Agalawatte Saga - SEC tight lipped in spite of clarifications

Aug 11, 2016

•    Will SEC explain its actions in light of new information?
•    Who are the movers and shakers behind regulator's arbitrary action?

The onus has been placed on the Securities & Exchange Commission (SEC) to explain the regulatory zeal with which it halted payments on the sale of a major stake in Agalawatte Plantations PLC to Browns Power Holdings (Pvt) Ltd.

Yesterday, considering an application filed on behalf of Browns Power Holdings, the Court of Appeal presided by Justice Vijith Malalgoda, issued notice on the SEC and the Colombo Stock Exchange for withholding approval of the announcement of a mandatory offer made by Browns Power Holdings

As parties involved in the transaction have confirmed that the sale was made at market price on the CSE with the necessary approvals, and have submitted evidence to the same, the market regulator is yet to explain its extemporaneous decision.

A corporate disclosure filed at the Colombo Stock Exchange at the behest of Agalawatte Plantations PLC on the 8th of August, clearly details the approvals process in the sale of 15,200,000 shares by Mackwoods Plantations (Pvt) Ltd.

Furthermore, the disclosure also notes that Mackwoods Plantations is wholly owned by only two shareholders, one local and one foreign and that while the foreign investor from Malaysia has been a significant shareholder since 1995, the local shareholder is Mackwoods (Pvt) Ltd.

The two shareholders, constituting all the shareholders of Mackwoods Plantations, had unanimously approved and executed an agreement under the Companies Act, for the sale of their stake in Agalawatte Plantations PLC.

It was in these circumstances, that Mackwoods Plantations sold their shares on the 14th of July 2016 on the CSE at the prevailing market price of Rs 20/- per share to Browns Power Holdings (Pvt) Ltd.

In spite of the clarification that has been issued by all parties involved in the transaction, the SEC which reportedly acted on a complaint from an external party, continues to remain mum. Is it prudent for the regulator to stop proceeds on the basis of external complaints by members of unlisted companies who are not even shareholders of the selling company? Does this flout the entire