BOI rebuts Cargo Boat charges of delay; says Renuka Lands at fault

With reference to the Daily FT article titled ‘Cargo Boat blames BOI for delay, abandons Rs. 2 b Baybrooke Commercial Complex’ published on 15 November, the Board of Investment has sent the following statement. The Daily FT story was based on a filing to the Colombo Stock Exchange by Cargo Boat Development Company:

We refer to the above article in which the company Cargo Boat Development Company PLC had blamed the BOI by alleging that “Due to the prolonged time taken by the BOI to extend the project implementation period stipulated in the principal Agreement dated 19 November 2014,” it was obliged to withdraw from the planned investment. In addition it is stated that Renuka Land Ltd. had sought approval from the BOI to extend the project implementation to 30 June 2019. However the company was unable to do so due to the delay of the BOI in finalising the said extension. 

On behalf of the BOI I wish to state that the statement is incorrect and does not reflect the actual course of events.

The agreement was not signed with Cargo Boat PLC, which is not a BOI company, but with a subsidiary of that company called Renuka Land Ltd. set up for this project.

Secondly it was never the BOI who delayed the project, but Renuka Land Ltd. which has on several instances sought extensions to the implementation of this project because of difficulties the company faced.

These extensions have always been accorded to them by the BOI. Hence it is accurate to say that Renuka Land Ltd. has never shown a clear intention to finalise the project.  

Here is a chronology of the project.

The Cargo Boat Development Company PLC which is a non BOI company has proposed to set up a subsidiary company to undertake a Commercial Complex at Braybrooke Place, Colombo 2, in 2013.

Accordingly, an application was submitted by R.B. Thambiayah and N.A. Thambiayah on 23 December 2013.

The BOI approval was granted on 26 December 2013 to set up a commercial complex at No. 43 and 29 Braybrooke Street, Colombo 2, with an envisaged investment of $ 14.95 m and offered 10-year tax holiday available under the Section 17A of Inland Revenue (Amendment) Act No. 08 of 2012. 

They have incorporated Renuka Land Ltd. to undertake this project and as per the approval, the agreement has to be signed before 26 February 2014.

Six months extension to sign the agreement was granted on 21 February 2014 based on the request made by the company by their letter dated 10 February 2014. 

A further three months extension was requested by their letter dated 11 August 2014 and it was considered and granted extension up to 21 November 2014 by our letter dated 21 August 2014.

In the said letter investor was informed that as per the prevailed Inland Revenue Tax Law, the company had to complete the investment on or before 31 March 2015 and the project should be completed by 31 March 2016.

However, the company by its letter dated 7 November 2014 requested to sign the agreement with the BOI and requested for amended draft agreement. Thereafter the agreement was signed on 19 November 2014.

The company again made a request on 20 November 2015 to grant extension of the project implementation period up to 31 March 2018 under the new IR Act which grants extension up to 31 March 2018.

Based on this request, Exe. Director (PI) has confirmed by his letter dated 7 December 2015 that this extension is available up to 1 April 2018 and to sign a supplementary agreement with the BOI in order to give legal effect in this regard.

Accordingly, the Investment Department issued the letter of approval on 1 January 2016 confirming the extension and to sign the supplementary agreement with the BOI. The draft agreement was issued to this company on 5 February 2016.  Then, the company again made a request by its letter dated 4 March 2016 to extend the project implementation period up to 30 June 2019.

Since, the above extension could not be facilitated under the prevailing IR Law, it was decided to consider this project under the BOI Regulation No. 2 of 2006 by our letter dated 19 April 2016.  

Accordingly, the company entered into a supplementary agreement with the BOI on 26 May 2016 to operate under the BOI regulation No. 02 of 2006 with a six-year tax holiday period.

Further, the investors have decided to sell their ownership to another party and approval was granted by the BOI on 21 July 2016 to this company to transfer 100,000 ordinary shares held by R.B. Thambiayah and N.A. Thambiayah to Mahen Weerasekera and Sanken Construction Ltd.

Therefore, there is no truth to the allegations made by Renuka Land Ltd. In fact the BOI has done everything within its power to help this company implement its project by granting the numerous extensions it had requested.