Print this page

Ceylinco Insurance lies to shareholders

Rate this story
(1 Vote)

A senior official of the Insurance Board of Sri Lanka (IBSL) has disputed a claim made to shareholders of Ceylinco Insurance that the IBSL has not raised any issue regarding the appointment of its directors.

A senior IBSL official, who spoke on grounds of anonymity, said the IBSL had indeed raised issue with the company on the matter and had also held discussions. However, the official said they expected Ceylinco Insurance to follow through with the promise to rectify the matter after the segregation of the business later on.

This followed the last Annual General Meeting (AGM) held by Ceylinco Insurance where shareholders pointed out irregularities in the appointment of directors.

It was said that the appointment of directors was in direct contravention to IBSL rules which states ‘the maximum number of employees the insurer can have on its Board is 1/3rd of the total number of directors on the Board.’

It was pointed out that altogether there were 16 directors on the Ceylinco Insurance Board and of that number 11 were executive directors and only 5 were independent. Shareholders say the company has continued to violate the said section 33A(2) at consecutive Annual General Meetings since 2011 when electing, nominating and appointing directors to its Board.

The purpose of the said restriction in section 33A(2) on executive directors is to ensure independence and good governance on the basis that non-executive directors have a sufficient degree of detachment from the company to ensure that the company is managed with full compliance in line with the obligations of the law and expectations of investors and in the best interest of the company.

Therefore, shareholders say that they are baffled as to how the company continues to make these reappointments to the board since according to the law governing the industry, IBSL must approve all appointments of Board directors to a registered insurance company. Albeit IBSL allows directors to carry out duties pending approval and if approval is not given the director or directors concerned are considered to have ceased office from such date approval is refused.

When a shareholder raised this point at the AGM, Upali Vitharana, a director of the Board said that all executive directors are employees of the company and it has remained so, as they held the positions long before the IBSL Act came into use. Vitharana had further said that the regulator, IBSL was aware of the position held by Ceylinco on this matter and but had not objected. However, he also said that the Board has taken steps to rectify the matter with the segregation of business that will take place later on.
When the share holder insisted that the insurer was in violation of the law of the country, since the Act came into being back in 2011; the director had responded that in his view the company has rectified the matter as they had explained to IBSL that they would realign the Board to suit the law when segregating the business.

Section 33C of the amended Insurance Board of Sri Lanka Act No. 3 of 2011 says that “(1) An insurer shall not appoint, elect or nominate as a director of such insurer a person whose appointment, election or nomination has not been approved by the Board under section 33B of this Act.

(2) Notwithstanding the provisions of subsection(1), a person whose name has been submitted to the Board for approval under subsection (1) of section 33B, may be appointed, elected or nominated as a director of the insurer, pending the receipt of the decision of the Board. However, where the Board refuses to grant approval and the insurer communicates to the person concerned, the decision of the Board, such person shall from the date of such communication, cease to hold office as a director of the insurer, subject to any decision the Board may reach upon any objections that may have been tendered by the person concerned, under subsection (3) of section 33B, against the decision of the Board refusing to grant approval. (3) It shall be the duty of an insurer to inform the Board forthwith of every appointment, election or nomination of a director, whose appointment, election or nomination, as the case may be, was approved by the Board.”

Copyrights protected: All the content on this website is copyright protected and can be reproduced only by giving the due courtesy to www.nation.lk' Copyright © 2011 Rivira Media Corporation Ltd., 742, Maradana Road,Colombo 10, Sri Lanka. Web Solution By Mithila Kumara | All rights reserved.