21st December 1997

Radical reforms in new Company Law

A proposed new Companies Act would make far reaching changes to the present Act bringing Sri Lankan legislation in line with developed markets.

One of the recommendations is that the concept of 'par value' in company shares be ended so that the stated capital reflect the actual financial status of a company.

Members of the Company Law Advisory Commission presented their draft legislation to Trade Minister Kingsley Wickramaratne last week.

"This will soon be presented to parliament in the form of a Draft Bill thus paving the way for the enactment of proposed changes," Minister Wickramaratne said.

The trade ministry said the new law would bring changes that would enable the corporate sector to function more effectively and respond to the demands of a rapidly changing environment.

The existing company law enacted in 1982 is based on the British company law of 1948.

The Act would provide for the incorporation of single shareholder companies when the single shareholder is itself a corporate body.

The commissioners having observed the existence of many businesses having one single controlling shareholder and others nominally being present merely fulfilling a legislative requirement had decided to allow incorporation of single shareholder companies.

The commission also hopes to bring down the incorporation costs for small business so that incorporating will become more popular.

The commission had also proposed the introduction of clear guidelines outlining the duties of directors and their accountability to the public.

How Santa was painted red

By Mel Gunasekera

Father Christmas or Santa Claus, as he is popularly known has been around for nearly a thousand years. But, Father Christmas did not really come into his own until he posed on his 900th birthday for a portrait by an artist named Haddon Sundblom.

You may wonder why jolly old Santa is featured on the business pages. But, Sundblom is attributed to using the renowned red and white corporate colours of Coke to paint the loveable red and white Santa Claus we all know today.

Ever since Coke was first sold a century ago, the company has grown from strength to strength creating a strong corporate image. The image created exists in the minds of people, helped by corporate identity. People see with their eyes in the form of logos, typography, house colours, which is physically represented in forms of dress, transportation, print and advertising.

It all began on 8th May 1886, in an untidy railway town of Atlanta Georgia when Dr. John Styth Pemberton, an experimental pharmacist who sold tonics and dubious remedies mixed the secret brew in his backyard.

This tonic, a mixture of water, sugar, fluid extract of a Kola nut, and other 'herbal extracts' (the secret Seven X formula), was marketed as a 'brain tonic', bringing relief to headaches.

Pemberton's partner and book-keeper coined the name 'Coca-Cola'. He thought the two C's would go well in advertising, and penned the now famous trademark "Coca-Cola", in his unique ornate script. He also mentioned Coca-Cola was "delicious and refreshing", a theme that continues to echo today, wherever it is advertised.

Coca-Cola has grown into the most successful brand name in the booming advertising market. Over the years, polar bears, sexy women, kids with happy families have appeared, to market the famous drink. But, the most beloved Coke character of all time, represented in various memorabilia is none other than Santa Claus himself.

Obviously, the Coca-Cola company does not lay claim to having invented Santa, but he has never been more popular, than when he began appearing in the ads developed by Sundblom in 1924.

He began working on his first Santa in 1931. Santa had previously been pictured by artists in red or green or dressed in animal furs. A number of prominent illustrators had tried their hand at rendering of St. Nicholas for Coca-Cola, but none quite captured the ebullient spirit of that jolly old elf, until Sundblom's irresistible creation came down the chimney, with his gentle smiling, rosy cheeks and twinkling eyes. It has been rumoured that Sundblom chose red with white trimmings, simply because that was the Coca-Cola trademark.

The reason behind Sundblom's choice of colours remains a mystery todate.

Others say since the colours were introduced during the second world war, it was merely a way of bringing out patriotic feelings of America and, most important, the stars and stripes - its flag.

Coca Cola in Sri Lanka told The Sunday Times that it was aware of the history and a Santa caravan was going around housing schemes promoting the company.

As Santamania continues to reign throughout today's highly commercialised world, rival soft drink giants have brought out their own version of St. Nick, dressed in blue or green, with white trimmings but Santa has steadfastly remained red and white.

And Coke has become the world's most famous brand with the help of its most famous and enduring spokesman: Santa Claus.

