Readers
write........
Are shareholders at
the mercy of managers to a takeover offer?When
an offer is made in terms of Section 10 of the
Takeovers and Mergers Code of Sri Lanka, the
mandatory offer is restricted to a period,
perhaps stated in the relevant section?
In the most recent case of a local industrial
company the document was dated 14th August 98 and
valid to 4th September 98, a period of 3 weeks or
21 days.
I do not know whether payment was made by the
offerer to the offeree on a T + 5 or T + 6 basis
as is prevalent on the Colombo Stock Exchange at
least in respect of the shares lodged with CDS,
on receipt of the Acceptance and Transfer
Document duly Authorised by the offeree’s
Broker. The same may not apply to offerees with
Share Certificates which must be certified as
authentic by the Company Secretaries, following
prior frauds that occurred on the Colombo Stock
Exchange prior to CDS transactions being
initiated.
A situation arose in respect of the initial
offer made by a foreign company whereby 77.18% of
the total offered for purchase, was accepted by
shareholders and other directors of the company
as well, including the managers to the takeover
offer, who sold out at a loss of rupees 6 million
apart from their subsidiary that had obtained a
concessionary premium when the company made its
initial public offer for listing on the C.S.E.
and did likewise. The majority shareholder and
chairman of the board of directors of the company
initiated the sell out on July 98, having signed
the chairman's report June 98, 23 days earlier.
It is significant that the annual report was sent
to shareholders after the offer closed on
September.
Was the firm of chartered accountants hired by
the board of directors for a valuation made aware
of the chairman's report and the decision not to
pay a final dividend, at least to equal the
previous years dividend, when in fact the profits
after tax had increased by 66.7%?
Though these strange matters are for the
regulatory bodies, to investigate, with the
foreign company at the close of the offer
September 98 owning 93.92% Section 209 (2) of the
Companies Act No. 17 of 1982 was triggered.
Consequently by letter dated September 98 the
remaining shareholders representing 6.08% share
holding or just over 600,000 shares received a
2nd offer to purchase, at the same price of Rs.
38. Who are these small fry? Three share holders
have 100,000 to 155,000 shares. Seven have 5000
to 30,000 shares. Eleven have 1000 to 4000 shares
amongst smaller hopefulls.
I raised various questions for clarification
at the A.G.M. in October 98 which were neither
answered by the Chairman who had been the
majority shareholder nor the foreign directors
after their election, to clarify the position of
this 6.08% shareholder representation in respect
of the specific issues raised.
In disgust, in every October, the 1st working
day after the A.G.M. I procured the forms that
had not been sent with the letter of September
for acceptance and transfer in respect of the 2nd
Offer. Five of them dated October in respect of 4
family members through 2 brokers and a sixth from
my neice perhaps dated middle October through a
3rd broker have been sent and are with the
managers.
As at Friday late October 3.30 p.m. the C.S.E.
nor CDS, had received the 5 acceptance and
transfer forms for transfer to the reserve
account as CDS procedure would have it. The 2nd
offer to these shareholders is open till the last
day December 98.
The question I have asked the secretary
general of the Securities and Exchange Commission
is. Is there no settlement day limit (number of
days) in respect of acceptances and transfers
duly made by shareholders, authorised by brokers
and received by the managers in respect of the
2nd offer necessitated by Company Act Section 209
(2) simply because it is open for 3 months?"
The company had only 331 shareholders as at
31st March 98. How many are there to service at
the 2nd offer? Although the shares remain in our
CDS accounts the broker will refuse to sell them
in the market having authorised transfer to
the foreign company and themselves having handed
over the papers to the managers. I await the
secretary general's reply.
Dr. N. I.
Wikramanayake,
Stock Market Investor
|
