1 October, 2020

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Economic Crimes: Take Early Steps To Initiate Proposed Company Law Reforms: Chandra Jayaratne

“In the light of serious economic crimes believed to have taken place over the last two decades, as ascertained from investigations and media exposes, purportedly challenging to a significant extent the macro-economic growth, stability, sovereign ratings and solvency of the state, state owned enterprises and selected key private sector businesses, along with a host of innocent citizens, it is an urgent priority,” says a former President of the Ceylon Chamber of Commerce and good governance activist, Chandra Jayaratne.

Chandra Jayaratne

Writing to the leadership team, Jayaratne urged them to take early steps to initiate the proposed Company Law Reforms.

We publish below the letter in full:

To:

Secretary, Ministry of Industry & Commerce,
Registrar General of Companies,
Governor of the Central Bank,
Chairman, Securities Exchange Commission,
Chairman / Secretary START,
Chairman, Ceylon Chamber of Commerce,
President, Bar Association of Sri Lanka,
President, Institute of Chartered Accountants of Sri Lanka,
Chairperson, Sri Lanka Institute of Directors,
K. Kanag-Ishvaran P.C. Chairman of Company Law Advisory Committee,

Priority Company Law Reforms Requiring Leadership Attention: Expanding the Provisions of Part XXI-Offences-of the Companies ActNo.7 of 2007

In the light of serious economic crimes believed to have taken place over the last two decades, as ascertained from investigations and media exposes, purportedly challenging to a significant extent the macro-economic growth, stability, sovereign ratings and solvency of the state, state owned enterprises and selected key private sector businesses, along with a host of innocent citizens, it is an urgent priority, that in addition to

* the early enactment of the proposed Proceeds of Crime Act, and

* effective enforcement by law enforcement agencies of the penal provisions of existing laws and regulations against offenders of serious economic crimes, and,

* Business Chambers and Professional Association taking steps to enforce ethical professional conduct by their respective memberships, with the imposition of stern disciplinary action upon failure by members in assuring due compliance with laws and regulations (NOCLAR)
that by appropriate Company Law Reforms, the Provisions of Part XXI-Offences-of the Companies Act No.7 of 2007 be expanded/amended without delay.

It is recommended that a multi-stakeholder group of nominees representing each of you, be charged with the responsibility of jointly developing the essential amendments to Part XXI-Offences-of the Companies ActNo.7 of 2007and thereafter progress with leadership commitment the effective implementation of the agreed reform agenda.

The Stakeholder Group is urged to consider the expansion/amendment of the Provisions of Part XXI-Offences-of the Companies ActNo.7 of 2007 to include the following recommendations:

· Where any Company registered under the Act has engaged in any serious economic crimes associated with money laundering, transfer pricing, tax avoidance, bribery, corruption, illegal transfer of state property, securities offenses, smuggling, trading in narcotics and dangerous substances, cross border illegal transfers of currency/gems/precious metals, the violation of regulations governing the management of foreign exchange, and or the violation of any written law for the time being in force relating to offences connected with the Poisons, Opium and Dangerous Drugs Ordinance (Chapter 218); the prevention and suppression of terrorism; the Bribery Act (Chapter 26); the Firearms Ordinance (Chapter 182); the Explosives Ordinance (Chapter 183); the Offensive Weapons Act, No. 18 of 1966; or an offence under the Banking Act, No. 30 of 1988;and any law for the time being in force relating to transnational organized crime; cyber crime: the Prevention of Money Laundering Act, No. 5 of 2006 ; offences against children; trafficking or smuggling of persons; the Customs Ordinance (Chapter 235) and any Regulation, Rule or Order made there under; the Excise Ordinance (Chapter 52) and any Regulation, Rule or Order made there under; the Payment Devices Frauds Act, No. 30 of 2006 and any Regulation, Rule or Order made there under; the National Environmental Act, No. 47 of 1980 and any Regulation, Rule or Order made there under;
every person who at the time of the commission of the offence was a director, secretary or other similar officer of the Company; or any person acting for or ‘on behalf of such a person’ shall be deemed to have committed an offense under this Act and upon conviction shall prevented by the Registrar of Companies from functioning as a director, secretary, officer or auditor of any company registered under the Act

· Amend Section 511 to read as:
“Where in any return, report, certificate, prospectus, statement in lieu of a prospectus, annual report, directors report, balance sheet, audit certificate, valuation, directors opinion on any valuation, going concern status, solvency and serious loss of capital, or in any other document, required by or for purposes of this Act or published in satisfaction of any provisions of this Act, any person willfully makes a statement or quotes from a statement of a third party, which statement is false in any material particular knowing it to be false, shall be guilty of an offences and be liable on conviction to a fine exceeding Rupees one million and to a term of imprisonment exceeding five years”

· Amend the last paragraph of Section 512 to read as:
“Shall be guilty of an offence and be liable on conviction to a fine exceeding Rupees one million and to a term of imprisonment exceeding five years”

