April 23 2001
The Securities and Exchange Commission of Sri Lanka monitors companies listed on the Colombo Stock Exchange to ensure fair trading on the securities market and to safeguard the rights of investors. Companies must submit to the surveillance of the commission and act within the law or face losing their listing on the Colombo Stock Exchange.
The decision in The Securities and Exchange Commission of Sri Lanka v Kotagala Plantations Ltd (SC Appeal 33/99) confirms and highlights the role of the commission while serving as a warning to companies that seek to mislead investors/shareholders and then seek refuge in legal technicalities.
The commission is empowered by the Securities and Exchange Commission Act 36
of 1987 (as amended) to achieve various objectives, including the regulation
of the securities market and the protection of the interests of investors.
This act allows the commission to formulate rules to achieve these objectives.
The commission licenses the Colombo Stock Exchange. Any company that seeks to be listed on this exchange must comply with the rules. Contravention of these rules is an offence under the act.
On October 3 1996 the respondent informed the shareholders that it had acquired
a controlling interest in a company called Agarapatana Plantations Ltd through
a wholly owned subsidiary called Lankem Plantations Holdings Ltd. However, by
June 3 1996 the first respondent company's shareholding in Lankem Plantations
Holdings had fallen from 99.9% to 49%. Consequently it no longer held a controlling
interest in Agarapatana Plantations Ltd.
The commission rules regarding the disclosure of information by public companies make it compulsory for shareholders to be informed of such an event. The respondent failed to comply with this rule, thus committing an offence punishable under the act.
Counsel for the respondent attempted to establish that the rules had no legal force due to amendments made to the principal enactment. However, the Supreme Court rejected this contention as "unsustainable in law", as it would render the listing system useless and do away with a public company's duty of disclosure.
Consequently the appeal was allowed.
For further information on this topic please contact Simon Senaratna at Simon & Associates by telephone (+94 1 38 19 06) or by fax (+94 1 38 19 07) or by e-mail (firstname.lastname@example.org).
The materials contained on this web site are for general information purposes only and are subject to the disclaimer
ILO provides online commentaries as specialist Legal Newsletters. Written in collaboration with over 500 of the world's leading experts and covering more than 100 jurisdictions, it delivers individually requested information via email to an influential global audience of law firm partners and international corporate counsel. Please click here to register for the service.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription. Register at www.iloinfo.com.