Friday Sep 20, 2024
Friday Sep 20, 2024
Wednesday, 10 December 2014 00:30 - - {{hitsCtrl.values.hits}}
The petition was taken before High Court Judge Amendra Seneviratne wherein Ceylinco Insurance and its Chairman J.G.P. Perera and 15 other Directors, its Company Secretary, Global Sea Foods Ltd., Prabhash Subasinghe and Castle Realty Ltd. are cited as Respondents.
Global Sea Foods Ltd. and Prabhash Subasinghe are parties associated with the Petitioner holding voting ordinary shares. Global Rubber Industries holds 22.25%. Other shareholders that Global Rubber is associated with are Prabhash Subasinghe, who holds (4.56%) and Global Sea Foods Ltd., (3.16%).
The Global Group became shareholders of the insurance company around 2010 and is now the largest group shareholder in Ceylinco Insurance, holding 29.97% of the voting rights.
S.A. Parathalinga PC instructed by Sudath Perera Associates appeared for the Petitioner. Kuvera de Zoysa PC appeared for the Respondent Company Ceylinco Insurance. Ali Sabry PC and Faiz Musthapha appeared for some of the Directors. Avindra Rodrigo appeared for Global Sea Foods. Harsha Amarasekera appeared for Prabhash Subasinghe.
Petitioner states Ceylinco Insurance, the market leader in the insurance industry, achieved a Gross Written Premium of approximately Rs. 22.7 billion and a profit before tax of Rs. 2.3 billion in 2013.
It states four Respondent Directors did not hold any shares and the other Directors had a declared interest in 840,226 ordinary voting shares amounting to 4.201% of the voting ordinary shares.
It laments the Respondent Director, despite holding merely 4.201% of the voting ordinary shares, exercised shareholder control of the Ceylinco Insurance through the shareholding of Castle Realty, CIESOT Ltd., Ceylinco Insurance A/C of Employees Gratuity Trust Fund, Pension Fund, Pension Trust Fund of Ceylinco Insurance and Gratuity Trust Fund of Ceylinco Insurance – Life Division.
It brings to cognisance that the Supreme Court relating to the Golden Key Credit Card Company has appointed a new Board of Directors to CIESOT.
Enlightening on the alleged non-compliance with the regulation of the Insurance Industry Act, it states the Board of Directors comprises 16 Directors whereas it can comprise a maximum of five Directors who are employees. It bemoans however the 12 Directors are employees holding executive positions.
It complains the said Respondent Directors have wrongfully, unlawfully and in contravention of the Insurance Industry Act nominated and re-elected the 12 Executive Directors.
It laments further that the Respondent Directors have wrongfully, unlawfully and in contravention of the Insurance Industry Act re-elected the 12 Executive Directors to exclude the representatives of other shareholders including the Petitioner, Global Sea Foods and Prabhash Subasinghe being nominated and/or elected to the Director Board.
Petitioner is seeking declaration from the Court that the said nomination, re-elections and appointments are therefore null and void and bad in law. However, Petitioner states that it is not seeking similar declarations against three Respondent Directors since their appointments would have complied with the Insurance Industry Act.
The Petitioner is seeking Interim Orders from the Court restraining seven Directors from acting as Directors whilst being an employee thereof in violation of the Insurance Industry Act and the Ceylinco Insurance from having employees on its Director Board.
Petitioner states the Respondent Castle Realty Ltd. has been incorporated with the 1st Respondent Ceylinco Insurance under the name Ceylinco Life Holdings Ltd. and the name has been changed to the present name.
It states Castle Realty Ltd. has purchased 344,400 shares of Ceylinco Insurance within a few days of the incorporation and that a further 181,000 shares in 2009, increasing its shareholding in Ceylinco Insurance to 525,400 (2.63%) voting ordinary shares.
Petitioner laments the said purchases have been funded by Ceylinco Insurance, which has advanced Rs. 131,885,875 to Castle Realty Ltd.
It states Castle Realty Ltd. has issued 100,000,000 Non-cumulative, non-redeemable preference shares to the shareholder fund of Ceylinco Insurance in January 2009 and further 31,885,875 non-cumulative, non-redeemable preference shares in February 2009.
Petitioner contends that by accepting non-cumulative, non-redeemable preference shares in Castle Realty Ltd., the Respondent Directors have caused loss to Ceylinco Insurance since Ceylinco Insurance cannot claim arrears of dividend and cannot recover the funds advanced until the liquidation of the Respondent Castle Realty Ltd.
Petitioner impugns that the aforesaid grant of the loan and/or the financial assistance from the funds of the Ceylinco Insurance to Castle Realty Ltd. is wrongful, contrary to the provisions of the Articles of the Association of the Ceylinco Insurance and amounts to conduct oppressive of the shareholders including the Petitioner, Global Sea Foods Ltd. and Prabhash Subasinghe, who are parties associated with the Petitioner holding voting ordinary shares.
Petitioner is seeking an order from the Court directing the Respondent Directors of the Ceylinco Insurance to pay Ceylinco Insurance Rs. 131,885,875 advanced to the Castle Realty Ltd. together with any loss of interest income caused to Ceylinco Insurance.
It is also seeking an Interim Order restraining Castle Realty Ltd. from exercising voting rights in respect of the 525,400 shares held by it.
Complaining of the alleged disproportionate remuneration of the Respondent Directors, it brings to cognisance that in the Annual Reports of Ceylinco Insurance of 2011, 2012 and 2013, the aggregate remuneration the said Respondent Directors have paid themselves is a staggering Rs. 1.4 billion.
It claims the said remuneration is the highest among the other leading insurance companies. It states that the total dividend paid to the 3,942 shareholders by the Ceylinco Insurance is significantly and disproportionately lower than the remuneration of the 16 Respondent Directors.
Petitioner complains the said Respondent Directors are paying unto themselves disproportionately large sums of money as remuneration, compensation and other emoluments to the detriment of the shareholders and are not paying the shareholders a reasonable dividend or return on investment.
On alleged financial irregularities, Petitioner states the Respondent Directors have caused a company named Emerald Wealth Management Ltd. to be incorporated with Ceylinco Insurance holding 900,009 out of 1,000,010 issued shares (90% of the equity) and the balance 100,001 shares held by Wealth Lanka Management Ltd., wherein some of the Directors were Directors of the said Wealth Lanka Management Ltd.
It also states that the Respondent Directors have subsequently caused the said shareholding of the Ceylinco Insurance in Emerald Wealth Management Ltd. to be transferred to a company called Ududumbara Hydro Energy Ltd., in which some of the Directors are shareholders and its Directors.
Petitioner also laments of irregular payments made to select employees of Ceylinco Insurance and complains the Respondent Directors are making such irregular payments wrongfully and unlawfully siphoning off funds of Ceylinco Insurance.
Petitioner also complains of the alleged violation of shareholders rights in segregating the long-term and General insurance business of Ceylinco Insurance as well as on the persons allegedly unfit/disqualified to be Directors and lack of independence of the Independent Directors.
Petitioner inter alia seeking the Court for an Interim Orders appointing Dinesh Weerakkody and Anil S. Amarasuriya to act as Directs of Ceylinco Insurance and appointing chartered accountants to carry out a forensic audit of the financial affairs and accounts of Ceylinco Insurance and to report to Court any financial irregularities and any loss caused to Ceylinco Insurance.
