in tranches to creditors by following the prescribed creditor hierarchy. The order of payment in a liquidation is limitative. This means that secured creditors and legal expenses have a priority position. Once payments to these preferential creditors are fully covered, other creditors can be paid in order of relevance. Debenture holders and creditors with floating charges are prioritized over unsecured and ordinary creditors. Unsecured and ordinary creditors contain traditional bank deposits above the insured amount, suppliers and other service providers. If a liquidation provides for an excess and the assets exceed the liabilities, members and shareholders are paid this surplus.
Bank depositors and other creditors often assume their deposit is secured and therefore guaranteed. Depositor protection is limited to an insured amount that can vary per jurisdiction. The surplus on bank accounts is considered risk capital. Few bank depositors are aware of this subordinated position of their bank deposit and feel defeated and lost after the liquidation. The main problem in bank liquidations is that actions cannot be reversed. This means that when a payment to creditors is made, there is no recourse and those who missed filing their claim further limit their recovery potential. The final liquidation payment ends the relationship of the creditor with the bank by discharge. A civil claim of liability against the wrongdoers requires causality between the closure of the bank and the loss of money. Not only is this difficult to prove, it is also a lengthy and costly procedure with uncertain results. Hence the reason to avoid mistakes during the liquidation of the bank.
This website aims to provide victims of bank failure, where the bank is to be liquidated, with the information they need to understand the process and prepare for a smooth transition. The realization that there is only one chance in a liquidation to recover assets paves the path for the right measures. Legal Floris LLC groups a large number of victims in bank failures to allow for a strong position in the pre-liquidation, settlement and liquidation stage of the bank.
A bank liquidation process is not always easy to grasp. This website provides novice creditors with the administrative and legal backup to prepare for a bank liquidation and explains how to prevent a similar event from happening in the future.