Sec Charges Melstacorp For Non-Compliance
- Harry Jayawardena Faces Court Appearance
By Faraz Shauketaly
Controversial Sri Lankan businessman, Harry Jayawardena faces the prospect of appearing before magistrates in Colombo along with other Directors of Melstacorp Limited – one of many Harry Jayawardena associated companies. The billionaire businessman and others are charged by the Securities and Exchange Commission (SEC) over non-compliance in connection with the transfer of shares in Lanka Milk Foods to Melstacorp.
The SEC have filed action in the Fort Magistrates Court in case number S/74140/2012 and named 10 respondents including Melstacorp Limited, Don Harold Stassen Jayawardena and eight others all of Norris Canal Road, Colombo 10. The allegation is that having triggered off the Takeovers and Mergers Code the company and its officers failed to fully comply under those terms.
Melstacorp Limited however dispute that the Code was ever triggered off pointing out that Lanka Milk Foods was within the control of Milford Exports Ceylon Limited since 1991 – a full four years prior to the Takeovers and Mergers Code was passed into law. All the non-Independent Directors of Melstacorp Limited have been the nominees of Milford Exports Ceylon Limited. Milford Exports is the managing shareholder of DCSL (Distilleries Company of Sri Lanka).
The action arises out of virtually an ‘own goal’ when an officer of Melstacorp had informed the SEC – erroneously as it is now claimed – that the Takeovers & Mergers Code had been triggered by two recent transactions. Amongst these transactions were the transfer by DCSL of shares it owned in Beruwela Beach Hotels, Balangoda Plantations Plc and Madulsima Plantations Plc to Melstacorp in an apparent move to consolidate Harry Jayewardene’s entities under one entity. It is expected that Harry Jayawardena will then list Melstacorp as a holding company on the Colombo Stock Exchange.
Melstacorp have already got a matter pending in the Court of Appeal in matters related to the mandatory takeover. Sources close to the Securities & Exchange Commission stated that the SEC appears to have ‘jumped the gun’ by bringing in this action whilst matters were pending in the Court of Appeal. However a legal source says, “it is very well permitted to have a parallel case going on in a lower Court – It depends on the circumstances and there are a number of precedents.”
Melstacorp line of argument is that there has been no change in the management control of Lanka Milk Foods since 1991 and that the transfer of shares is by the same (related) parties who are in effect the controlling shareholders; the question of triggering off a mandatory bid does not arise. They further argue that it was an erroneous notification sent by an officer of their own company that has caused this matter to arise.
Melstacorp further clarified that the Independent Directors of the company would not necessarily be aware of these transactions as they were routine in nature.