· Introduce a new section, where any business of a company is carried on with intent to

o defraud creditors of the company or creditors of any other person, or

o defraud shareholders of the Company, or

o Oppress the rights of minority shareholders, or

o for any fraudulent purpose,
every person who is knowingly a party to the carrying on of the business in that manner commits an offence and be liable on conviction to a fine exceeding Rupees ten million and to a term of imprisonment exceeding ten years

· Introduce a new Section whereby:

a company fails to file a special resolution with the registrar of Companies within 15 days after it is passed, the company and any officer who is in default commit an offence
if a company fails to include the required details in its register of directors, and in its register of charges, the company and any officer who is in default commit an offence
a director who fails to declare an interest in an existing transaction with the company commits an offence

· where in the case of a company limited by shares or by guarantee that has only one member. And such member takes any decision that—

(a) may be taken by the company in general meeting, and

(b) has effect as if agreed by the company in general meeting,

And he fails to (unless that decision is taken by way of a written resolution) provide the company with details of that decision such member he commits an offence.

where the directors fail to prepare a directors’ report for a particular financial year, any director who failed to take reasonable steps to ensure that a report was prepared commits an offence
and such offenders shall be liable on conviction to a fine exceeding Rupees one million and to a term of imprisonment exceeding five years

· The term of imprisonment exceeding five years referred to in Sections 511 and 512 above is essential in order that such offenders can be charged in addition under the Prevention of Money Laundering Act and the provisions of that Act relating to the recovery of proceeds of crime could then be enforced

· Where an offence under this Act is committed-

o every person who at the time of the commission of the offence was a director, secretary or other similar officer of the Company; or

o by any person acting for or ‘on behalf of a person’ referred to in the above subsection of this section

shall be subject to the provisions of this part of the Act:

· The Section 514 of the Act allowing Compounding of offences are not to be applied in the case of offenses referred to in Sections new sections to be introduces as recommended above, as well as offenses under sections 511 and 512 as amended

I trust that considering the importance of these submissions in assuring national and citizens’ risk management and macro-economic growth and stability, the leadership team addressed, supported by those copied in on this letter, will take early steps to initiate the proposed Company Law Reforms.

Yours Sincerely,

Chandra Jayaratne

cc. President and Minister of Law & order
Prime Minister
Minister of Justice,
Attorney General,
Auditor General,
Speaker of Parliament
Chairman, Public Finance Committee of Parliament,
Chairman, Public Enterprises Committee,

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Latest comments

  • 7
    1

    what about politicians looting public money? Are you joking, compared to all money, politicians loot from public fund, from all sorts of contracts, and from all sort of mega projects as commission, what you are talking is peanuts, the main cause of Sri Lankan downfall in economy is corrupt political leadership,? what about Central bank scam? what about money we lost to China for fake contract? such as Mattala airport, While major crimes in finance sectors are committed, you do not open your mouth for fear of life threat from big people, now you have picked up this type of fraud, it is not bad one, but go for big one as well, we count 100 rupees in fraud, but forget one billion rupees in fraud, when a public steals some thing worth of 1000 rupees we punish but when politician steal millions from public money we do not speak out for fear of thereat? what is wrong with mind set of Sri Lankan academics, experts and economists….

    • 6
      1

      Good work Cahndra, keep it coming!
      Sri Lanka needs a discussion on Debt Cancellation and accountable lending practices, based on work of the Jubilee Debt Campaign in London.

      Fact is that the serious economic crimes of the current Bondscam Ranil and Colombo 3 mafia are worse than all others, and obviously Bond Ranil must share a prison cell with Mahinda Rajapaksa and his US citizen brothers Basil and Gota whose funds are safely in LA.
      Bond Ranil and mafia have put Lanka into the IMF debt trap and “Bail Out Business” and exposed Lanka to what the Africa Development Bank (AfDB) terms “Vulture Funds”. 55% of Lanka’s sovereign debt is held by shadowy international bond traders WHOSE NAMES ND IDENTITIES WE DO NOT KNOW?!!!
      So, though Sri Lanka paid $1 billion of its sovereign debt this year and is due to pay another $4 Billion, the names of these international sovereign bond traders who hold Lanka’s debt stock and to whom Lanka has been mortgaged, and who are crashing the rupee are NOT know. The CBSL is sitting on this information and has embargoed it like it has the full bondscam Report

      • 6
        0

        There is a massive financial Crime unfolding in front of our eyes at this time: A Land Grab that destroy agriculture and fill up paddy lands in Sri Lanka, and turn Lanka into a US Military Base.

        Bondscam Ranil and his mafia are bragging about setting up a Bingiriya Industrial park and export processing zone though there is NO FDI coming to Lanka. Not a single name of a real investor for whom all this land is being grabbed is specified. This will be like the Volkswagon Car factory and Horana Tire factory for which lands were appropriated.

        Ranil has said, “we seek 4,000 acres in Trincomalee. Five thousand acres have been allocated for Hambantota. Another ten thousand in Moneragala and one thousand acres in Kalutara. There are 100 acres of Mawathagama. 600 acres will be inspected in Kuliyapitiya.”

