Commercial HC issues interim orders to conduct audit in an oppression and mismanagement case

Monday, 5 July 2021 03:16 - - {{hitsCtrl.values.hits}}

The Commercial High Court (HC) issued an interim order directing to conduct an audit for Tech Pacific Lanka Ltd., which is a company specialised in IT distribution.

The action was filed by a major shareholder of the company, i.e, Engenuity Ltd., in respect of the acts of oppression and mismanagement of Tech Pacific Lanka by the second to fifth respondents, who are respectively, founding shareholders and minor shareholders of the company.

It was brought to the attention of the Court that prior to the investment made by the petitioner, the company was controlled by the second and third respondents, who are father and son respectively, as a family concern.

After the investment also, the second and third respondents in collusion with the fourth and fifth respondents, who are also employees of the company, continued to control all aspects of the company contrary to the Investment and Shareholder Agreements between the parties.

As a result of numerous demands made by the petitioner, the respondents had agreed to conduct an audit and accordingly, KPMG commenced an audit. However, while the audit was underway, the respondents arbitrarily stopped the audit as several irregularities, wrongful and unlawful actions of the respondents were disclosed through an interim report issued by KPMG.

When the matter was supported in court by Counsel Attorney-at-Law Manoj Bandara, Attorney-at-Law Thivanka Hettiarachchi, instructed by Sudath Perera Associates, the Colombo Commercial High Court Judge Pradeep Hettiarachchi issued two interim orders, for conducting an audit into affairs of the company, and for restraining the respondents from obstructing or interfering with the functioning of the auditor and tempering or destroying accounts data from its computer system and ledgers.