GRI asks Ceylinco Insurance to comply with the law to the fullest
Tuesday, 13 January 2015 01:54
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Responding to a statement made by Ceylinco Insurance in the Daily FT yesterday (12) under the title ‘Ceylinco says Insurance Board approval received for segregation model,’ the company’s second largest shareholder Global Rubber Industries (GRI) said it had no objections whatsoever to Ceylinco Insurance following the regulations of the Insurance Board of Sri Lanka; in fact what it insists on is that Ceylinco Insurance follows all applicable laws.
GRI, which is embroiled in a battle with Ceylinco Insurance directors over the modalities of the IBSL requested segregation, say: “IBSL has informed us that ‘In terms of the provisions of the Regulation of Insurance Industry (Amendment) Act No. 03 of 2011 composite insurance companies are required to segregate its long term insurance business and general insurance business into two separate companies by February 2015. In doing so, companies will be required to comply with all relevant laws, including the requirements stated in the Companies Act No. 07 of 2007.’”
Section 185 of the Companies Act provides that if the whole or more than half the value of the assets of a company are to be disposed of or if a company is seeking to enter into a transaction or series of related transactions which have the purpose or effect of substantially altering the nature of the business carried on by the company, it must obtain either 75% (special resolution) or unanimous shareholder approval.
GRI states that Ceylinco Insurance has failed so far to follow this requirement, since at their upcoming EGM, the company plans to get an ordinary resolution passed instead of a special resolution as the law demands. According to the Companies Act, it is absolutely necessary for Ceylinco Insurance to get the approval of at least 75% of its shareholders, in order to move over 50% of their assets to two new entities as they intend doing.
In their petition in case no. 60/2014 (CO), Ceylinco Insurance has stated that the ‘whole of the undertaking of the Long Term Insurance Business of the (Company) including all the assets and liabilities thereof will be transferred to (Ceylinco Life Insurance Ltd.)…The whole of the undertaking of the General Insurance Business of the (Company) including all the assets and liabilities thereof will be transferred to (Ceylinco General Insurance Ltd.)…’
GRI says that Ceylinco Insurance has in their own circular, represented that Ceylinco Insurance would only remain an ‘investment holding company’ following the transfer of its insurance business.
The company has only sought a simple majority of approval by seeking an ordinary resolution in its notice of an EGM to authorise two companies called Ceylinco Life Insurance Ltd. and Ceylinco General Insurance Limited to carry out the long-term and general insurance business of the company. The said resolution does not comply with the requirements of Section 185 of the Companies Act.
The District Court has held that the approval that the District Court gave in terms of Section 102 of the Regulation of Insurance Industry Act for the transfer of insurance business to Ceylinco Life Insurance Limited and Ceylinco General Insurance Limited is per incuriam (mistake in law or fact), because the Company had not informed the Court of the company’s obligations under section 185 of the Companies Act.
GRI explained that Ceylinco Insurance must comply with the laws and regulations in the country, which are set to ensure transparency and good governance. While most insurance companies have already completed their segregation after obtaining a special resolution from their shareholders, Ceylinco Insurance has waited till the eve of their deadline to segregate and are seeking an ordinary resolution to transfer their insurance business, in contravention of the requirements of the Companies Act.
“We reiterate that we insist that Ceylinco Insurance PLC complies with its obligations under the Companies Act, and enable all shareholders to duly participate in the decision-making process of the segregation of the insurance business of the company,” says GRI.
