Bloomberg

(Bloomberg) -- The former directors of African Bank Investments Ltd. failed in their duties to protect the company, according to a report compiled by John Myburgh, who led an investigation into the South African lender’s collapse in August 2014.

“The directors of the bank acted in breach of their fiduciary and other duties to the bank” and the business of the bank was conducted “negligently” in some respects, Myburgh said in a summary of findings, which was published on the South African Reserve Bank’s website on Thursday. The board allowed itself to be “dominated” by former Chief Executive Officer Leon Kirkinis and unsecured loans to its furniture retail business Ellerine were reckless, according to the report.

The study, which was commissioned by the central bank in 2014 a month after the provider of unsecured loans collapsed, was submitted in February last year. The central bank asked Myburgh, a lawyer, to probe the company for reckless, negligent or fraudulent behavior, while also investigating management practices and disclosures. African Bank Investments failed as bad debts soared and funding dried up.

‘No Fraud’

“There was no evidence that the business of the bank was conducted with the intent to defraud depositors or other creditors of the bank or any other person or for any other fraudulent purpose,” the report said.

“The commission does not make a finding that all the board members were responsible -- equally or otherwise -- for such conduct. The commission did not have the time nor the capacity to investigate each board member’s individual conduct in the period 2007 to 2014 in order to ascribe individual responsibility.”

Under South Africa’s Companies Act, directors may be held liable for breaches of their fiduciary duties and any losses, damages or costs sustained by the organization.

When African Bank Investments collapsed, shareholders lost all of their money and bondholders were forced to take haircuts. Its remaining viable assets were rescued and started trading last month as African Bank Ltd.

To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net. To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Vernon Wessels, John Viljoen

©2016 Bloomberg L.P.

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