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.
At a creditors’ meeting on 20 October 2009, creditors where provided with an update on key events and activities since the last creditors’ meeting in February. Mr. Olafur Gardarsson, Moratorium Supervisor and member of the Winding-up Committee, presented his and the Resolution Committee’s intention to make an application to extend the moratorium by nine months. On 19 November, at the request of Kaupthing Bank’s Resolution Committee, the District Court of Reykjavík granted Kaupthing Bank an extension of the moratorium on debt payments until 13 August 2010.
The moratorium gives the Bank the opportunity to continue discussions with the Bank's creditors with the aim of maximizing recovery for all stakeholders. An Informal Creditors' Committee ("ICC") has been formed. The moratorium will assist in making the Bank's ongoing co-operation with the ICC more effective. The Resolution Committee communicates with the ICC regularly and abbreviated versions of the presentations from meetings with them are available on this website in the ICC meetings section.
The moratorium is not a part of bankruptcy proceedings. The moratorium is a procedure under Icelandic law which has provided the Bank with appropriate protection from legal actions, such as the freezing of assets, and ensures that it is able to maintain a banking license sufficient to support its assets. Applying for the moratorium was, in the opinion of the Resolution Committee, a necessary step to ensure that all creditors of Kaupthing are treated fairly and appropriately by protecting the Bank’s assets in accordance with Icelandic law and EU directives.
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 chapters 6 and 8 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