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Monday, 7 March 2011 00:32 - - {{hitsCtrl.values.hits}}
The Securities and Exchange Commission (SEC) has been slapped with a fresh call to investigate the serious loss of capital as well as rise of default debts along with a host of issues of good corporate governance on the part of directors in Hilton Colombo’s owning company Hotel Developers (Lanka) Plc (HDL).
The fresh salvo has been fired by attorney-at-law and notaries public V.W. Kularatne Associates on behalf of its client Nihal Sri Ameresekere, who has previously filed several litigations against HDL.
In their letter to SEC Chairperson Indrani Sugathadasa, Ameresekere’s lawyers estimate the end 2010 defaulted debt by HDL to the Government to be over Rs. 11 billion. This, along with accumulated losses, has resulted in a serious loss of capital. HDL’s share capital is Rs. 452 million.
The letter raises the issue of role of directors of HDL in such circumstances in terms of Sections 219 and 375 of the Companies Act, which implies personal liability for all the debts of a company.
The SEC has also been informed that despite this precarious situation, the directors on the HDL Board hadn’t complied with or were acting contrary to the Companies Act No. 7 of 2007. This reference is in view of in SEC’s Board of Commissioners, the Registrar of Companies is an ex-officio member.
Several issues of good corporate governance on the part of the HDL Board had been raised as well, especially in the context of the serious loss of capital and debt situation. They include duty of directors on insolvency, duty of directors on serious loss of capital and duty of directors to act in good faith and in the interests of company.
The lawyers have also referred to non-implementation of the Attorney General’s directions to the SEC following previous litigations filed by Ameresekere.
Ameresekere, who was once a Chairman of HDL, four years ago instituted a winding-up application, which is yet to be inquired into.
Heading for a decade on Default Board
Come June 2011, Hotel Developers (Lanka) Plc (HDL) will dubiously celebrate a decade of presence in the Colombo Stock Exchange’s Default Board.
The company was transferred to the Default Board on 28 June 2001 due to non submission of Annual Reports for the F/Y 31 March 1991 to 31 March 2010 and non submission of Financial Statements for the quarters ended 31 March 1998 to 31 December 2010.
Analysts rapped the SEC for allegedly turning a blind eye in terms of taking action against a listed entity remaining on the Default Board for over nine years. Sources said that litigation against it prevented HDL from publishing accounts, but officially such a disclosure hasn’t been made by the company as yet.
“The SEC must either get the listed entity to publish accounts or make a proper disclosure as to why it cannot publish accounts,” analysts added.
Despite absence of audited or provisional results since 1990/1 financial year, HDL shares continue to be traded. Last week around 5,600 shares of HDL traded between a high of Rs. 145 and a low of Rs. 130 before closing at Rs. 135, unchanged over the previous week.
