Who Decides When a Financial Institution is Dead?

GN Savings and Loans Ltd

The GN Savings and Loans Ltd.’s license case provokes a fundamental question of whether the insolvency of a financial institution belongs to the technical expertise of a regulator or the legal authority of a court. A careful re-reading of the judgment reveals that the Court of Appeal never independently conducted any technical financial evaluation. What it actually did was entirely within the domain of legal reasoning and procedural assessment.

The Bank of Ghana has primary statutory power to determine insolvency for regulatory action. The courts only step in to check whether that decision is lawful, reasonable, supported by evidence or procedurally fair. So, the court is not a financial appraiser, it is a legal review authority.

The case was ultimately resolved entirely through legal procedures and reasoning. The court used the tools of evidence law, constitutional law, administrative law, and statutory interpretation to conclude that the Bank of Ghana's decision was procedurally and legally unjustifiable. The technical financial questions of whether GN Savings and Loans Ltd. was truly solvent, what the real value of the IPCs was, whether the balance sheet test would have changed the insolvency determination were never actually answered by the Court of Appeal. The court side-stepped those questions by finding that the regulator had not legally justified its decision in the first place.

This raises a genuinely important concern about whether the licence restoration order was made without the court ever conducting or commissioning a proper financial evaluation of the viability of GN Savings and Loans Ltd. The legal process resolved the presumed procedural injustice but left the underlying technical financial question unanswered.

When the court examined exhibits PNK 3, PNK 5 series 1, 2 and 3, PNK 9, and PNK 10, it was not conducting financial analysis. It was making a legal determination about whether those exhibits had been properly considered, properly contested, or properly rebutted by the respondents. The court's reasoning was essentially that the respondents failed to deny or rebut the documentary evidence the appellants introduced, therefore the contents stood as uncontested. That is a rule of evidence, not a technical financial analysis.

Reference is made to a portion of the judgment as:

The appellants contend that the 3rd respondent (GN Savings and Loans Ltd.) and its affiliates, particularly Gold Coast and the 3rd applicant (Groupe Nduom Ltd) have invested in Government infrastructure projects as loans and advances to contractors who the Government through its Ministries, Departments and Agencies (MDAs) have hired to execute the projects and that several Interim Payment Certificates (IPCs) have been issued by the Government or its MDAs to the joint benefit of the 3rd respondent or Gold Coast. The appellants relied on exhibit PNK 2 being a schedule of details of IPCs that were due, owing and payable to the 3rd respondent or Gold Coast, in support of their claim. We (Court of Appeal judges who heard and determined this matter) have had a look at exhibit PNK 2 and on the surface of it, one cannot tell how it relates to the 3rd respondent (GN Savings and Loans Ltd., emphasis mine). There is no indication thereon that the 3rd respondent is a beneficiary of the IPCs per exhibit 2.

The appellants relied on another exhibit to establish the Government’s indebtedness to the 3rd respondent – exhibit PNK 7. They are reports of review and evaluation of Government infrastructure development projects financed by Groupe Nduom. It is not disputed that that the 3rd respondent is a member of Groupe Nduom (the 3rd appellant), but since the Audit Reports are about the entire Groupe Nduom and there is no indication anywhere therein that all or some of the IPCs are directly to the benefit of the 3rd respondent (GN Savings and Loans Ltd.), we do not see how that can form a basis of saying that the figures therein form part of the assets of 3rd respondents; as debts owed it by the Government of Ghana.

The Court of Appeal made a curious remark that because some letters were not responded to by the Government or its MDAs, much more they denying the claims made therein, and the Bank of Ghana failing to exhibit evidence to prove their case, therefore shows that the contents of exhibits PNK 5 series 1, 2, and 3 have not been denied. They are therefore deemed to be true as between the parties thereto.

This decision of the court is intriguing as it leaves readers of its judgement to wonder whether it settled the case fairly and justifiably. This is because the case hinges on the validity of the indebtedness of the Government to GN Savings and Loans Ltd. To be a fair court, and to settle the case fairly, the Court of Appeal could have appointed an independent financial investigation agency to conclude the matter objectively. This is because the High Court had already maintained that some of debts are being litigated.

