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by a concerned shareholder

I read with interest the reports relating to the recent AGM of Combank in the Sunday Observer and other newspapers including the response of Mr. Amarasuriya, the Chairman of Combank published in your newspaper on the 30th April.

I have been a small shareholder of Combank, DFCC and many other public companies for over two decades and have attended many meetings of these companies although not participating as vociferously as some others tend to do. I do not claim to be an expert but am somewhat familiar with company secretarial matters.

I was present at the meeting of Combank on 6th April until it adjourned for a poll. I hope the Chairman of Combank does not place me also among the "unenlightened" after reading my comments that are meant to be constructive.

Both Combank and DFCC are very successful banks and long term shareholders of the two banks have benefited immensely from their investments in these two companies. Therefore the shareholding dispute that they are presently involved in is a very unfortunate developments that, if not resolved quickly and amicably, can damage both banks. However, since the dispute is the subject of several pending legal actions, I do not wish to comment further.

Despite Mr Amarasuriya's criticism of your journalism, I feel that your newspaper has overall acted quite fairly by Mr Amarasuriya since he has been given the opportunity to prominently respond in detail to the comments made by the previous correspondent.

However, I must point out that Mr Amarasuriya is mistaken in stating that 1 % of shareholders and not 0.5 % attended the meetings in person. When the meeting was called to order, the Secretary announced that 38 % of shareholders were present by proxy and about 300,000 shares or "less than 1%" were present in person.

This number actually amounts to only 0.2% of the shares. Perhaps, the 0.6 % of the shares owned by the directors, mainly by the Chairman and MD according to the directors report could be added to this count, although the directors participate at these meetings in that exalted capacity and not as mere shareholders.

What is relevant is that apart from the directors, the total personal attendance was very low when compared with the proxy attendance and the Chairman should have kept this in mind when conducting the meeting.

Contrary to Mr Amarasuriya's assertion, the shareholder who made a lengthy speech did cast aspersions on some directors although he may not have named them. I will not elaborate or quote to avoid risking defamation or contempt of court.

He also appeared to be aware of certain positions taken by the directorate on some issues that were not known to the public. Mr Amarasuriya stated at the meeting that he agrees with that shareholder, that there is a conflict of interest in the DFCC serving on the Combank directorate but the directorate does not agree with his view.

He has repeated this view in his published response. He did state at the end of the shareholder's speech that legally there is no barrier to their continuing on the directorate of Combank. Firstly, I share your previous correspondent's view that Mr Amarasuriya should not have projected his personal views from the Chair especially if they were not in line with the directorate's view.

Secondly, I cannot understand why the issue of conflict is being raised at this time when (a) In the 1990's during the tenure of many of the current directors and Mr Amarasuriya's Chairmanship, the previous main shareholder, Chartered Bank, a bank directly competing with Combank, was represented on the Combank directorate by that bank's Country Manager and another official and they only vacated office in the mid 1990s due to a legal barrier and not voluntarily because of any conflict of interest, ( b) Mr Amarasuriya himself was a director of DFCC until recently and even sought re-election of Combank while still being a director of DFCC, (c) The directorate of Combank recommended and got approval from shareholders to amend its Articles and give DFCC the right to appoint nominee directors recently even after DFCC had purchased Vardhana Bank, (d) Mr Amarasuriya and the MD of Combank have continued to be directors of Commercial Leasing, an associate company of Combank even though both institutions are competing for leasing business, and (e) The law has been changed again permitting a director of a bank to also be a director of a subsidiary or associate bank.

In my view, the decisions of Combank to have directors in Commercial Leasing and by DFCC to have directors in Combank are both justified since they are associate companies and the parent companies have responsibility to their own shareholders to ensure value enhancement of their investments.

The Combank directorate has also done the right thing by not applying different rules to the white sahibs and the browns. I wholeheartedly support the proposal made by directors of Combank to change auditors every 5 years and am happy that Mr Amarasuriya has promoted this at various forums over the years.

However, he may have been able to handle this item on the Agenda faster had he declared the level of support for the resolution based on the proxies received. The proxy form specifically asked shareholders to indicate whether they were for or against the resolution. Most of the proxies would have been filed by 28th March or the latest by 4th April giving ample time to count the proxies and the voting preference.

In the absence of a statement by the Chairman, I think it was correct to have a poll on such an important matter since 0.2% of shareholders attending personally should not have been permitted to pass such a resolution on a show of hands ignoring the wishes of the proxy voters. I noticed that the Chairman and MD quite rightly did not vote when the vote was called since they themselves had recommended appointment of new auditors, a matter that is reserved for shareholders.

Since I left the meeting after it was adjourned to conduct a poll, I cannot comment first hand on the proceedings relating to the AGM when it was reconvened after the poll. However, with regard to the EGM, I too feel that whatever the reasons for the lack of a quorum, the Chairman should have called that meeting off and not commenced a discussion or permitted debate on the subject by making a statement from the Chair.

The matters relating to positions taken by certain directors should have been discussed by the directorate. In any case, if Central Bank approval had not been received at the time of the meeting, I think it would have been illegal in terms of the banking law to pass the resolution amending the Articles in that form because the resolution itself (rather than just a reference in the circular) should have included a provision that the amendment will become effective only on receiving Central Bank approval.

Under the company law any special resolution amending the Articles become operational immediately upon the resolution being passed. It seems that the directorate of Combank and the company secretary have not paid sufficient attention to the technical and administrative details relating to the circular, resolutions and the meetings.

Shareholders have come to expect very high standards from the country's premier bank and it is hoped that the shortcomings experienced at the meeting will be remedied in the future.

*****

K. C. Vignarajah writes with reference to article of 16.04.2006 .....

The "shareholder" bemoans that the meeting had to be prolonged. Some shareholders attend meetings only to fraternize with the directors, partake in refreshments and blissfully go home. Any serious discussion of the issues involved is a barrier before the shorteats and coffee! Many chairmen of companies encourage and pamper this kind of shareholder, to finish the meeting early without discussing any substantive issues.

To his credit, the ComBank chairman did not descend to this type of tactic and in contrast engaged in healthy dissent politely, and accepted correct positions.

The DFCC director and related parties were blaming the chair for delaying the shareholders, after engineering the very delay by demanding an unnecessary poll after the chairman had declared, after show of hands, in favour of new auditors. Thus it will be clearly seen as to who really delayed the meeting unnecessarily.

The "shareholders", desperately clutching at straws to make a case, implied that the old school tie counted in my speaking up for Mahendra. Yes, we were classmates at Royal; that gave me the better ability to vouch for his exemplary character. The hallowed traditions and good values are the essence of the 'Learn or depart' motto, which with its manifold meanings were buttressed consistently.

The commanding voice of the retiring Vice Principal of Royal, (the late Mr. M. M. Kulasekaram), commending in the mid 1950s, the "Oath taken by the Young men of Athens' has continued to reverberate vibrantly upto today. "We will never bring disgrace to our city by any act of dishonesty or cowardice; nor ever desert our suffering comrades in ranks.

We will fight for the ideals and sacred things of our country, both alone and with many ... We will strive unceasingly to quicken the public sense of civic duty, and thus in all these ways strive to transmit this city, not only not less but greater, better and more beautiful than it was transmitted to us".

Is it not time to ponder - How have we contributed to the above ideals?

What have we achieved for the Country?

What have we added for the betterment of mankind?

These values drive to quicken the public sense of civic duty of many.

www.ceylincoproperties.com

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