Банкеръ Weekly

Briefs

SMC GETS READY TO INVESTIGATE MUNICIPAL BANK SCAM

A short lull followed the first court clash regarding the secret transfer of Municipal Bank shares. However, it will last till February 10 at the latest when the regular session of the Sofia Municipal Council (SMC) is expected to approve a legal assignment for a thorough research of the facts and circumstances resulting in the changed structure of Municipal Bank's capital. According to people acquainted with the project for that assignment, there will be three accents in it. The first one will be to investigate if the already dismissed heads of the three municipal companies - Water Supply and Sewage, Roads and Facilities, and Sofinvest - that sold their stakes in Municipal Bank have committed a crime. More precisely, it will be checked if their actions can be regarded as breach of trust under the Penal Code. If it turns out that the managers of the three firms can be sanctioned as per the Penal Code provisions, they are threatened by a three to five year sentence. The assignment will also include an inspection of the management contracts of these companies' heads in order to establish if under the clauses in them they have not inflicted injuries to the Sofia Municipality by selling their shares in the bank. In that sense, the possibilities for taking them to task will be considered. The second aspect of the assignment concerns the members of Municipal Bank's supervisory and management boards. It will be ascertained if they have violated their obligations as per article 237 of the Commercial Code which stipulates that the members of supervisory and management boards should fulfil their obligations with the care of good traders, to the interest of the company and all shareholders. It will be analysed if in their work Municipal Bank's managers have not violated its effective statutes and article 289 of the Commercial Code, under which provisions the execution of a right on the basis of a trade deal is inadmissible if it is done solely with the purpose to injure the interests of another party. The assignment plans to check also if there are legal grounds for the Sofia Municipal Council to lay a claim against the managers of the bank's management and supervisory boards under article 240 of the Commercial Code. The third aspect of the assignment concerns the fact that the transfer of bank stakes from three municipal companies to the private Sofia Pharmacies, Sofstroy, Sredets Public Utilities, and Equipment Assembly and Fitting Company, may be declared void by court. Inquiries will be made to establish whether the Sofia Municipal Council is able to profit by art. 71 of the Commercial Code. The article stipulates that each member of the company may, through a claim filed to the regional court (in this case, the Sofia City Court), defend the right of membership and the various membership rights (rights due to shareholding) when they are violated by company bodies. If it turns out that the Sofia Municipal Council is allowed to file claims in court under this article, municipal officers will insist that measures be imposed on the shares transferred from the three municipal companies - therefore, it will not be possible to use these shares to vote at the bank's general meetings until the court makes a decision on the council claims.All hypotheses described so far will have to be thoroughly examined by an external legal consultant who will be appointed by the Sofia Municipal Council. The legal office that gets the task will have to recommend the municipality specific steps that will make it regain full control over Municipal Bank. The municipality lost it when the three municipal companies transferred their stakes in the bank's capital to four private companies. Before that deal, the Sofia Municipal Council and the municipal companies controlled 80.5% of the bank's capital. After the transaction, their stake was reduced to 71 per cent. On the other hand, the total shareholders' stake held by the private companies grew up from 16 to over 25 per cent. According to the acting statute of the bank, the general meeting of the bank needs their consent in order to take any important decision.

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