Ceylinco Insurance & CIESOT! What is the True Story? Read through thread and continue

Ceylinco Insurance Employees Union says...
Both Presidents of Ceylinco Insurance Employees Union of Ceylinco Insurance PLC Life and General division have sent the following release with the title, ‘Why take money from Ceylinco Insurance Employees to pay Golden Key Depositors?’

Following is the text of the release…

Efforts are being made to drag the Ceylinco Insurance Employee Share Ownership Trust to the Golden Key issue and rob the entitlements of thousands of employees of Ceylinco Insurance and their families. Since its inception, Ceylinco Insurance had nothing to do with Golden key Credit Card Company. Ceylinco Insurance is a well regulated company listed in the Colombo Stock Exchange.

The contribution of its employees was and continues to be vital to elevate the company to its present status as the market leader in the insurance industry in Sri Lanka.

They were encouraged by the fact that they are shareholders of the company through the CIESOT scheme.

CIESOT stands for Ceylinco Insurance Employees Share Ownership Trust and this fund was created in the year 2000 only for the purpose of managing the shares owned by the employees of Ceylinco Insurance. Hence, CIESOT does not have any ownership of any shares and non of the trustees own any shares either. CIESOT is governed by a trust deed prepared in line with the Trust Ordinance and this deed was registered in the land registry on the 17th of August 2000. Prior to the establishment of the trust, the approval of the then Controller of Insurance was obtained and the Colombo stock exchange was also informed.

Lalith Kotelawala was appointed as a trustee of CIESOT in his capacity as the then Chairman of Ceylinco Insurance and this does not mean that he owns any of the shares managed by CIESOT. Further, he has not being enjoying any dividends as a trustee and no other benefits were given to him at any stage.

The role of the board of directors of CIESOT was to perform the administrative functions related to the trust on behalf of the beneficiaries who are the employees.

The Shares are owned solely by the employees of Ceylinco Insurance. The purpose of formulating this scheme was to reward employee loyalty and accordingly employees were given dividends every year.

Similar employee share ownership schemes are in operation in several corporate entities. The employee share ownership scheme of Seylan Bank is identical to that of Ceylinco Insurance as both schemes were established under the same guidelines.

When the Golden Key issue erupted, the authorities strongly said that employee shares of Seylan Bank cannot be touched as the shares are owned by the employees.

Moreover, five of the former Golden Key Directors still perform their duties as Trusties of the SESOT of Seylan Bank.

At a time when efforts are being made to promote FDI’s to the country, what the country needs is more prudent measures to safe guard corporate entities and to win the trust and confidence of investors.

By destabilizing a corporate entity such as Ceylinco Insurance, what would be the signal we give to the potential investors and the capital markets? What is the agenda behind this move? Isn’t it an effort by some unscrupulous individuals acting for personal gain and the end result would be ‘robbing Peter and paying Paul’.

Hence, we earnestly request the authorities not to destabilize the mindset of the employees of this great company which has done a yeoman service to its over three million customers for a period spanning two and a half decades.

- See more at: http://www.dailynews.lk/?q=business/ceylinco-insurance-employees-union-says#sthash.3MCEWZ68.dpuf

Supreme Court orders immediate removal of CIESOT’s Board of Directors
GK Chairman and 4 nominees to be appointed
April 11, 2014, 5:27 pm

www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=101560

By Suresh Perera

The Supreme Court (SC) has ordered the immediate removal of the Board of Directors of CIESOT Pvt. Ltd., the biggest single shareholder of Ceylinco Insurance PLC, and directed the stakeholders, H. D. K. P. Alwis and E. T. L. Ranasinghe to appoint Golden Key (GK) Chairman, Priyantha Fernando and up to four others as nominated by him as members of the newly constituted board.

Fernando, a former Deputy Governor of the Central Bank of Sri Lanka (CBSL), heads GK as its Chairman in terms of a SC directive.

The company secretary of CIESOT, Nilika Abhayawardena, was directed by the SC to record GK as the owner of 10 shares hitherto held by J. Lalith B. Kotelawala and to take steps to record the ownership change, including informing the Registrar General of Companies of the new ownership, and all other steps as are necessary in terms of the Companies Act.

"We received a certified copy of the SC Order last week and will be nominating four new members to the CIESOT Board in due course", says Dushanthi Hapugoda, a GK director.

"In the backdrop of the SC directive, the coast is now clear for us to now move forward to raise more funds to settle struggling GK depositors", she stressed.

CIESOT was also enjoined by the SC from disposing of the shares of Ceylinco Insurance PLC., and the Securities and Exchange Commission (SEC) and the Colombo Stock Exchange will ensure that no transactions takes place of these shares until further direction by Court.

The three-member Bench headed by Chief Justice Mohan Peiris, PC comprised Justices Priyasath Dep, PC and Eva Wanasundera, PC.

The SC noted that the exchange of letters through the SEC and Ceylinco Insurance PLC, ex facie, confirms the position that CIESOT is a mechanism resorted to for a collateral purpose, and that a share ownership scheme does not genuinely exist.

Ceylinco Insurance, while maintaining that CIESOT is not governed by the transitional provisions of an Employee Share Option Scheme/Purchase Scheme as contemplated by Section of the Colombo Stock Exchange Listing Rules and that by letter dated December 19, 2012 informed the SEC that the company would be taking steps to dispose of the shares held by CIESOT prior to March 1, 2015, through the Colombo Stock Exchange, Court observed.

The SC made Order that the SEC, in cooperation with the Financial Investigation Unit (FIU)of the Central Bank investigate this transaction to determine its true nature, transgressions of any of the legal provisions, and submit a report to this Court within two weeks.