Telecom monopoly under fire

The decision to give a monopoly on international calls to the now privatised Sri Lanka Telecom while the regulatory structure is still in its infancy has come under fire from legal experts.

"Concerns arise as to whether the existing telecommunications industry could in fact maintain and promote efficient competition within the industry if a single operator is permitted to have sole access to certain indispensable areas such as international access,"former Securities and Exchange Commission Director General Arittha Wickramanayake told the 5th National Law and Economy conference organised by the Law and Society Trust. Although it could have been justified under state ownership, such an advantage could not be justified after it has been privatised, Mr. Wickramanayake said.

''The fact is that the ultimate cost of this 'subsidy' is borne by the consumer and this goes against the grain of the Telecommunications Regulatory Commission Act," he said. "The Act sought to provide the Commission with powers of investigation and inquiry and required it to perform a quasi judicial role. Experience has however shown that such bodies composed of non-executive members find it hard to meet these responsibilities in the manner envisaged by the law," Mr. Wickramanayake said.

Participants at the seminar said there were questions whether the Commission could act independently. Though the Commission was not required to act on the directive of the Telecommunications Minister, other than in certain specified situations the Chairman of the Commission, the Secretary to the Minister was a public servant, working under the Minister. The Act also had provisions to hold public hearings but not a single hearing had been held so far.

Mr. Wickramanayake said that in order to be equitable it is necessary that the regulations which exist in the sector provide adequate safeguards for all the stakeholders in the industry including operators, consumers and other users of the services provided by the industry. "In addition to equity between the various stakeholders, the regulation should also be equitable between the operators themselves," he observed.

Lanka: a base to carve gemstones

A French speciality jewellery designer who is setting up a jewellery factory in Sri Lanka is hoping to make Sri Lanka a base to carve gemstones.

The initiator of the project Bernard Robisco said, the recent liberalisation of the gem and jewellery industry had tipped the scales in favour of Sri Lanka.

Mr. Robisco had chosen Sri Lanka over Thailand, despite the devalued Baht making Bangkok competitive.

"We tried to do it in Thailand, but since the situation is not that good, we have moved our entire operation to Sri Lanka," he said.

"In Bangkok you pay 7 per cent as VAT and another 10 per cent for foreign exchange transactions, so it is very expensive to do business there, unlike Sri Lanka."

Operating under the name Myway Creations (Pvt.) Ltd., the investors in the US $ 5.5 mn project also intend to establish a design centre for talented youngsters to create and design jewellery.

Speaking to The Sunday Times Business, Bernard Robisco, Myway Creations said, this project is the first of its kind in Sri Lanka.

"But we hope to invest an additional US $ 10 mn as part of our expansion programme," he said.

The project would be completed in three stages.

Phase one would see a facility to design carvings for rough precious and semi-precious stones imported from his Ruby mines in Tanzania.

The stones mined in Longido, Tanzania nicknamed 'watermelon ruby' has ruby crystals growing inside a greenish mineral called zoisite.

The large crystals are suitable for carving animals with background foliage. Some carvings could fetch up to two million dollars per piece. Some of these collectors items would be especially made for super-rich customers.

Sri Lankan artists will be used to design the stones, which will then be sent to a factory in China for carving.

Thereafter, the carvings will be sent back to Sri Lanka to add the finishing touches, which may include fixing precious stones found in Sri Lanka to the final product.

"We are sending the stones to China because the workers in that factory know how to carve out the designs," Mr. Robisco said. "Once the Sri Lankan project gets under way and the staff are suitably trained, we can start carving the stones here in Sri Lanka," he said.

Phase two would see the manufacture of gem studded jewellery using some of these carved stones for export. The final stage will be the manufacture of gold and silver plated rings for export, he said.

The company intends to start with 10 designers initially. "It took me about 5 years to develop the Chinese to carve the stones to my way of thinking, despite the Chinese being famous for their carvings." (M. G.)

Continue to Business page 2 * Pugoda: PERC seeking more offers * Impact of East Asian miracle's crisis * Garment industry:the other side?