Restraining order obtained ahead of NDB’s EGM

In the backdrop of the EGM of National Development Bank (NDB) scheduled for today being cancelled by NDB Bank, on 22 July the bank’s fourth largest shareholder Dr. Sena Yaddehige obtained an interim order preventing the amendment of Articles of Association to remove the requirement that the bank’s chairman should also be an independent director. 

The shareholder, holding 5.26% shares of NDB, had instituted action against the National Development Bank (NDB) by case bearing No. CHC/29/2016/CO seeking an interim order to restrain NDB from acting contrary to its Corporate Governance obligations and its Articles of Association and tabling the only intended resolution scheduled to be passed at the EGM. 

Dr. Yaddehige being the fourth largest shareholder of NDB Bank had been represented in Court on Friday by President’s Counsel Dr. Harsha Cabral along with Kushan Illangatilake, Nishan Premathiratne and Mahela Liyanage, Attorneys-at-Law instructed by Julius and Creasy. 

Counsel Premathiratne of the legal team for Dr. Yaddehige stated that in terms of this Restraining Order granted by the Commercial High Court, NDB was precluded from tabling the resolution to its shareholders so as to remove the requirement of having an independent director as the bank’s chairman.  

Premathiratne further added that to date no application has been made by NDB bank to the Commercial  High Court, to vacate the said restraining order preventing NDB from tabling the resolution at the EGM, thus when the bank has notice of the Court order, tabling such a resolution would anyway amount to a violation of the Court Order.

On behalf of Dr. Yaddehige, it had been submitted to the Commercial Court that NDB Bank at all times had voluntarily compiled with the Corporate Governance requirements by appointing an Independent Director as its Chairman. Thus, the resolution which was to be presented to the shareholders of NDB Bank at the Extra Ordinary General Meeting on 27 July 2016 seeking to amend the Articles of Associations, so as to remove the requirement of having an independent Director as the bank’s chairman was not in the interest of the Bank and would result in complying at a lower standard in respect of the Corporate Governance Code of Good Governance.  

Deputy Minister of Public Enterprise Development Dr. Eran Wickramaratne’s statement to Daily FT was also referred to where the Minister had “some private banks, such as the National Development Bank, follow even stricter criteria requiring the chairman of the board to be an independent director as well”.

High Court Judge Shiran Gooneratne being satisfied with the submissions of Dr. Yaddehige’s legal team has thereafter issued an interim restraining order under and in terms of the Companies Act to restrain NDB Bank from presenting the special resolution to amend the Articles of Association of NDB at this EGM on 28 July until the matter is to be gone into by Court.