Several existing Board of Directors of the Hotel Developers Ltd., the owning company of Colombo Hilton, have appealed to remain and continue serving amidst moves to reconstitute it by the new Minister of Public Enterprise Development.

It is customary in public sector that Board of Directors are expected to resign when there is a change of Minister and in the case of Hotel Developers, it shifted from Finance Ministry to the newly set up Ministry of Public Enterprise Development. 

When the Hotel Developers Board was asked to resign, there had been differences of opinion at a meeting on Wednesday. The members had decided not to resign after having got advice from a legal luminary. 

The existing Board of Directors of Hotel Developers comprises of Sagarica Delgoda (Chairperson), Padma Maharaja, Dheeshana S. Ameresekere, Athula Senanayake, Priyanka Dissanayake, Joseph M. Soosaithasan, J. Salinda Fernando, J.M.U.P. Jayamaha and Ananda De Silva.

The position taken by some of those appointed to the Board by Finance Minister Ravi Karunanayake is that Hotel Developers’ owner is Treasury, following the takeover of an under-performing state enterprise via an Act brought in by the previous regime.  

It was viewed that if at all, a request for resignation should come from Treasury, the appointing authority and not the Ministry of Public Enterprises, a portfolio held by Kabir Hashim.

Another view was that it was the prerogative of the Board to nominate and appoint new members as per Company Law, which is applicable to Hotel Developers. But this view was dismissed by others on the basis Hotel Developers now comes under the Takeovers Act and not under the Company Act.

Given the impasse, the Hotel Developers Board was summoned for a meeting at Temple Trees by Prime Minister Wickremasinghe on Wednesday evening.

At the meeting, further different viewpoints emerged. 

At the Premier’s meeting, another view was that it is at the discretion of the Government to decide whether it wants the existing Board or whether it wants to appoint a new one since the ultimate owner is the State.

Thereafter, the Premier has said that aggrieved Board members can make an appeal to Public Enterprise Development for continuity. Several have submitted the appeal yesterday for consideration.

It was speculated that Prime Minister Wickremasinghe had informed Minister Karunanayake that former Board members if needed can be re-appointed elsewhere as well.

One reason cited was the existing Board had played a key role in improving the performance of Hotel Developers, and hence must be retained unchanged. However the biggest turnaround at Hotel Developers came during the previous regime when the Board at that time repaid Treasury Rs. 1 billion for the first time as part settlement of a longstanding loan of Rs. 3 billion from the Government.

This was possible as a result of the Balance Sheet Restructuring Program initiated by the company under the Rajapaksa regime with the support of the Government involving the conversion of 80% of the loan into equity. This brought about a saving of Rs. 1.1 billion by way of interest and HDL’s success in negotiating a new management agreement with Hilton International Management Corporation, where the total management fees payable to its operator Hilton Worldwide was brought down to 11.75% from 33%. The later was a significant milestone in the turnaround, which guaranteed a contribution to the profitability of around Rs. 250 million annually.