Two heads of Touchwood resign amidst attempts to resurrect the firm
View(s):Two heads of Touchwood Investments, the troubled forestry management company have tendered their resignations on Friday in the wake of attempts by new investors to resurrect the company .
In a stock market disclosure,Touchwood Investments announced that its Chairman Roscoe Meloney and Vice Chairman / CEO Swarna Maloney have resigned from the positions they were holding in the company.
The announcement said that their resignation came into effect from the 26th of September. It added that the husband and wife duo would remain as ‘Non Executive Independent Directors’ of the firm.
Meanwhile the Colombo Stock Exchange said that it has imposed a Trading Halt on the company pending a disclosure regarding media reports.
This is the third time trading has come to a halt and it came early morning – about an hour into trading. The share gained by more than 50 per cent witnessing enormous retailer participation on Thursday
New investors of the company , on Thursday pledged to invest US$21 million from overseas business interests to bail out the organization.
The move came even as the Securities & Exchange Commission (SEC) said it was continuing a probe in the company’s affairs.
The no-interest loan from Singapore backers of the new investors was sufficient to lift the company from its present plight, which is due to the fault of some staff and outsiders, according to company’s out going chairman Roscoe Maloney. These announcements were made at the company’s 14th annual general meeting held at Hotel Renuka, Colombo and chaired by new Executive Director cum acting CEO Lanka Wijendra Kiwlegedera, a former senior manager at the company, who was appointed to both positions this week.
An elderly shareholder being given a helping hand to attend the AGM. Pic by Nilan Maligaspe.
Shareholders were told the loan is returnable in 10-15 years time.
In a stunning series of announcements on Tuesday and Wednesday, the embattled company said ruling party parliamentarian Duminda Silva, who is a suspect in a murder case, has been appointed as an executive director while Solomon Kankanamge Dhammika, Vice Chairman of the South Asian (7-a-side) Football Association and Director of Benchmark Education Institute, Matara has been appointed Executive Director.
The announcements saw the share price soar to Rs 4.70 per share from Rs. 3.10 and even lower as speculators took over sensing Mr. Silva’s entry as a signal of powerful government backing to resurrect the firm.
Mr. Maloney is abroad but he spoke through a video-presentation where he said the crisis was due to manipulation from within the company and outside.
He was confident that the new team would resurrect the company and called for shareholder support to the bail-out plan. Mr. Kiwlegedera who chaired the meeting as pro-tem chairman said the entry of Mr. Silva with his business interests here and overseas and strong government connections would result in state support for the firm.
The pro-tem chairman announced the new directors who were however not present at the meeting.
Shareholders complained that there was no intimation to them about the new appointments, apart from the announcements in the market.
They were also told of plans to further re-structure the board of directors of the company, in which Maloney and his wife Swarna (founders of Touchwood) hold a small stake.
Other directors at the head table were L.L. Kulathunga, the most senior director, Soloman Dammika and Upul Pieris. Ms. Swarana Maloney, Vice Chairperson was not present.
In the past 10 days, the SEC has suspending trading in the company shares on two occasions amidst a probe into its affairs while a depositor/investor in the company has filed a winding up action.
Asked whether the probe is over, a SEC spokesperson said, “No … not yet, the investigation is still going on. As a policy the SEC does not give information out about the progress of ongoing investigations.”
K.C. Vignarajah, good governance activist and shareholder, welcomed the new initiative saying any effort to resuscitate a troubled company should be appreciated. However he pointed out that the board had not followed the due process of 21 days notice to shareholders on the appointment of new directors before the AGM was held.
He also cited Art. 275 of the Companies Act which says that in the event of a winding up action all share transactions are void unless a court decides otherwise. He was also concerned that the SEC had lifted the ban on trading without any explanation to shareholders.
However Mr. Kiwlegedera said the company has enough money and this situation has been explained to the SEC.
One of the shareholders, present at the AGM, told the Business Times on the sidelines of the meeting that, “the management will be bringing about US$21 million to solve some of the problems within the company. The new independent director Mr. Duminda Silva is a business man and his involvement in the company is good in a way. If he does something bad it will tarnish his name.
He will do something good to the company. The newly appointed directors are bringing money to solve the cash flow problem.”
Another shareholder said the government has planned to donate 2000 acres of land to the company to plant sandalwood. “It is with the support of Duminda Silva that the government has planned to do so,” he said.
However another shareholder Dr. M.G.M.S Zurfick, Falcon International President, asserted that, “I don’t have faith in the company because when you are doing business you need to answer the queries made by the shareholders. I was asked to come to the AGM and I wanted to find out what exactly has happened to the board. When a person invests his or her money they will definitely expect a good profit. What is the point of investing money? Also a lot of mitigations are going on within the company. When mitigations are taking place the new investors will come in and the old shareholders will pull out. This is what is going to happen. The relevant authorities are not providing me with the contact details for me to clear out my doubts. Without hiding anything they must tell the truth,” he said.
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