Kaupthing debt write offs overturned by court

A former executive at Iceland’s now-defunct Kaupthing Bank has been ordered by a court to repay a ISK 640 million (EUR 3.9 million) which the bank granted him to buy Kaupthing shares.

Reykjavik District Court yesterday backed up the Kaupthing resolution committee’s claim that the loan should be repaid, even though the bank’s board wrote it off in the weeks leading up to Kaupthing’s demise. Dozens of other former employees are in the same position, as the court ruling marks a legal precedent.

Dozens of former Kaupthing employees will probably now need to pay back loans from the bank which were used for the purchase of shares following yesterday’s court decision to overturn the board of directors’ autumn 2008 decision to write off the debts. The total amount at stake is around ISK 32 billion (EUR 195.5 million), RUV reports.

It caused a media storm in winter 2008 when it was revealed that the board had made such a decision just weeks before going bankrupt. The decision applied to around 80 staff members who had taken loans to buy Kaupthing shares.

The loans totalled ISK 32 billion and around ISK 15 billion of that was at employees’ own risk. The largest part of the 32 billion went to the bank’s most senior executives. The Kaupthing resolution committee decided last May to try and get the debt write off overturned in court.

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