The Court of Appeal needed financial and accounting valuation of the debts owed to GN Savings and Loans Ltd. by the Government to fully and accurately answer the balance sheet test question of insolvency. Debts under litigation can only be considered as asset in claim, not an asset in certainty. A litigated debt is often treated as a contingent asset or impaired receivable, not a fully certain asset. But the Court of Appeal ruled that the mere fact that a party is in court claiming a debt does not necessarily mean the debt does not exist. Even if the debt existed in the books of the claimant, it may not be recovered once the debtor contests its validity.

The pivotal finding of the court was that the trial court misallocated the burden of proof. Once the Court of Appeal corrected that allocation and placed the burden on the respondents, the respondents' case collapsed because they had not adduced sufficient evidence to justify their decision. The court did not verify the actual figures or independently audit GN Savings and Loans Ltd.'s books. It simply found that the Bank of Ghana failed to discharge its legal burden of demonstrating that its revocation decision was fair and reasonable. The trial court placed it on the appellants, but the Court of Appeal reversed this, holding that since the Bank of Ghana was asserting the positive claim (that revocation was fair and reasonable), the burden rightly fell on the respondents. This was purely a matter of legal procedure, grounded in sections 11, 14, and 17 of the Evidence Act (NRCD 323) and case law including Rv. Turner (1816) and Kwakye v. Attorney General [1981].

The appellants who initiated the proceedings and seeks reliefs must have borne the burden of establishing the grounds for the reliefs. The appellants were asserting that their rights to administrative justice, property, and equality had been violated. That is a positive assertion requiring proof and not a negative one. When an appellant challenges an administrative decision, by articulating that the decision was unfair, it is not purely a negative averment in the evidentiary sense. The burden of proving that the regulator’s decision was unreasonable or unlawful rested on the appellants.

The core factual dispute was whether GN Savings and Loans Ltd. was actually insolvent at the time of licence revocation. This required applying two technically distinct tests:

- The cash flow test — whether the institution could pay obligations as they fell due.

- The balance sheet test — whether liabilities exceeded assets.

The court insistently observed that a regulator acting fairly ought to apply both tests, not just one. This is a fundamentally financial or accounting judgment, not a legal one. The court cited the Australian Federal Court case of Pearce v. Gulmohar Pty Ltd [2017] FCA 660 and Sanell v. Porter [1966] 115 CLR 666 to reinforce that temporary illiquidity does not equal insolvency where realizable assets are sufficient.

With Section 123(5) compliance, a large portion of the judgment turned on whether government debts owed to Gold Coast Advisors Ltd — assigned in part to GN Savings and Loans Ltd. — should have been counted as assets when determining solvency. Evaluating whether these IPCs were valid, quantifiable, and realizable required financial and contractual expertise. The court found that exhibits PNK 3 and PNK 5 (series 1, 2, and 3) demonstrated government indebtedness exceeding GH¢2 billion, with GH¢629,091,335 assigned to the 3rd respondent — a figure exceeding GN Savings and Loans Company’s stated capital deficit of GH¢344.46 million.

The outcome of the appeal ultimately turned on technical financial analysis, specifically whether a proper, balanced insolvency assessment had been conducted that accounted for realizable government debts assigned to the institution. The trial court's error, as identified by the Court of Appeal, was not merely procedural; it was a failure to appreciate the financial substance of the balance sheet test and the significance of the IPC evidence.

The case therefore stands as a strong illustration that regulatory litigation at the intersection of banking law and constitutional rights demands both rigorous legal procedure and competent financial and technical analysis, and that the absence of either can lead to a miscarriage of justice. The Court of Appeal should have approached the issue of insolvency as a fresh financial investigation, but not only as a review of a regulatory determination already made under statutory authority.

Even if the Court of Appeal does not usually retry entire cases or hear all evidence again, the nature of the case and the impact of its outcome on the financial system of Ghana as well as the regulation of financial institutions including banks, demanded an approach that settles the case via an independent financial and accounting evaluation.

Emmanuel Kwabena Wucharey
Economics Tutor, Advocate and Religion Enthusiast.