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The executors of the late Bulaimu Muwanga Kibirige’s estate have filed a petition in the Commercial Court to stop bankruptcy proceedings against BMK Uganda Limited. Yako Bank Uganda Ltd had requested the court to declare BMK Uganda Ltd bankrupt for not paying a debt of 1.5 billion Ugandan shillings.
On Tuesday, May 28, 2024, Justice Cornelia Sabiiti Kakooza was unable to deliver a ruling on the case because the ruling was not ready.
In an affidavit, Sarah Mushabe, a bank manager, stated that BMK owes the bank 1.5 billion shillings, which includes the principal loan amount and interest of 2% per month. She explained that on March 11, 2022, BMK obtained a loan of 1.4 billion shillings. An agreement was signed, and the money was disbursed to BMK’s accounts in installments.
According to the loan agreement, BMK was required to pay interest of 2% per month and repay the loan within six months. However, Mushabe noted that BMK only managed to pay 92.9 million shillings, leaving a significant balance unpaid.
“The outstanding debt has now grown to 1.5 billion shillings, which remains unpaid despite numerous demands and reminders,” she said.
Mushabe stated that the bank served a statutory demand on BMK on September 19, 2022, but BMK failed to pay the debt. This led the bank to start bankruptcy proceedings against BMK. A statutory demand is a formal demand for debt served on a creditor.
Mushabe also pointed out that the properties pledged as security are burdened with charges from other creditors, including banks, making it impossible to secure even partial payment of the debt.
In response to the situation, the bank wants the court to wind up BMK and order the liquidation of the company. Liquidation involves selling a company’s assets, ceasing its operations, and deregistering it with the Uganda Registration Services Bureau.
In defense, the directors of BMK have asked the court to dismiss the bank’s insolvency petition. They argue that the petition was started prematurely because the bank failed to serve a statutory demand to BMK, as required by section 4(d) of the Insolvency Act, 2011, and Regulation 5(1) of the Insolvency Regulations, 2013.
The directors of BMK Uganda Ltd are Harunah Kalule Kibirige, Jamiel Kasujja Muwanga, Ali Kibirige Muwanga, and Haruna Kalule Muwanga, who is also the company director.
Ali Kibirige Muwanga swore an affidavit stating that under Ugandan insolvency laws, the bank was required to serve BMK with a statutory demand for compliance or to set it aside before starting insolvency proceedings based on that demand.
“BMK was never served with the statutory demand at its registered offices or place of business. The scribbled signature on the statutory demand, heavily relied on by the bank, does not show the date on which it was served, and the person who supposedly received it on behalf of BMK is not identified,” argued Ali Kibirige Muwanga.
He added that only BMK’s directors, secretary, or principal officers are authorized to receive official documents on behalf of the company, unless the company has given written permission for another person to do so.
Ali Kibirige Muwanga mentioned that the company only became aware of the statutory demand after the insolvency proceedings were filed against it.