The most appropriate way out for disgruntled depositors of collapsed finance companies is to seek a court order towards winding them up under the Companies Act No 7 of 2007, asserted Aritha Wickramanayake Attorney at Law and Senior Partner of Nithya Partners. Speaking at the Sunday Times Business Club’s monthly meeting last week during a forum to discuss issues pertaining to the law, concerns of depositors and the position of finance companies and ways of overcoming the crisis, he said that, appointing a liquidator to sell all assets of failed finance companies under the law will ensure the repayment of deposits and other liabilities of the company.
At the discussion |
Depositors of collapsed Sri Lankan finance companies should seek its liquidation under civil law to realize assets while criminal proceedings may put pressure on directors to surrender other assets. "If you try to use the criminal process as the primary means, then you are going to lose focus on realizing as much as possible from the assets of the company," he said. Mr Wickramanayake argued that through quick action, administrators, liquidators and receivers can be appointed under the island’s revamped company law to deal with situations when firms don't have assets to settle all their liabilities.
He added that even now it is not too late to adopt winding up procedure for collapsed Ceylinco Group Companies. He pointed out that under a winding up action against the company, a liquidator or administrator could be appointed by the court to seize the assets of the company and the directors, and action could be taken to settle the money of debtors. However he expressed his doubt on the ability of the Golden Key Credit Card Company Ltd to repay its depositors.
Mr Wickramanayake said that the intervention of the Central Bank to prevent the collapse of Seylan Bank and vesting it in the Bank of Ceylon was able to avert a major crisis in Sri Lanka’s banking sector. He pointed out that measures taken by the Central Bank to appoint managing agents for troubled Ceylinco companies such as for Ceylinco Investments and Realty Ltd, Asian Finance. Seylan Merchant Leasing,
The Finance Company, F&G Finance Company Ltd, etc helped to stabilise the finance sector in the island. He noted that the appointment of an expert group by the Central Bank to advise the respective management teams of additional steps to be taken, while also assisting in obtaining necessary financing support from financial institutions has brought positive results in resurrecting the collapsed finance companies and building public confidence in the finance at the dissension sector. Meanwhile registered finance and leasing companies are returning to stability and regaining public confidence, according to the Chairman of the Finance Houses Association, Shirley Perera.
During his presentation, he said companies are improving because the crisis is easing. Companies that were once in a bad position are now being managed better. Some companies have not fully started their leasing operations but they are doing some limited transactions, Mr. Perera said. He asserted that most of the finance companies were under pressure not because of their fundamentals but because of a public panic caused by the failures of two unregulated finance companies - Golden Key and Sakvithi, he said.
He noted that finance companies play a vital role in the economy especially for the small and medium sector. Presenting the plight of depositors in a moving manner, Neelanie Goonetillake, President of the Association of Depositors at F&G, said that most of them are now leading miserable lives as they have been totally dependent on the interest income. Some of them are suffering without money to buy food, drugs and other essential items.
They have now become ‘walking skeletons’, she said. Some others are weeping here in Sri Lanka without knowing the plight of their children who are studying overseas as they have no money to send. These people have sold their property and deposited the money in F&G to use the interest for their children’s education.
Many depositors have stopped their children’s education at international schools as they cannot afford to pay school fees but they were faced with fresh problems as local schools are not accepting these students, she said. She called upon the president to intervene in this matter to find a redress for affected depositors on humanitarian grounds.
The law enforcement authorities including the Criminal Investigation Department (CID) are not taking any interest in investigating the financial fraud, she said. She added that after all the money cannot vanish into thin air. She disclosed that they found it difficult even to make their complaints to the CID as there was only one policemen to take down their complaints. This is a pathetic situation, she said. The event was held at the Cinnamon Grand, the host hotel, with Hameedia as the co-sponsor. |
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