The Lithuanian Court of Appeal made a decision favourable for our client – the bankrupt credit union Taupkasė (the bankruptcy administrator was Klaipėdos Administratorių Biuras) – in a case over recognising a credit union share as a deposit.
Although the court of the first instance ruled in favour of the claimant – a credit union share owner – the Lithuanian Court of Appeal overturned this decision and issued a new ruling, particularly important in the light of the increasingly frequent disputes between credit union share owners and bankrupt credit unions.
Credit union shares are not considered an insured deposit
In this case, the credit union share owner was seeking for the court to recognise additionally acquired credit union shares as a deposit agreement. According to the Law on Insurance of Deposits and Liabilities to Investors, deposits are insurable and insolvency proceedings are considered an insured event. This means that normally when a credit union files for bankruptcy, deposits up to EUR 100,000 are paid to depositors.
Under national law and case law, shares are not insured because in essence they are not deposits but securities. Therefore, in the event of the bankruptcy of the credit union, the value of the share is not returned to the shareholder. For these reasons, the claimant (the credit union share owner) sought for the credit union shares to be recognised as a deposit, in which case he would have been paid the full value of the share.
Court decision to define the liabilities of credit unions and their customers
This court decision is very important because, according to the Bank of Lithuania, credit unions are becoming increasingly popular in Lithuania as an alternative to banks. It is therefore very important to define the responsibilities that apply to both credit unions and their customers in the event of bankruptcy.
Our team representing the client
The client was represented by counsel Kazimieras Karpickis and associate Greta Kubiliūnaitė.