Editorial

Security

Politics

World

Letters

Sports

Obituaries

Archives

The extraordinary general meeting of Commercial Bank which was scheduled to be held on March 30 but adjourned to April 6 to be held immediately after the AGM, could not be convened due to the lack of even the reduced quorum of 30% of shareholders required for an adjourned meeting. The shareholders expressed their displeasure at the poor organization of the AGM.

Some shareholders who were present were critical that the Chairman, Commercial Bank Mahendra Amarasuriya, allowed the meeting to drag on with one shareholder, Vignarajah, who some said was a school mate of Amarasuriya, being permitted by the Chair to make a long prepared speech very critical of the Monetary Board, DFCC, and other large shareholders linked to companies associated with businessman Harry Jayawardena. Vignarajah was very critical of the directors nominated by DFCC and also Shelton Wanasinghe and asked that they should leave the board of Combank.

According to those present, even after some shareholders objected to the statement on the grounds that it had nothing to do with the Agenda for the AGM, the Chairman had permitted Vignarajah to carry on with his statement.

At the end the Chairman had stated that Combank had obtained legal advice from two legal firms and they had advised that there was no legal impediment to the DFCC directors continuing to serve on the Combank board and that the Banking Act also permitted a director of one bank to be a director of another bank when the latter was a subsidiary or associate company.

Sunday Observer learns that Amarasuriya himself made use of this provision when he was re-elected to the board of Combank in March 2005 at which time he was also a director of DFCC.

The directors concerned who were at the head table had neither been invited by the Chairman nor had they sought to respond to Vignarajah but Nihal Fonseka, a DFCC nominee director had informed some shareholders who had inquired after the meeting as to why they did not respond that many of the matters raised by Vignarajah were sub judice and in any event it was the Chairman's responsibility to maintain order and decorum without permitting people to make slanderous statements.

The Annual General Meeting which was also adjourned on March 30 was held on the April 6 after a quorum was established when the Company Secretary announced that although less than one half of one per cent (0.5%) of shareholders were present in person, 38% of shareholders were present by proxy.

The Secretary said that in counting those present by proxy, DFCC which owned nearly 30% of Combank and several other shareholders owning about 12% had been collectively counted only as 10% in terms of an interim order issued by the Court of Appeal restricting their combined presence and voting rights.

Shareholders were becoming restive since neither the Chairman nor the Secretary was able to announce the number of those present at 3.30 p.m., being the scheduled time of the meeting.

Before the EGM could be called to order, Nihal Fonseka had informed the Chairman that DFCC had decided not to attend the EGM. When this decision was announced by the Chairman, the Secretary informed that none of the shareholders subject to the court imposed voting restriction had signed the attendance for the EGM and the number of shareholders present by proxy were only 22%.

It thus transpired that some foreign institutional shareholders as well as the largest individual shareholder Al Mashek holding 10% of Combank had decided not to file proxies. Analysts feel that these shareholders may have had reservations on the amendment to the Article since it sought to increase the power of directors to sell fixed assets from Rs. 5 million to more than Rs. 1,000 million and the circular had not provided sufficient justification for such a massive increase.

Shah of the Employees Union made a lengthy speech denouncing DFCC and Fonseka and the Chairman agreed that it was improper for Fonseka to have consented at board meetings to hold an EGM and then for DFCC to withdraw.

Fonseka agreed that the board made decisions in principle many months ago but the actual circular and resolutions sent to the shareholders had not been considered by the board in the light of developments since that time before the formal notice was sent out to shareholders by order of the board.

He added that while as a director of Combank he will make decisions in that capacity it does not mean that DFCC acting as a shareholder will automatically support those decisions if by doing so interests of shareholders are threatened.

He said that in this particular instance DFCC had received legal advice that given the present state of litigation relating to the shareholding of DFCC in Combank DFCC should not at this stage vote in favour of the resolution to amend the Articles and also should not vote in favour of special resolutions if they are not essential to the functioning of Combank.

He said that DFCC had written to Combank in February in relation to the AGM that its participation and voting at the AGM will depend on the Agenda and legal advice that it receives and the same position was obviously applicable to the EGM.

Fonseka commenting on the resolution to appoint a Trustee for the ESOP scheme said that based on advice DFCC had received, in terms of the operative Sinhala version of the amended Banking Act, loans can continue to be granted either directly to an employee as done up to now by Combank or to a trustee for the purchase of shares under an ESOP and this matter should be referred back to the Central Bank and in any event there were many other options for financing the scheme without involving a trustee.

Shah made various allegations against DFCC and its nominee directors and wished to move a resolution denouncing their conduct when a shareholder pointed out that there was no meeting to move any resolution.

While the Chairman ruled accordingly, there were many who felt that the Chairman should have controlled the proceedings and maintained decorum and if Combank was keen to have the resolutions passed they should have convinced their other large shareholders to submit proxies to ensure a quorum.

It had also been surprising that when the AGM was reconvened to announce the poll result, the Chairman had agreed to record a statement by Shah relating to the EGM critical of DFCC and its nominee directors ignoring the fact that only specific business of which due notice has been given could be taken up at the AGM.

Those present had been even surprised by Amarsuriya giving personal opinions agreeing with those making statements from the floor critical of fellow directors and felt it was inappropriate for the Chairman of a shareholder meeting of a leading public company to do so.

With regard to DFCC's withdrawal, some felt that the position taken by Fonseka that his decisions as a director of Combank cannot be automatically linked to DFCC's support as a shareholder was technically and legally correct but others say that if DFCC had a problem, it should have been specifically conveyed to Combank.

Most agree however, that the pending court cases initiated by employees of Combank have given rise to an unusual situation and it would be a natural thing for DFCC to act on legal advice under the present circumstances.

Sunday observer has learnt that shareholders totaling to about 10% including Sri Lanka Insurance, Distilleries and Lanka Milk Foods had filed proxies opposing the two special resolutions of the EGM. Analysts feel that in retrospect, the non-attendance by DFCC and other shareholders who were subject to the restriction imposed by court who had voted against, saved the day for the directors.

They contend that, had the meeting commenced with the presence of these shareholders with a 32% attendance and had DFCC not voted, on a poll the count would have been 10% against and a maximum of 22% for the resolutions resulting in the resolutions being defeated due to the lack of a 3/4th "yes" majority required to pass special resolutions. The defeat of resolutions recommended by directors by the shareholders would have been a major embarrassment to directors.

All in all many of the shareholders left the AGM feeling that the serious differences among the directors and the apparent animosity of the Chairman towards the Managing Director were very unhealthy developments and hoped that better sense will prevail among all in order to preserve Combank's status as the Numero Uno in local banking as projected by its latest annual report.

| News | Business | Features | Editorial | Security |
| Politics | World | Letters | Sports | Obituaries | Junior Observer |

Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.