Golden Key optimistic of making 41% cash payout to depositors

With Ceylinco assets worth billions of rupees transferred to SPV


In what appears to be a silver lining, a possible cash payout of 41% of the holdings of Golden Key (GK) depositors is on the cards following the transfer of Ceylinco Group assets worth billions of the rupees to the GK Special Purpose Vehicle (SPV) in terms of the Supreme Court (SC) order, a senior official said last week.

The biggest anticipated cash inflow of around Rs. 3.5 billion will come from the sale of a parcel of 2.28 million, high-value shares held by Lalith Kotelawala in Ciesot (Pvt) Limited, the major stakeholder of Ceylinco Insurance Ltd., PLC.

As of last week, Ceylinco Insurance shares traded in the range of Rs. 1,340 each.

The SC directed that GK be declared the owner of the shares held by Kotelawala in Ciesot and for the company secretary to record the ownership change and inform the Registrar of Companies.

The three-member SC bench headed by Chief Justice Mohan Peiris, PC, comprised Justices J. Sripavan and J. Ekanayake."This is good news indeed", enthused Dushanthi Hapugoda, a member of the newly-constituted GK Board of Directors.

"We received a certified copy of the SC judgment last week and the coast is now clear to acquire and dispose of these assets to settle distraught depositors", she said.

"Initially, we are optimistic of making a Rs. 100,000 each across the board settlement to all depositors", she noted. "Depending on the cash flow, we can work out the next step".

Hapugoda drew the attention of Court to the sale of 2.7 million Ceylinco Insurance shares by Ceylinco Limited, yielding Rs. 500 million, but the proceeds were not channeled to repay GK investors.

"We didn’t get this money", she told The Sunday Island. "They refused to cooperate in ongoing efforts to grant relief to depositors".

Asserting that subtle moves are afoot to launch a protest campaign against the SC order to take-over Kotelawala’s shareholding in Ceylinco Insurance claiming it will undermine the stability of the company, she asked how come this didn’t happen when half a billion rupees was raked in by divesting 2.7 million shares earlier.

On S&L Investment Company Ltd., Court observed that it had gone through the matters set out in detail. It is clear that as per the Auditors Financial Statement submitted as at 31.03.2013, the net worth of the company is Rs. 467.27 million, of which Rs. 150.26 million represents its property. The current assets of the company represent the investments in Fixed Deposits and investments in other instruments, which have been identified and are deposited outside the Ceylinco Group of Companies.

The monies are deposited in Standard Chartered Bank, National Savings Bank, HSBC, Seylan Bank and the People’s Bank amongst other investments. It appears that the Wijerathne family (family members of the sister of Mrs. Sicille Kotelawala) became the shareholders of the company through a new share issue on 16.03.2009 after the collapse of GK, with a view to diluting the 100% share ownership of Mr. and Mrs. Kotelawala, the SC order noted.

When this matter was raised at the meeting with the Board on 26.11.2013, Kotelawala denied any involvement in the new share issue on the basis that he was in custody at the relevant time. He has stated that he was unaware of any consideration passing on this new share issue.

Court therefore declared the share allotment made on 16.03.2009 to Mrs. Wijerathne, Sherrene Patitance Chiristabel, Miss Wijerathne, Anusha Tahire and Miss Wijerathne, Sonali Arundhini is null and void and the value to be distributed among the shareholders prior to the new allotment i.e. Mr. & Mrs. Kotelawala on a pro rata basis on their existing shareholding.

Court directed the transfer of ownership of the shareholding of Lalith Kotelawala and Mrs. Kotelawala to the GK SPV and also made order that the current directorate of the Company ceases to hold office and hand over the functions to the SPV, inclusive of all documents, books and accounts in soft or hard form of the company to the SPV.

The Court also made order that any person or any corporate body that interferes with the implementation of these recommendations will be visited with very serious sanctions and the Attorney General is directed to bring to the notice of Court of any such person or corporate body which interferes with this process.

On Trillium Residencies Limited, there is a recommendation that since these properties are not owned by Kotelawala or Mrs. Karunanayake, the Court may allow the agreement reached between Trillium Residencies Limited and GK.

