Major shareholder calls for EGM at Ceylinco Insurance
Tuesday, 23 December 2014 01:49
-
- {{hitsCtrl.values.hits}}
Suggests appointment of independent party to recommend best model for segregation of Life and General biz; raises fresh round of queries
Major shareholder Global Rubber Industries Ltd. has requested Ceylinco Insurance Plc (GRI) to convene an Extraordinary General Meeting (EGM) to explain the company’s plans with regard to segregation of Life and General businesses.
GRI directly holds a 22.25% stake in Ceylinco Insurance (CINS) and has proposed three resolutions for consideration at an EGM.
CINS has 2,579 voting shareholders and 1,363 nonvoting shareholders.
GRI maintains that the EGM is necessary since the company hasn’t convened a similar meeting to present details of segregation despite assurances given in the 2013 Annual Report.
As per GRI’s notice, CINS has incorporated two companies – Ceylinco Life Insurance Ltd. and Ceylinco General Insurance Ltd. – with the intention to transfer relevant businesses. However, most other composite insurance firms have transferred only one class of insurance to a subsidiary whilst retaining the other class in their segregation exercise. Separate Boards of Directors have been appointed to these two companies as well.
If licenses are issued to these two companies by February 2015, the company (CINS) will be disallowed from carrying out insurance business and from using the word “insurance” in its name.
“The company has not disclosed to its shareholders the manner in which the rights of the shareholders in the company (CINS) will be protected in a situation where all the assets and business of the company have been transferred to Ceylinco Life Insurance Ltd. and Ceylinco General Insurance Ltd.,” the GRI notice claims.
Additionally, no disclosure has been made with regard to the business the company will carry after the transfer of both classes.
Since segregated companies are required to list on the Colombo Stock Exchange at a subsequent date and among other requirements, GRI has asked CINS to furnish to shareholders as a matter of urgency a host of information within two weeks of passing the proposed resolutions and before the company takes any further steps to transfer assets.
Among answers sought are what the share structure of the two companies will be upon transfer of assets and what business the company will carry thereafter, how the rights of shareholders in the company will be protected in a situation where all the assets and business of the company have been transferred to the two companies, if the existing shareholders of the company will be issued the same number of shares in the two companies equal to the existing stake in the main company, if not why the company has not opted to transfer only one class of insurance to a subsidiary while retaining the other class in order to carry out the segregation required by the Insurance Board, and what safeguards are in place during and after the segregation to ensure that the right of the shareholders in two companies will not be diluted.
How the liabilities that accrue to the company in respect of the gratuity and pension of the employees of the company will be met by Ceylinco Life and Ceylinco General following the transfer of insurance business to these two companies is another poser.
Another is if the company will transfer the shares in the company held in the names of employee trusts and other funds to the two companies to enable the said companies to meet their pension and gratuity liabilities to their employees.
GRI has also inquired about the qualifications and credentials of the directors appointed to the Boards of the two separate companies and how they were selected and whether IBSL approval had been obtained.
GRI has proposed that CINS seek the opinion of an independent auditor/investment advisor/independent actuary approved by shareholder to recommend the model for segregation that is most likely to generate optimum results and best protect or enhance value of the investment of the shareholders of the company and make available same to shareholders.
In its notice to the company, GRI has attached a cheque for Rs. 500,000 being a sum reasonable to meet the expense of circulating the resolutions among shareholders with an indication if further sums are required it would be paid.
