The Colombo Stock Exchange (CSE) has written to the Central Bank (CB) to rectify an anomaly between the Banking Act and the Companies' Act pertaining to listed banks, according to a CSE official. Whilst the Banking Act says that shares of a bank shall not be registered till the origins of the purchaser is verified, the Companies’ Act says the shares need to be registered upon purchase.
"Shares brought through the Central Depository System (CDS), must be 'immediately' registered by the company/bank, according to the Companies' Act. The Banking Act allows the banks not to register shares if the banks do not know the origins of the purchaser. The Banking Act precedes the Companies Act," Surekha Sellahewa, CEO CSE told the Sunday Times FT.
“There is a clear contravention (difference) between the two Acts. We have requested the CB to consider this issue and that the Banking Act directions may need to be amended to safeguard the free transferability of listed banks' shares that are bought through the CDS,” she said. She explained this is why Hatton National Bank (HNB) has still not registered millions of shares.
HNB has not registered some 21.3 million shares purchased by four foreign investors between October 2007 and February 2008 with the bank saying it is yet to verify the legitimacy of these shareholders. HNB has said it needs to verify whether these shareholders are treading the minimum shareholder-threshold limit which is 10% and with special permission 15% under the Banking Act. “If HNB is not satisfied with the bona-fide of the share owners we reserve the right not to register them,” HNB Managing Director R. Theagarajah told the Sunday Times FT.