Former GK directors unlikely to get repossession of their assets

As Govt. has to recover advance given for repayments

by Suresh Perera

The Golden Key (GK) management has turned to the Central Bank for advice on the release of the personal assets of Lalith Kotelawala and other former directors, but all indications were that the go-ahead for repossession has been ruled out by the Attorney General’s department, officials asserted last week.

While Kotelawala has already filed a motion in court seeking the return of his assets and properties worth billions of rupees, some of the other former directors continue to push GK to expedite the process, they said.

"We have written to the Central Bank for advice on this as it is not a matter we can decide on", says Dinesh Perera, the company’s CEO. "We are awaiting clarification".

However, officials insisted that the release of the assets is unlikely as the government has to recover the funds advanced to repay 41% of the holdings of GK depositors.

So far the Treasury has released Rs. 544 million for reimbursements under the first phase, which has already been completed. A fortnight ago, the Cabinet approved the second tranche of around Rs. 4 billion for the second stage, but the process is yet to begin due to a delay in the fund transfer.

The Treasury has assured that the monies will be made available this week for GK to kick-start the follow up round, which has been held up as the cash transfer has not materialized despite the go-ahead from the government, officials said.

The cheques of depositors with holdings between Rs. 2-3 million have already been printed, but they cannot be audited, signed and dispatched without money in the kitty, they explained. "If funds are transferred, we can mail them within a matter of days".

Another Rs. 4.5 billion will be required for the third and final phase to be completed within a year, which will boil down to a financial commitment of Rs. 8.5 billion from the Treasury to wrap up the repayments process, they pointed out.

With the properties owned by GK and its subsidiaries inadequate to repay the Treasury advance, the personal assets of the former directors will have to be liquidated to raise more funds to meet the shortfall in the cash flow, they noted.

With the winding up of the proposed second round, around 300 depositors will remain to be reimbursed in the Rs. 10 million and above segment. In terms of the Supreme Court approved action plan, GK investors are entitled to only 41% of their deposits after deducting the Rs. 300,000 repaid under three different stages earlier.

At the end of the day, it translates into a financial loss of 59% per depositor – a fortune to a sizeable percentage who were small-time investors keen to benefit from a higher rate of interest to help make ends meet.

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