The Deputy Solicitor General informed Court that Trillium Residencies has given an undertaking that whatever proceeds of sale will be made available to the GK SPV. Accordingly, Rs. 42.92 million will be transferred within two months.

Investigations revealed that two apartments in Hyde Park Residencies and Apartments are owned by the said Directors and notices had been issued to tenants occupying them to vacate the premises by 8.9.2013. Apartment No. 79/11/1 owned by Mr. Kotelawala was occupied by a tenant and is worth over Rs. 34 million.

The other apartment is owned by Mrs. Karunanayake who states that the furnished apartment No. 79/11/8 was gifted to her daughter and was occupied by the officers of a company styled Colombo International Container Terminals Ltd., and the apartment is estimated to be worth over Rs. 34 million, Court further observed.

The Report of the Task Force states that it took over the premises as the owner of the property owned by Kotelawala had handed over the keys of the two apartments to GK. There are three recommendations that are sought: To declare that GK the owners of the property owned by Mr. Kotelawala bearing number 79/11/1, Hyde Park Residencies, to declare that the deed of gift dated 18.12.2008 is null and void as the transaction took place after 30.06.2008 as per the plan of action and to declare that GK is the owner of the furnished property (which was owned by Mrs. Karunanayake previously) at Hyde Park Residencies.

Court made order granting the relief sought accordingly. The Court however directed the SPV to grant an opportunity to the counsel of Mrs. Karunanayake and Kotelawala to place material before the SPV as to why this property should not be appropriated in the manner that has been directed for the settlement of the GK depositors within a two-month timeframe.

On investment in Ceylinco Venture Capital Company Limited by GK, Court ordered the investment and dividend should be appropriated towards the settlement of GK depositors.

On bank accounts of the respective former GK Directors, Court directed the final balance be calculated after taking into account all the receivable interest up to the time of transfer to the benefit of GK SPV. All parties concerned inclusive of the banks where the accounts are maintained were directed to ensure and facilitate the procedure.

Where necessary, Counsel for the respondents was allowed to make representations to the SPV on behalf of their clients.

Court also referred to submissions by Avindra Rodrigo on behalf of the petitioner that a corporate entity described as PICTET and CIE, a Swiss Bank, owns 2,136100 shares of Ceylinco Insurance and sought a direction be made to GK SPV to have this transaction investigated as the transaction is a sham intended to put the shares of the company out of the reach of the SPV. This share transfer had been effected in 2009 after the events precipitating the scrutiny of the Court occurred.

The Court directed Priyantha Fernando, the Chairman of the SPV, to take all such steps to investigate the share transfer to PICTET & CIE and submit a report thereon within one month.

With regard to No. 13, De Fonseka Place, Colombo 4, Chandana Weerasooriya who appeared for the tenants submits that he is willing to settle the arrears of rentals if he is permitted to take whatever items that belong to his clients – the tenants.

Priyantha Fernando, Chairman of GK SPV informed Court that he is willing to grant them time to remove whatever movables on the premises that belong to the tenants having negotiated the outstanding rentals due to the SPV.

Court directed that these rentals be settled on or before 28.02.2014. In the event of a failure by the tenants to settle these rentals, the SPV will be entitled to sell the items on the premises and appropriate the proceeds of sale for the benefit of the depositors.

Asked about complaints that the Inland Revenue Department (IRD) is threatening legal action against GK depositors, mostly small-time investors with their life’s savings lost, Hapugoda said the matter can be addressed at the correct forum.

On the basis of the depositors’ list, the IRD had demanded declarations from them. Many investors lament that this is an unkind intervention when scores of GK depositors have been reduced to paupers and cannot even afford to buy a postage stamp to mail a declaration form.

"We will look into these complaints as many of these people are now leading a hand-to-mouth existence", she said.

The contribution made by Central Bank Governor, Ajith Nivard Cabraal and the head of the GK Task Force, DIG (CID) Ravi Seneviratne to grant relief to struggling depositors was enormous, Hapugoda said.

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