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Mahendra Amarasuriya responds to our article 'Commercial Bank AGM fiasco as stated by a shareholder' published in the Sunday Observer on 16th April 2006.

I refer to the article which was published in your newspaper on 16 April, 2006 under the heading 'Commercial Bank AGM fiasco as stated by a shareholder'. I am compelled to draw your attention to certain statements relating to the AGM which were published in the article, since such statements can easily mislead the general public.

It has been reported that some shareholders were critical that the Chairman allowed the meeting to drag on with one shareholder. Mr. Vignarajah speaking at length. It must be remembered that a Chairman of a meeting should provide a reasonable opportunity to the shareholders to express their views on the matters which were itemized in the Agenda, whilst managing the time allocated for the meeting.

This becomes very critical when the shareholders express their views on important issues and make proposals on extremely vital matters relating to the Company.

I summarize below the issues referred to by Mr. Vignarajah to enable you to decide whether there were any grounds on which I could have prevented him from expressing his views:-

Corporate Governance. Risk Management & Compliance with laws and regulations, all reported in Directors' Report on pages 70, 71 & 74 respectively and Re-election of Directors and Appointment of Auditors, as detailed out in the notice of meeting.

I have no doubt that you will now agree with me that any impartial Chairman could not have stopped Mr. Vignarajah from mentioning the facts he expressed at the meeting. Further, I similarly permitted all the other shareholders who wished to address the meeting to express their views in full, without interrupting them.

The shareholder who enlightened you, may not have been present when I cautioned Mr. Vignarajah four times, requesting him to finish his speech as quickly as possible. I also interrupted him on two or three occasions to ensure that his speech was relevant to the Agenda, but there was no mention at all of these matters in your article.

The problem is that, when articles are published with incomplete facts, there is a tendency for the readers, who were not present at the meeting misunderstanding the proceedings of the meeting and arriving at wrong conclusions. It appears that you did not participate at the meeting and therefore I do not want to blame you for reporting matters in this manner. Nevertheless you should have made an effort to verify the reported matters from a reliable shareholder, who attended the entire proceedings of the meeting, before publishing a misleading article.

Some reference has been made to the fact that Mr. Vignarajah was a schoolmate of mine. The relationship with the shareholder is immaterial and in chairing a meeting, the Chairman has to decide whether the views expressed are material and relate to the Agenda of the Meeting, before he interrupts a shareholder who is expressing his democratic right to speak.

It was also reported that Mr. Vignarajah was very critical of the Directors nominated by DFCC and also of Dr. Wanasinghe. Once again the facts have not been presented clearly. It was very clear that Mr. Vignarajah was not critical of the two DFCC nominees or of Dr. Wanasinghe, on a personal basis. He was only against any nominee of DFCC sitting on the Commercial Bank's Board due to the obvious conflict of interest.

He went to the extent of appreciating the services rendered by Dr. Wanasinghe, but was against Dr. Wanasinghe's continuation on the Board for the specific reasons given by him.

Your article says that the directors concerned had not been invited to respond to Mr. Vignarajah. I do not know whether the shareholder who gave you the information was present at the meeting at all stages.

But those who were present throughout the meeting were well aware that Mr. Fonseka did make a clarification, when the shareholders were critical, when they came to know that DFCC was going to abstain from attending the EGM. Likewise the two DFCC Directors could have responded to the matters raised by Mr. Vignarajah, if they wished to do so. Dr. Wanasinghe did respond to Mr. Vignarajah by mentioning his correct age.

It was also reported that on the commencement of the adjourned AGM on April 6, 2006 the Company Secretary announced that less than one half of 1% shareholders were present in person. This should be corrected as 1%, instead of one half of 1%. Although it appears to be an insignificant issue, the figures are important since there is a big difference between 1% of the issued capital and 1/2% of the issued capital.

I wish to express my views on your statement that 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. Not only the number of shareholders, but also the number of shares represented by such shareholders were required to be counted.

Certain shareholders were of the view that the total number of shares held by the shareholders, who were present on 30 March, 2006 should have been considered as the relevant number of shares. But this is not correct. We had to consider the number of shares of those who were present at the adjourned AGM, disregarding those who attended the 30 March, 2006 meeting.

