Wednesday, 25 September 2013 00:58
Troubled firm announces appointment of controversial MP to Board as Non Executive Independent Director
Duminda first MP to serve Board of a listed
Share price soars by 72% to Rs. 3.10 with 25% stake traded among speculative retailers
Move comes two days ahead of AGM
activists raise red flag
Touchwood Invest-ments Plc (TWOD) has appointed controversial MP Duminda Silva as a Non Executive Independent Director to its Board, sending shockwaves among good governance activists and analysts.
Apart from Duminda, the appointment of Lanka Wijendra Kiwlegedara to the Board as an Executive Director was announced.
In its filing to the CSE, Duminda has been described as a businessman, Member of Parliament – Colombo District, Monitoring MP – Ministry of Defence, Chief Organiser Sri Lanka Freedom Party – Kolonnawa Seat and Chairman R. Duminda Silva Foundation.
Kiwlegedara is the founder and Deputy Chai-rman/Chief Operations Director of Woolim Lanka Ltd., a BOI approved mineral export firm and Managing Director of Asian Investments and Mercantile Services Ltd.
The appointments, especially that of Duminda, who is also a suspect in the murder of Bharatha Lakshman two years ago over which the legal proceedings are on, come two days ahead of the AGM of Touchwood.
Analysts said appointing someone who is facing charges of murder to a Board was against good governance practices though listed company boards cannot be fully absolved from that allegation.
It is also the first time an influential MP has been appointed to a Board of a listed company.A senior official of the Parliament told the Daily FT that there was no bar for a MP to be a director of a private company and there were many such MPs in Parliament.
“However if the company wants to contract with a Government entity, at that point he has to get the necessary approvals after he declares his interests. Other than that there is no legal impediment,” the official added.
Usually announcements of new directors are preceded by a Board meeting. It couldn’t be confirmed whether the Touchwood Board met this week or recently. There were reports that Chairman and Deputy Mr. and Mrs. Roscoe Maloney had been overseas. Sporadic appointments to and exits from the Touchwood Board are nothing new. Most appointments have been short-lived for multiple reasons (See box).Though the appointment of Duminda caused shivers for many, the predominant sentiment among investors in the Colombo Bourse appeared to be joy. Some even believe Duminda’s entry will help revive the company.
The battered stock price of TWOD shot up to Rs. 3.10 up by 72% or Rs. 1.30 from its previous close. More interestingly, a record 26 million shares which is a 25% stake of the company changed hands via 1,717 trades for Rs. 66 million.
Considering the all-time low price of 90 cents a few weeks ago, yesterday’s gain is a huge windfall for those who traded on the stock of late.
The Maloneys have been shedding their stakes in recent months; so has another shareholder, ASPIC Corporation, also connected party to Maloney.
Touchwood styles itself as the pioneer of the agro-forestry investment industry in Sri Lanka. It specialises in the cultivation of high value exotic tropical timbers as an alternative and sustainable source of forest products (mahogany, vanilla, sandalwood, teak and other cash crops).
As per its 2012/13 Annual Report, TWOD has planted over 400 trees of high-value timber in 2,854 acres spanning 42 plantations in six districts. This is in addition to timber plantations in Thailand in which customer deposits have been taken by the company.
As at end FY13, TWOD’s assets amounted to Rs. 8 billion, up from Rs. 6.8 billion in the previous year. Despite styling itself as pioneer and in business for over a decade, TWOD remains saddled with over Rs. 500 million worth retained losses. Liabilities amounted to Rs. 4.7 billion as at end FY13, up from Rs. 3.7 billion a year earlier.
The company is also facing a winding up application filed in Western Province High Court by a customer K.A.D.L. Priyanka Nanayakkara on account of a Rs. 3.8 million claim. TWOD has opposed the claim and will challenge the case in Court. The case is scheduled to come up on 3 October.
The Daily FT learns that there is a growing number of defaulted customers who will support the case filed by Nanayakkara.
The Securities and Exchange Commission (SEC) is continuing with its investigations on TWOD. Between 9 and 16 September, trading of TWOD shares was suspended for six market days.
The SEC also directed the Company from acquiring, transferring, disposing, pledging, hiring, mortgaging, leasing, creating a charge over or otherwise alienating any non-current assets depicted in the balance sheet of the company without the prior approval of the SEC till the completion of the investigations; to desist in any manner from destroying, concealing, altering, removing, amending or cause to be destroyed, concealed, altered, amended or removed any information that is in the records or books of the company maintained in the ordinary course of business; and extend to the SC the company’s fullest cooperation in respect of the investigations conducted by the SEC.
Following the latest appointments the Board of Directors of Touchwood Investment Plc comprises R. Maloney (Chairman), J.G.S. Maloney (Vice Chairperson/CEO), L.L. Kulatunga (Independent Director), M.I.U. Peiris, A.R. Perera, D.R. Silva (Non Executive Independent Director) and L.W. Kiwlegedara (Executive Director).