Financial institutions may fail for a variety of reasons. Account holders often are unaware of the timelines of preparation and the procedures to file a claim. International business people who use an offshore company are mostly left in the dark where it comes to asset and fund recovery. A detailed description of the pitfalls of financial institution failure can be found in our article on the introduction to bank liquidation.
An active company is needed to file a claim to the estate of a bank in liquidation because the company must have legal capacity to make claims in the liquidation proceedings. The company must be in good standing in the jurisdiction of incorporation in order to be accepted by the liquidator. Furthermore, the company must have a clear title to the assets and funds held in the offshore bank accounts.
In order to reactivate or reinstate the offshore company, first, the company must be in compliance with all local laws and regulations. Specifically, the company must have filed the necessary annual reports and paid all applicable taxes, fees, and other obligations. Second, the company must be registered with the applicable government agency. Lastly, the company must have a registered office address in the jurisdiction of incorporation. A proof of debt submitted by the claimant provides the liquidator with all the necessary information to establish claim eligibility.
To submit a proof of debt to the liquidator, the client must prepare a proof of debt document and attach all relevant supporting documents. This document should include the name of the company, the address of the company, the name of the account holder, the legal basis for the debt, the amount of the debt, the date from which the debt has been incurred, and any other relevant information.
In a creditor hierarchy, bank account holders typically rank lower than other creditors such as collateralized bondholders and secured creditors. This means that in the event of liquidation, these creditors have priority over bank account holders when it comes to recovering assets and funds. Bank account holders may be able to recover some amount of their funds, depending on the amount of assets and funds available in the estate of the liquidating bank