News
Govt. to repeal controversial Takeover Act
The Cabinet this week approved the repeal of the controversial Revival of Underperforming Enterprises or Underutilized Assets Act of 2011 under which the previous administration abruptly took over 37 institutions, including private companies, and sent shockwaves through the investor community.
The repeal Act, which is in draft form, ensures that the relevant institutions and properties are vested in the Secretary to the Treasury for and on behalf of the State. As such, he or she will be custodian of these assets. The Act does not return these assets to the previous holders who include well-known entrepreneurs such as UNP Parliamentarian Daya Gamage and business tycoon Harry Jayawardene.
“The sole objective of repealing this Act is to reassure worried investors that it will not be used again,” said a source from the Ministry of Public Enterprises under whose purview the subject matter lies.
“All acts done under or pursuant to the repealed Act for the purpose of control, administration, management and revival, as the case may be, of underperforming enterprises or underutilised assets and the execution of all contracts and deeds, agreements, memorandums of understanding, guarantees, powers of attorney of whatever nature and all licence permits and approvals obtained in relation or in pursuance thereto be valid in force in accordance with the terms thereof,” the draft repeal Bill states.
The Revival of Underperforming Enterprises or Underutilized Assets Act was enacted to vest the “underperforming enterprises or underutilized assets” with the Government and make provisions for “their proper management, administration or revival and for the payment of relevant compensation”.
But it created a strong sense of uncertainty in the minds of investors and had an adverse effect on the country’s ease of doing business, the Cabinet was told this week.
The legislation was passed as an urgent Bill in 2011. It was quietly sent to the Supreme Court for a determination–but the then Government prevented the draft from being accessed by anybody before the 48-hour deadline for the SC ruling had passed.
The Supreme Court registrar refused to release a certified copy until the Court’s decision was conveyed to the President. A draft went to Parliament and to the Opposition Leader only after the SC made a determination and communicated it.
All this effectively prevented the raising of any objections and led to serious concerns that the Government, in introducing this bill, intended to take over private institutions at will. The Bill was also drafted by a private company. Laws are usually drawn up by the Legal Draftsman’s Office.
The underperforming enterprise named in the Act was Hotel Developers (Lanka) PLC, the owning company of Colombo Hilton. The underutilized assets named are the Pettah property of Charmers Granaries; the Badulla properties of Colombo Commercial Company; the Pettah and Narahenpita properties of Lanka Tractors Ltd; land belonging to Pelwatte Sugar Industries Ltd; and land owned by Sevanagala Sugar Industries Ltd.
Acquired, too, was the property of Sinotex (Lanka) Ltd; Jaqalanka Ltd; Plymouth Industries (Pvt) Ltd; Cosmos Macky Industries Ltd; Kabool Lace (Pvt) Ltd; former Cashew Corporation land; Intertrade Lanka (Pvt) Ltd; Suchir NEB Projects (Pvt) Ltd; Ceylinco Leisure Properties Ltd; Seetha’s Fashion (Pvt) Ltd; D.C. Apparel (Pvt) Ltd; Needle Crafts (Pvt) Ltd; HY Fashion Garments (Pvt) Ltd; Collins Garment (Pvt) Ltd; Ruhunu Putha Apparels (Pvt) Ltd; and Sanjaya Garments (Pvt) Ltd.
The remaining companies on the list were Macfa Apparel (Pvt) Ltd; Yobeedha Associates (Pvt) Ltd; Dynamic Clothing (Pvt) Ltd; 609 Polymers Exports (Pvt) Ltd; Cosco Polymer Lanka (Pvt) Ltd; Great Wall Thread Manufacturing (Pvt) Ltd; Adamjee Extractions (Pvt) Ltd; Data Food (Pvt) Ltd; Tendon Lanka (Pvt) Ltd; Rican Lanka (Pvt) Ltd; Composite Tower Solutions (Pvt) Ltd; Health Food Products (Pvt) Ltd; Sri Chirag (Pvt) Ltd; Royale Exports (Pvt) Ltd; and Continental Vanaspathi (Pvt) Ltd.
The law defined “underutilized asset” as land that was once owned by the Government but alienated to any person by outright sale, lease or through a divestiture on the basis this would result in generating employment, foreign exchange earnings or savings or economic activities beneficial to the public, but where such benefits have not accrued.
It could also be land owned by a person who had been granted tax incentives, incentives under the Board of Investment Law or regulations framed there under, or any government guarantee, but where the desired benefits have not accrued.