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Pursuant to Art. 101(4) of Act no. 161/2002 on Financial Undertakings (cf. also items 3 and 4 of temporary provision V of the same Act) the rules on liquidators of bankrupt estates principally apply to a winding-up board of a financial undertaking, its work and the members of the board. The rules on liquidators are mainly in the Act on Bankruptcy etc. no. 21/1991 (Bankruptcy Act). The following are a few main items on liquidators which moreover equally apply to the winding-up of Landsbanki Íslands hf.:
He who has been appointed liquidator is considered to be the official trustee while performing the role of a liquidator pursuant to Art. 77(3) of the Bankruptcy Act. There is great responsibility entailed in their work and among other things the rules of chapter XIV of the General Penal Code no. 19/1940 on violations in public office apply.
A liquidator must be independent in his work as he is both the guardian of the estate and a court appointed mutual agent for all creditors. This position of the liquidator is reflected in the competency rules of Art. 75 of the Bankruptcy Act and is a part of generally recognised principles and international criteria in this field.
A liquidator must observe the law in his work. The role of a liquidator is bound by law and his primary duty is to guard the interests of the estate in all accounts. The liquidator cannot decide how to perform his work or the affairs of the estate in other regards.
A liquidator shall in general perform all duties required in the winding-up but according to Art. 77(1) of the Bankruptcy Act he is authorised, at the estate’s expense, to seek assistance or services to perform specific tasks under his responsibility. This extends to all operations and daily operations of the estate, as well as any kinds of outsourced assistance or specialist services.
A liquidator is personally liable for damages pursuant to general rules on tort damages, for any damages which he, or those who work under him pursuant to Art. 77(1) and (4) of the Bankruptcy Act, may cause in their course of work.
A liquidator is entitled to a fee for his work which is paid from the assets of the estate, cf. further in Art. 77(2) of the Bankruptcy Act. The same applies to all costs incurred during the winding-up, whatever it is called. These costs are generally considered to be so called administrative claims pursuant to item 2 of Art. 110 of the Bankruptcy Act.
Creditors can direct written criticism on the work of a liquidator to the District Court and a judge can on his own react against a liquidator if required, cf. further Art. 79 and 169 of the Bankruptcy Act.
The aforementioned items are not exhaustive for the legal status during the bank’s winding-up.
The fee of a winding-up board and a resolution committee, while it was working, as stated above, part of the costs which are considered to be administrative claims at winding-up.
In order to avoid any misunderstanding it is prudent to present a few facts on the fee of the winding-up board and other independent specialists and service providers who contribute to the winding-up:
Payments for specialist services are paid pursuant to invoices by hourly fees and a significant part is in the form of VAT. For Icelandic operators a 25.5% VAT is calculated on top of the fee. This means that roughly 20% of the amount of invoices for specialist services of Icelandic parties, including the liquidator, goes to the state treasury in the form of VAT.
Payments for specialist services are not wages under any circumstances but rather income of the companies for which the relevant specialists work. This income must, as other income of the relevant companies, support all operational expenses and costs, taxes and obligations, place of work, insurance and other costs, whatever they may be called.
The amount of the hourly fee is based on the rate list of the companies for which the relevant specialists work, whether foreign or domestic. The amount of the hourly fee in consistent with that which is customary for similar specialists doing similar work in each country.
Domestic specialist consultation and services is generally less expensive than foreign. For that reason all effort is made to buy domestic specialist services when possible but some projects do require the participation of foreign specialists.
The tasks which must be performed are both extensive and complicated. They must be performed under all circumstances and the interests of the estate cannot be postponed or wasted. Thus the amount outsourced work hours will be considerable, not least with the bank’s senior management.
When covering costs and fees the scope of the interests at stake must be kept in mind and it is also unavoidable to look to the significant gains made in the form of increased reclaims and the generally improved financial status of the bank.
The winding-up of Landsbanki Íslands hf. is an extensive and multinational project. Assets and other rights of the bank which must be collected, disposed, investigated or spent as required are to be found all over the world. In addition to the geographical scope then it is a fact that the bank’s asset portfolio, its composition, size of its operation and nature before the collapse are such that it requires considerable work of domestic and foreign employees of the bank and other specialists. Thus the project is both time consuming, complicated, extensive and concerns interests counted in the thousands of billions.
About 12 thousand claims were lodged within the grace period for lodging claims and their total amount is valued at ISK 6,500 billion. There is great work entailed in making decisions on claims and a great number of claims are disputed, especially large claims for deposits of all sorts lodged with priority. It is very time consuming and extensive work to process the claims and resolve the disputes, occasionally by trying a case before the courts.
The total costs of the bank’s operations and winding-up for 2009 and 2010 is about 13.45% of the increase of the value of assets and other reclaims which have taken place simultaneously based on a fixed exchange rate of April 2009 to December 2010. Thereof the cost of the bank’s senior management, resolution committee and winding-up board, is about 0.42% of the increase. Considering the exchange rate effect of the Icelandic Krona on the published value of assets between periods the same total costs amount to 28.5% and the costs of the senior management 0.89% of the calculated value increase based on the estimated increased value of assets on December 31st 2010.
The total costs of the bank’s operations and winding-up for 2009 and 2010 is 0.375% of the combined recorded balance sheet (assets and debts). Thereof the costs of its senior management, resolution committee and winding-up board, are only 0.0117% of the recorded balance sheet. The senior management’s share of the total costs of the bank’s operations is about 3.12%. All other winding-up costs, including outsourced specialist services of domestic and foreign specialists, amounts to 96.88% of the total costs of the years in question.