Aggrieved depositors of the failed Golden Key (GK) Co, which triggered many collapses across Sri Lanka’s finance company sector nearly two years back, will have to wait longer for their money despite reports this week that the formation of a new company could end their problems.
Though it was announced this week that a limited liability company under the name of GKCC Special Purpose Vehicle Company Ltd will be formed to operate as a viable business venture under the supervision of a Board of Directors and an advisory council, and that everyone including depositors had agreed to the proposal at a meeting at Temple Trees presided over by President Mahinda Rajapaksa on Monday, a group of depositors filed an affidavit in Court – three days later – on Thursday saying they are not in favour of the way the company is being structured.
GK depositors told the Business Times that although they agreed to the formation of the new company and the transferring of all GK assets to this firm, they were not in favour of the proposal of issuing share certificates to them in proportion to the amont outstanding for each depositor instead of being paid their full amount.
President of the GK Depositors Association Anusha Emmert told the Business Times that they filed an affidavit at the Supreme Court on Thursday against this move. Even at the meeting with the President on Monday they made it clear that depositors wanted money and not shares or high director positions in the new company or other companies.
Under the new plan, the assets will be sold but ploughed back to the company and channelled to investments that would eventually increase profits and earnings. The rationale behind this, a senior official of the Central Bank told the Business Times, is because the assets are worth just Rs 2.2 billion compared to the liabilities (money owned to 7,100 depositors) being Rs 26 billion. The decision to issue share certificates had been taken due to this reason, he said, adding that the depositors will now not be able to sell their shares until the company is transformed into a viable entity.
He said the plan proposed by the Central Bank had received the nod of parties concerned including the 3-member Chartered Accountants Committee, Attorney Generals Department and depositors, at the meeting. Depositors however, according to Ms Emmert, have a different story.
The blue-print of the new firm will be presented before the Supreme Court on Wednesday, October 27 when the GK case comes up. According to the decisions taken at the Temple Trees meeting, a board of directors and panel of advisors representing the sareholders would be appointed to the company which in turn will manage some of the properties while others will be sold and the money ploughed back and used in new investments.
“The main aim of the company will be to address the problems of the depositors by creating profits and value that can give direct returns to shareholders,” the Central Bank official said. The Central Bank will act as the facilitator of this process.
The formation of the Special Purpose Vehicle was done in accordance with a Supreme Court directive issued in 2009 after depositors went to court after the company collapsed in late 2008. The collapse triggered a run on deposits in other firms in the group. The Court also permitted on August 6 this year for a new bank account to be opened in the name of this company. Therefore this was not a new arrangement, the official said. But he conceeded that the modalities of the company had not been finalized at that time, due to ongoing valuation of GK assets.
Dushyanthi Hapugoda, President of the GKCC Depositors Association, the breakaway group of GK Depositors Association, who also attended Monday’s meeting, said her group is not opposed to the issuance of shares to depositors. She said the new company should be operated by qualified professionals who can make it as a viable entity and representatives of depositors should be appointed to a committee of observers but not as directors of the firm. |
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