GRI keeping close tabs on CIESOT fund after court decision

Wednesday, 1 April 2015 00:39 -     - {{hitsCtrl.values.hits}}

Global Rubber Industries (GRI), the largest shareholder of Ceylinco Insurance with 22.25% equity of the company, has stated that it is awaiting Ceylinco Insurance Plc’s compliance with CSE Rules on ESOPs as per the undertaking given by the insurance company. The shares held by CIESOT in Ceylinco Insurance, which are valued at Rs. 6 billion, have been held out by the insurance company for the benefit of employees. Under the CSE Rules on ESOPs and other share schemes for employees, such shares must be allotted to the employees and transferred to them. In the event that the insurance company does not allot and transfer them to the employees, the insurance company is required to sell the shares. The insurance company has told the SEC and the Supreme Court that it will sell the shares but has also taken steps, following the investigation of the Supreme Court over the shares, to allot them to employees. “If indeed the shares are transferred to the employees, the employees will stand to benefit a lot. If the shares are sold, then provided the shares are sold to a bona fide investor at the best possible price, the employees will benefit if the proceeds are disbursed to the employees,” said GRI. However, the shareholder said that the employees as well as fellow shareholders should ensure that the employees receive the benefit represented as due to them under the Trust. GRI has alleged during ongoing litigation against Ceylinco Insurance that the market share of the insurance company during the last two years has seen a gradual decline. Analysts state that the drop in performance in a company can be attributed to a lack of concentration on the core functions of the business by the management along with high management costs. GRI has alleged that such high management costs were borne of the fact that the insurance company’s 16 directors drew roughly Rs. 1.4 billion in salaries and perks from the organisation during the last three years, figures that are extremely steep compared with other insurance companies. Some of the other alleged malpractices include questionable transactions which eroded company profits. GRI Managing Director Prabash Subasinghe said that he did not want the insurance company to surrender its position as a market leader to its competitors as this would hurt both shareholders and employees. The largest shareholder, who denies rumours that GRI would be divesting Ceylinco Insurance shares in the near future, said that rather than selling their equity they should remain committed to ensuring that the business of the company was carried out in the best possible manner. “GRI and its sister company, GSF, have business connections in more than 50 countries around the world and we will be able to use those connections to further the business development of Ceylinco Insurance while at the same time bring world-class expertise to the company,” said Subasinghe. He also stated that the streamlining of Ceylinco Insurance would profit the company and shareholders by way of increased dividends and that these benefits would also pass on to employees through higher salary increments, incentives, bonuses, etc.