SEC suspends sale of Agalawatte Plantations’ control

• Acts on complaint from Nrimalee Samaratunga and another that 61% stake sale on Friday by Dr. Chris Nonis was without due authorisation and shareholder approval
• Broker Claridge in which Nonis has interests directed to withhold proceeds worth Rs. 304 m until SEC issues final directive

The Securities and Exchange Commission (SEC) yesterday suspended the already executed sale of control of Agalawatte Plantations Plc (APL) flagging off lack of required shareholder approval and other irregularities.

In a directive issued in terms of Section 13 (c) and Section 13 (p) of the SEC Act, the capital markets regulator informed the broker concerned, Claridge Stockbrokers, to withhold the sale proceeds of the sale of 15.2 million APL shares for Rs. 304 million until such time this matter is examined by the SEC and further instructions are issued by the SEC.

Last week a 61% stake of APL was sold by Mackwood Plantations Ltd., to Browns Group via the stock market.

SEC said yesterday Nirmalie Samaratunga and M. J. Varma has complained to the SEC that 60.8% of the shares in Agalawatte Plantations PLC held by Mackwoods Plantations Ltd., has been sold by Dr. Chrishantha Nonis, without due authorisation and without the approval of the shareholders of Mackwoods Plantations Ltd. 

SEC said this transaction appears to fall under the category of a major transaction for which shareholder approval needs to be obtained prior to the sale being effected.

Pursuant to the said complaint and through the Colombo Stock Exchange (CSE), the SEC has obtained a copy of the CDS account opening form of Mackwoods Plantations Private Limited and note that the two persons authorised to issue instructions are Shelendra Ranaweera and Lalith Fonseka, whereas according to the information provided to the CSE, the written instructions for the sale of the 60.8% shares of Agalawatte Plantations PLC has been issued by Dr. Chris Nonis. 

In light of this the SEC needs to verify whether Dr. Chrishantha Nonis is a duly authorised signatory to issue trading instructions for and on behalf of Mackwoods Plantations Ltd., in addition to whether the shareholders of Mackwoods Plantations Private Limited has in fact approved the sale of the aforementioned parcel of shares. 

SEC also drew the attention of broker concerned Claridge Stockbrokers to the Directive issued by the SEC on 12th February 2010, which prohibits a director selling the shares of a company on the Default Board.

“The sale of shares without due authorisation of the owner of the said shares is a matter of grave concern to the SEC as it affects the credibility and integrity of the Securities Market,” the capital markets regulator said. 

Furthermore, the sale of shares in violation of the written instructions issued to the broker and contrary to a Directive issued by the SEC is a serious breach of discipline on its part and a matter on which the SEC takes very serious cognizance. SEC also said broker’s conduct is aggravated by the fact that it is a company in which Dr. Chrishantha Nonis has an interest.

Soon after the sale, as reported in the Daily FT on Friday, Mackwoods Plantations in a statement said it sold out due to serious industry downturn. “As has been widely reported, domestically and internationally, the global commodities crash in the past few years, the Russian Crisis and subsequent depreciation of the Rouble, reduced the buying power of Russia and CIS countries. This was further aggravated by the oil price crash, which reduced the buying power of the Middle East Countries, and in addition substantially impacted the rubber industry, as the falling oil price allows for synthetic rubber substitutes to replace natural rubber. This has aggravated the strain in particular for those plantations Companies with predominantly rubber exposure, including Agalawatte Plantations PLC,” the statement said.

“The transaction was formally authorised and effected by the shareholders of Mackwoods Plantations Ltd. The shares, worth Rs. 304 million were purchased by the Browns Group,” the statement said.

“Given the severe financial impact of the commodities crisis on Agalawatte Plantations PLC, it was felt both prudent and timely to divest its shares to the Browns Group, which is already in the plantation sector of Sri Lanka,” it added.

Majority shareholders of Mackwoods Securities, the holding company, charged that the control of Agalawatte was sold without their knowledge.

The fresh controversy is the latest twist to the battle of Mackwoods among siblings. The recent EGM and appointment of three nominee directors to Mackwood Securities the holding company of the diversified entity, is being legally contested taking the family dispute public.