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E.B.
Creasy AGM turns stormy
The incident occurred when shareholders asked probing questions about the firm’s performance amid allegations of financial irregularities. It comes amid growing concern among shareholders, especially minority shareholders, that they are not being treated properly and that corporate managements are not forthcoming enough about the way companies are run. Al Nakib, a Kuwaiti investor, who together with his brother T.T. Nakib controls 14.5 percent of E.B. Creasy, making them the second largest shareholders, was called ‘troublesome’ by the management at the annual general meeting (AGM) when he questioned certain transactions of the company. “I was going to ask a question and the chairman said that he knows me as a troublesome foreigner. Then a lot of minority shareholders defended me, saying that the chairman was behaving inappropriately,” Al Nakib told The Sunday Times FT. A minority shareholder, M. Mohideen, who defended Al Nakib, was threatened with ejection. Mohideen said he was disappointed with the way the board of directors conducted themselves at the AGM. Al Nakib said he challenged the chairman to enforce the threat but that then S.D.D.R. Arudpragasam, managing director of E.B. Creasy, intervened and said the threats were not meant for him. “But I said that it does not matter, because he is also a shareholder. I took it as an insult addressed to me,” he said. “They were very insolent and discriminatory, because I was a foreigner. I informed the house that since I was a shareholder, regardless of my nationality, I was entitled to ask questions.” Rajaratnam was not available for comment but Arudpragasam, Managing Director, E.B. Creasy, who was the deputy chairman of the AGM, responded to the allegations. Al Nakib said that he was also denied his right to talk to the auditors. “Since I did not get any answers, I walked out. I plan to take them to courts,” he said. The questions that he tried to ask were essentially about where monies that were entitled to the shareholders went to, but he did not get an answer from the chairman, A. Rajaratnam. Al Nakib alleged that E.B. Creasy, which acquired 4.5 million bonus shares from its subsidiary company, Lankem Ceylon had manipulated the funds by transferring them among the group companies. E.B. Creasy owns 80 percent of Lankem Ceylon. “When I asked why it was not reflected in the annual report, he did not answer the question and said that I was a troublesome foreigner,” he said. “Rajaratnam claimed that E.B. Creasy sold the shares on the market, but he would not give the price and the date of the sale.” The firm’s annual report does not make any specific reference to the share sale, he said. Upon checking CSE records, Nakib said that he found out that such a sale had not taken place. “Lankem Ceylon declared a bonus issue in 2004, where one share was given free for every two shares held. According to the annual report these shares were not reflected and I wanted to know what had happened, but I did not get an answer. I asked a legitimate question and these people were very rude to me,” Nakib said. He also alleged that E.B. Creasy was lending to companies that were not related to them. “In note 13 to the financial statements, there are 14 companies which are not at all related to E.B. Creasy. The only relationship is that some directors of E.B. Creasy sit on the boards of these companies,” he said. Nakib said that he obtained a court order in February, stopping E.B. Creasy from lending to these companies. “Despite this, they have lent funds to these firms. This is contempt of court,” he said. E.B. Creasy’s Arudpragasam said there were some differences of opinion at the meeting and it was not orderly with shareholders becoming unruly, while trying to talk at the same time. He said there was ‘one hostile shareholder’ at the AGM who was provocative. “He is a hostile shareholder, who had taken the company to court. We explained that the bonus shares he asked about were sold to Colombo Fort Land and Building Company (CFLB),” he said. He said Nakib is a short term investor in the CSE and the company cannot be managed to suit his needs. He said Nakib became a shareholder about one year ago and from the way he has been investing in the CSE, it is evident that he is a short term investor. “For the past 18 years, we have been managing the company. When it was near virtual liquidation, we managed to turn the company around,” he added. When asked whether Rajaratnam called Nakib a troublesome foreigner, he said the former had said so because Nakib had been hostile. “What the chairman meant was that usually non national shareholders were very friendly people who are cooperative with the management. In this particular case, he (Nakib) has been very hostile,” he said. Arudpragasam said that the bonus shares were renounced and the company managed to sort out some debts. The company has 20 large shareholders, who own 96.48 percent between them. The total shareholders amount to 503 and CFLB is the largest shareholder with 52.4 percent. “Together with associate companies of CFLB, it owns more than 75 percent in E.B. Creasy,” Arudpragasam said. “He was not allowing the meeting to be conducted properly, but we answered his questions,” he said. He said there was no necessity for Nakib to talk to the auditors, because the head table was willing to answer the questions. “It is not that we did not want him to question the auditors and he could always do so,” Arubpragasam said. He said that the company is in a particular group, owned by CFLB, and that this allows the transactions to the 14 firms. Nakib, however, said these companies are owned by CFLB, but not by E.B. Creasy. “Therefore it is not legal,” he said. Arudpragasam said foreign shareholders are always welcome to invest in the company, but when they try to influence company decision making for their short term gain, the management has to be prejudiced against them.
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