You may not be aware that most of the shareholders who came for the meeting came up to the registration section, outside the Auditorium only between 3.15 - 3.30 p.m. If you had attended the meeting you could have seen for yourself of the practical difficulty our staff had gone through to trace the number of shares held by all such shareholders by feeding their names into the computer and arriving at the required figures, within a short period of time.

You also stated in the article that analysts feel that some shareholders may have had reservations on the proposed amendments and Circular had not provided sufficient justification for the proposal. It was stated in the Circular that the Rs. 5M limit which had been placed over 35 years ago, needs to be increased to a realistic level.

Certain analysts say that in terms of Article 109, the Board, at present, is empowered to arrange for sale of any land or other fixed assets acquired consequent on the default of any borrower, in the repayment of any facility granted by the Company to such borrower, at any consideration, without any limitation, and when compares with this position they do not wish to make any comments on the proposed limit.

Your Article also stated that the Board made a decision to amend Article 109 many months ago. However, according to our records this decision was made only four months prior to the proposed EGM and at this time the Board was fully aware of the voting restrictions placed by the Courts on certain share holdings.

Accordingly, there is no need to reconsider this decision by the Board in the light of new developments, as reported in your Article. This decision in fact, was not re-considered / amended at any subsequent stage, thereby leaving authority with the Bank to arrange for the EGM, as per the Board decision taken four months ago.

The Board whilst granting approval to hold an EGM on another issue, at its July 2005 meeting further decided that the EGM on this particular issue should be held with 2006 AGM. This decision was arrived after giving due consideration to the matters such as the costs to be incurred, other practical issues etc. Similar arrangements were made for the EGM required to be held for amending article 109.

In keeping with journalistic traditions, it would have been prudent if you had got the facts (given by a shareholder) verified by at least another independent shareholder, prior to writing an Article based on the information provided by a shareholder.

I draw your attention to the following, stated in your Article:-

"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."

I am surprised on your reporting that 'it had also been surprising that when the AGM was reconvened to announce the poll result, the Chairman had agreed to record a statement made by Mr. Shah relating to the EGM, critical of DFCC and its nominee directors, ignoring the fact that only specific business of which due notice had been given, could be taken up at the AGM.

I specifically mentioned that I could not entertain any issue, which had been submitted as a resolution, without adequate notice and I could not allow any business, other than the business for which due notice had been given, to be taken up at the meeting. At this stage Mr. Shah stated that it was not a resolution. It was only a matter relating to an issue which was discussed in arriving at a decision on the possibility of holding the EGM.

At this discussion Mr. Fonseka said that DFCC would be abstaining from participating in the EGM. Then few other connected matters were also revealed and Mr. Shah requested for recording his statement on facts discussed at this point of time. Mr. R. Senathirajah, who was present at the meeting representing Messrs. Julius & Creasy, lawyers of the company too confirmed that recording of such a statement could be permitted. The recording was permitted only on these grounds.

If a fellow Director is trying to explain that Combank convened the EGM without the authority of the Board, which position is not factual, it is the Chairman's duty to explain what actually happened and on what basis Combank summoned the EGM. If a few people who were present at the meeting had interpreted this as being critical of fellow directors, such people must be expecting the Chairman to back people disregarding the validity of their views.

It is stated that Sunday Observer has learnt that shareholders totalling to about 10% including Sri Lanka Insurance, Distilleries & Lanka Milk Foods had filed proxies opposing the two special resolutions of the EGM.' This statement is incorrect. However I am unable to correct this statement, since such correction may lead to releasing confidential information.

Due to this fact, I am also not in a position to comment on the last two penultimate paragraphs, which have been based on the above statement.

I cannot understand the basis on which reference had been made to 'apparent animosity of the Chairman towards the Managing Director'. It is because I invited the Managing Director to respond to a few queries made by the shareholders at the meeting, on matters which were more appropriate to be answered by the CEO of the Bank? You are requested to give similar publicity to my letter in your next Sunday Observer, as was done, when you published the article under heading 'Commercial Bank AGM fiasco as stated by a shareholder' on 16th April 2006 in Sunday Observer.

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