Good governance activist Chandra Jayaratne has requested the Ministry of Finance and Planning to ensure the 2015 budget is formulated in the national interest and encourages new development activities and investment promoting growth, prosperity and livelihoods.

In a letter to the Ministry of Finance and Planning Secretary, Mr. Jayaratne has noted that it is important that persons of high integrity and independence, who possess the required expertise and proven track record of achievements in the relevant fields are appointed to the Company Law Reform Advisory Commission, that is due to be established with a mandate to recommend reforms required to the Companies Act and associated and ancillary legislative enactments and connected regulations.

He has written that in order to ensure effective and best practices, the Commission members should plan and complete the Commission tasks within a period of 18 months since their appointment.

“They should publish an interim white paper within 12 months so that it allows room for a further three months for public review, debate and submit the final recommendations with the publication of a report within three months thereafter,” Mr. Jayaratne has written further.

Furthermore, in his letter he has noted the importance of declaring and establishing that those appointed to the advisory Commission are ‘fit and proper persons’ with no conflicting interests in the performance of their assignment roles.

He has pointed out that the terms of reference of the Advisory Commission should inter alia set the objectives of the proposed reforms in order to:

·         Encourage company formation, in Sri Lanka and offshore, and

·         Facilitate effective operations and management of companies with enhanced efficiency, effectiveness and economy and thereby assure sustainable competiveness, enhanced growth and investments, and creating new livelihood opportunities, and

·         Facilitate good governance, due compliance, transparency and has added these reform objectives should further highlight the specific needs of the state including:

·         The need to attract new local and foreign investments

·         Encourage the informal sector to operate as corporatized entities

·         Attract further capital formation and spur capital and debt market operations.

We publish below the latter in full;

Secretary,

Ministry of Finance & Planning,

The Secretariat,

Colombo 1.

Dear Sir,

A Proposal to Make the 2015 Budget be in the National Interest and Lead to New Development Activities and Investments, Promoting Growth, Prosperity and Livelihoods

In response to the publicly advertised invitation, it is proposed that the Budget 2015 lead to the establishment of a Company Law Reform Advisory Commission, with a mandate to recommend reforms required to the Companies Act and associated and ancillary legislative enactments and connected regulations.

The primary tasks of the Company Law Reforms Advisory Commission should be to revise, reform, update and bench mark with appropriate global best practices, the Companies Act and associated and ancillary legislative enactments and connected regulations, in order to achieve the objectives set here under and thereby satisfy the longer term expectations of the state, the corporate sector stakeholders and the stakeholder of society seeking sustainable growth, prosperity and livelihood opportunities via corporate sector operations in Sri Lanka and overseas.

The terms of reference of the Advisory Commission should inter alia set the objectives of the proposed reforms;

1. In encouraging company formation, in Sri Lanka and offshore, and
2. In facilitating effective operations and management of companies with enhanced efficiency, effectiveness and economy and thereby assure sustainable competiveness, enhanced growth and investments, and creating new livelihood opportunities, and
3. To facilitate good governance, due compliance, transparency.

These reform objectives should further bring out specific emphasis of the needs of the state;

1. in attracting new local and foreign investments, and
2. encourage the bringing in of the informal sector to operate as corporatized entities, and
3. attract further capital formation, and
4. spur capital and debt market operations.

These reform objectives should also promote and safeguard the sustainable long term interests of all stakeholders.

Without dilution of the generality of above primary the objectives, the Commission should be inter alia be required to specifically address through the reform of the Companies Act, associated and ancillary legislative enactments and connected regulations or by new legislative enactments, the following law reforms linked or associated with an efficient, effective and well regulated corporate sector;

1. Takeovers, Mergers & Acquisitions
2. Chapter 13 type Bankruptcy Code
3. Insolvency and Winding Up
4. Recovery of Proceeds of Crime
5. Assurance of Directors, Officers and Key Managers being “fit and proper persons”
6. Duties, Accountability, Retiring Age and Remuneration of Directors, Officers and Key Managers
7. Declaration of Related Party Transactions and Conflicts of Interests
8. Control of Insider Dealings and Other Violations / Manipulations of Capital and Debt Markets Operations
9. Misrepresentations in Prospectus/Accounts/Reports, Defamation and Libel
10. Duties, Accountability and Remunerations of Auditors, Audit Reports and Accountability of Auditors
11. Transparency and Accuracy/Validity of Disclosures,  Accounts and Other Stakeholder Disclosures
12. Fair Value and Solvency linked Disclosures and Commitments
13. Public Safety, Consumer Protection and Environmental Protection linked Disclosures and Commitments
14. Good Governance, Ethical Conduct and Corporate Social Responsibility linked Disclosures and Commitments
15. Anti Bribery, Corruption and Policy Corruption linked commitments
16. Control of Corporate /Financial and Cyber Crimes, Money Laundering, Terrorism Financing and Transfer Pricing
17. Share Options, ESOPS and Derivatives
18. Assuring Effective Compliance, Control and Risk Management
19. Promoting and facilitating Small & Medium Size Companies and Not for Profit Operations
20. Mediation and Arbitration in Corporate Dispute Resolution

The Advisory Commission should be made up of persons of high integrity and independence,  with required expertise and proven track record of achievements in the relevant fields associated with Company Law Reform and the realization of the objectives set out herein before. These members must be required to declare and establish that they are “fit and proper persons”, “with no conflicts of interests’ in the effective performance of their assigned roles.

The Advisory Commission should be required to plan and complete its tasks within a period of 18 months from their appointment, with the publication of an interim white paper to be completed in 12 months from their appointment, allowing further three months for public review, debate and to submit their final recommendations with the publication of a report within 3 months thereafter.

I am sure that the above proposal will receive the due consideration of yourself, your advisory team and the Hon. Minister of Finance & Planning.

Yours Sincerely,

Chandra Jayaratne

cc. Secretary to the President,

Governor, Central Bank

Registrar of Companies,

Chairman, Law Reform Commission

Chairman, Securities Exchange Commission,

Business Chambers and Professional Organizations,

Editors of Media Institutions