Current legal status
On 9 October 2008, the Icelandic Financial Supervisory Authority ("FME") appointed a Resolution Committee of Kaupthing Bank hf. (the "Bank"), in accordance with article 5 of Legislative Act No. 125/2008 on the Authority for Treasury Disbursements due to Unusual Financial Market Circumstances etc.
The Bank was granted moratorium on debt payments on 24 November 2008 which lasted until 13 February 2009. Later an extension was granted from 13 February 2009 until 13 November 2009. The Bank requested further extension of the moratorium on 13 August 2010 and a hearing to consider the extension was held at the District Court of Reykjavik.
On 18 August the District Court of Reykjavik granted an extension of the moratorium until 24 November 2010 when the maximum moratorium period ends and the Bank automatically enters into winding-up proceedings. After amendments made to the Act on Financial Undertakings on 22 April 2009 this change in legal status will not affect current operations of the Bank. The ResCom continues to operate under a winding-up proceedings with the same aim as before to maximise the value of assets. That may include waiting for the maturity of assets rather than disposing of them immediately.
Olafur Gardarsson, Attorney to the Supreme Court of Iceland, was appointed as Moratorium Supervisor. He works with the Resolution Committee, which continues to wield the powers of the Board of Directors of Kaupthing in accordance with Icelandic law. His aims are consistent with those of the Resolution Committee, namely, to preserve assets and to optimize the recovery of assets for creditors.
According to the new Act no. 44/2009 amending the Act no. 161/2002 on Financial Undertakings, a Winding-up Committee has been appointed by the District Court of Reykjavík to handle various matters which are beyond the capacity of the Resolution Committee. Both committees are dedicated to working together in the best interests of the Bank and its creditors. The members of the Winding-up Committee are Mr. Olafur Gardarsson, Attorney to the Supreme Court of Iceland and the Bank's Moratorium Supervisor, Ms. Feldis L. Oskarsdottir, Attorney to the District Court and Mr. David B. Gislason, Attorney to the District Court.
The main task of the Winding-up Committee is to handle the claims registration and recognition process whereby it will be formally decided who the creditors of the Bank are as well as the quantum of their claims. The Winding-up Committee will also handle the payment of recognised claims at the appropriate time.
It should be noted the Resolution Committee continues the ordinary business of the Bank in spite of the claims registration process. The Resolution Committee continues to preserve and protect the Bank's interests as necessary.
A short summary of the Icelandic moratorium legislation and the rationale for extending the moratorium can be found in chapter 4 of Kaupthing Creditors' Report which is on the Bank's website.
Arion Bank hf. (formerly New Kaupthing Bank), a separate legal entity which assumed control of the Icelandic operations of Kaupthing on 22 October 2008, is not affected by the moratorium nor is it subject to control by the Resolution Committee or the Winding-up Committee of Kaupthing Bank hf.
Below are links to applicable laws, regulation and decisions:
Ministry of Business Affairs: http://eng.vidskiptaraduneyti.is/laws-and-regulations
Ministry of Justice: http://eng.domsmalaraduneyti.is/laws-and-regulations/english
The Financial Supervisory Authority (FME): http://www.fme.is/?PageID=146
FME, legislation: http://fme.is/?PageID=612
FME, decisions: http://fme.is/?PageID=867
Althingi, the Icelandic parliament: http://www.althingi.is/vefur/upplens.html