        The land grabs to set up infrastructure for Trumpands military bases and supporting infrastructure continue in Lanka as in Chagos islands/ Diego Garcia military base- in the name of Human Rights and Security for Indian Ocean, when in fact Trump is the single biggest threat to world peace at this time ..
        Although there is no Foreign Direct Investment (FDI) coming to Sri Lanka after the loss of investor confidence caused by the Bondscam in the CBSL Prime Minister Ranil is requisitioning massive amounts of strategic lands for industrial development despite Lanka’s labour shortage, lack of skilled industrial labour and

        PUTTING THE CART BEFORE THE HORSE: Filling up paddy fields and land grabbing for Industrial parks for FAKE DEVELOPMENT PROJECTS! These ‘economic development’ plans are dratted in Washington by Millennium Challenge Corporation (MCC) to benefit Trumpland and its strategic interests in Indian Ocean

      • 5
        0

        Best thing is file a RTI case against CBSL to get this information regarding the names of the international bond traders and wealth funds that hold Lanka’s soveriegn debt and then start a debt cancellation discussion with these bond traders.
        Of course the London Club exists for this, and the Paris Club of Aid donors (OECD) have put Lanka into the debt trap in the first instance with Trumpland’s proxy Japan and ADB playing a key role in Debt trapping Lanka
        . This is the new way that IMF stays in busines, as its HIPC bailout project was turned down by many impoverished countries (a decade ago and IMF almost had to close down cos it had no clients), because of exposure to Vulture Funds which asset strip countries via court cases against debt trapped countries.
        Now IMF and WB first say that you are a Middle Income Country (MIC), force poor countries to borrow from international bond markets because as an MIC you cannot get concessionary loans. This is the Washington Consensus MIC Debt trap to keep IMF and WB in Business for the America First and global 1 percent.

        • 1
          0

          Sri Lankan Airlines was to be sold off to a American Vulture Fund – Texas Pacific Group (TPG) when Eran Wickramaratne was re-structuring Sri Lankan. That was until the Australian Government took TPG to court for asset stripping a Health care company in that country.

          There are a lot of US-EU-Japanese Vulture funds circling around Lanka at this time to asset strip resources via Public-Private-Partnerships (PPPs) with corrupt SOEs.

  • 2
    0

    Directors/promoters of publicly traded companies need to be held liable for defrauding shareholders. Ordinary shareholders have had their investments wiped out due to private placements prior to IPO (Softlogic, Expolanka) and theft of company assets procured using shareholder funds by directors of public companies (Expolanka “selling” Norfolk to the directors’ personal company)

    Additionally, bribery commission should be empowered to act against officials of publicly traded companies who solicit and accept bribes. It is no secret that directors and procurement personnel enrich them by bribes and related party transaction

  • 1
    0

    ‘what is wrong with mind set of Sri Lankan academics, experts and economists….’

    All pandithayas. They want to see their name in print. They don’t really expect anything to change in Paradise.

  • 2
    1

    I wonder why persons like CJ still try to put the parties of Sirisena, Rajapakse and Wickramasinghe on the correct path without seeking for a new leadership and a party.

  • 2
    0

    Mother of all crimes if SL is bribe taking. Just close that and the country will prosper. Start monitoring and declaring income and assets of key officials of key state departments on periodic basis.

  • 2
    0

    I heard Thilanga Sumathipala embezzled rs six billion. that can be true because people say 83 people from shammi silva’s side Sumathipala fans. How come. then Sumathipala went to Dubai. what was his intention.

  • 3
    0

    It says, when Ranil come to this time 100 day govt, with the 42 seats out of 225, Ranil already had experience in Evaporating govt wealth. Bond scams had begun in 1997. Ranil was there. At that time, he also was the responsible minister for the Sri lanka’s Worst PORT involved VAT scam. govt lost Rs Ten billion and the Muslim man is gone forever.

  • 0
    0

    This article suits well for the sale of the Edirisinghe Trust. Media accuses Penthouse Ravi involving in it. Mangala Samraweera has hired the ETI director to the Finance Ministry. that should be a govt involved financial crime. They sold shares of a private Bank also that way, probably the govt do not have rules about selling bank shares to foreigners. I am not sure where Ajith Kumaraswamy would get a share of the illegal profits in indirect ways or is it he simply needs to keep the job, anyway, I think politicians make Ajith kumaraswamy also another Arjun Mahendran. Any corrupt deal that the govt makes, Ranil gets his share but not to his own account.

  • 0
    0

    Everywhere ‘Economic Crimes’ were/are committed. Most countries have checks and balances to control of this to low levels.
    SL is no exception. Remember ‘Sinhala’ Marikkar of the SWRD B cabinet was found guilty of fraud.
    Till about a decade ago, the Company Laws served the intended purpose.
    Then the ‘Culture’ of corruption/nepotism/impunity proliferated. Company Laws meant nothing.
    .
    Chandra Dayaratne feels, the ‘Reformed’ Company Laws will bridle Economic Crimes.
    No Sir it will not in the toxic ‘Culture’. ‘Reformations’ will go on till the cows come home.
    We need to bridle the ‘Culture’. If we succeed, the present Company Laws may be sufficient.

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