The Court Registrar was directed to communicate a copy of the Order to the Director General of the SEC and the Director of FIU.

By a motion filed on March 31, 2014, the Chairman of GK has informed Court of an impending declaration of a dividend by Ceylinco Insurance, of which will also accrue to CIESOT, Court further observed.

The SC therefore make Order enjoining the Directors of Ceylinco Insurance from paying out a dividend in favour of CIESOT and directed them to pay such dividend to GK, who will hold it in trust until further directed by Court.

Court directed that in the event of a dividend having being declared after April 2, 2014 and the communication of this Order, such dividend shall be paid to GK, which will hold it in trust until directed by Court. The Registrar of this court will communicate this Order to the Chairman, Managing Director and Company Secretary of Ceylinco Insurance forthwith.

"We further order CIESOT restraining and/or appropriating and/or disposing of the dividend income in the event of the declaration of a dividend or any other payment or disbursement on or after April 2, 2014 without the prior approval of Court".

In terms of the SC directive, the new Board, as appointed by this Court Order, will act in consultation with the Attorney General who will have overall supervision of their activity.

On PICTET and CIE, the SC noted: "It is brought to our notice that this entity commenced purchasing shares in Ceylinco Insurance through the custodian bank Citibank N.A. of 67, Dharmpala Mawatha, Colombo 7 on May 29, 2009 and has continued to purchase Ceylinco Insurance shares until September 29, 2009 and has accumulated 2,136, 100 shares in Ceylinco Insurance equivalent to 10.68% of the issued share capital.

"PICTET and CIE has issued the proxies in respect of the shares to the Ceylinco Insurance Board of Directors through its Power of Attorney Citibank N.A. The Task Force has made several requests to PICTET and CIE to disclose the source of funds for the purchase of the shares, the names of the final beneficiaries and the details in respect of the proxies. A request has also been made to Citibank N.A., the Power of Attorney holders, to disclose the source of funds and the details of the proxys and of any remittances made on behalf of PICTET AND CIE.

"We have been informed that during the period leading up to September 28, 2009 several Ceylinco Group Companies have disposed large quantities of shares of Ceylinco Insurance and that PICTET AND CIE have been purchasing directly from the Ceylinco Group of Companies. It could well be that these shares have been purchased for the purpose of maintaining control of the Ceylinco Insurance and that the shares were purchased from the shares disposed of by Ceylinco Group of Companies.

"We also take cognizance of the fact that Mr. J. L. B. Kotelawala has been in control of the Ceylinco Insurance prior to the collapse of Golden Key and that Mr. Kotelawala is also a controlling member of the Board of Trustees of CIESOT and that, it is therefore, highly probable that the said shares have been purchased by PICTET AND CIE for and on behalf of Mr J. L. B. Kotelawala.

"We also note that PICTET AND CIE is a private Swiss bank which resorts to banking secrecy to veil the identity of investors and have been sued with US$ 156 million by the Trustees in the Bernard Madoff case, now under investigation by the Justice Department of the United States as a part of a probe on Swiss Bank’s aiding tax evasion".

The SC made Order that the 2,136,100 shares of Ceylinco Insurance held by PICTET AND CIE (Banque PICTET AND CIE SA) be transferred to a blocked account at the Bank of Ceylon until further ordered by Court and that PICTET AND CIE disclose the identity of the investor on behalf of the aforementioned parcel of shares in Ceylinco Insurance.

Court further directed that Citibank N.A., the Power of Attorney holder, to disclose the details of the proxy they hold on behalf of PICTET AND CIE and all such other information that they have in their custody regarding this transaction.

The Director Bank Supervision of the Central Bank will seize all such documents in the possession of Citibank N.A. with regard to this transaction and to submit a comprehensive report with regard Citibank’s role as the Power of Attorney holder. The FIU of the Central Bank will probe this transaction and furnish a comprehensive report of the role of each and every party concerned in this transaction and to invoke the provisions of the Money Laundering Act and the Financial Transaction Reporting Act for the purposes of such an investigation, Court noted.

Court further ordered that the Central Depository System Pvt. Ltd., will suspend the dealing of the 2,136,100 shares held by PICTET AND CIE in Ceylinco Insurance and furnish the details of all transactions effected through the Central Bank Depository System Pvt. Ltd to the FIU of the Central Bank.

The SC also made order that the Colombo Stock Exchange takes cognizance of the Order made to the Central Depository Systems directing them to suspend the dealing of the 2,136,100 shares held by PICTET AND CIE held in Ceylinco Insurance and to ensure compliance of the direction.

"CIESOT is an instrument for
Kotelawela control of Ceylinco’’
Golden Key director now on CIESOT board alleges
May 24, 2014, 7:51 pm

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In terms of the CIESOT Trust, shares of Ceylinco Insurance owned by CIESOT cannot be transferred to the eligible employees. The shares are to be notionally allotted to the eligible employees and the difference between the market value and the cost of the notionally allotted shares were to be paid as termination benefits to such eligible employees, the company has clarified in a statement.
This difference was to be funded by Ceylinco Insurance each year to ensure no shares would ever be sold by CIESOT, therefore enabling the voting control of Lalith Kotelawala to be maintained. However, Ceylinco Insurance has never funded the difference between market value and cost of Ceylinco shares to CIESOT and the termination benefit has never been paid to any of the eligible employees who ceased employment at Ceylinco Insurance since the inception of CIESOT, the statement by Ms. Dushanthi Hapugoda, a company director , noted.

Hapugoda, a Golden Key depositor appointed to the board of that company as a depositors’ representative, has now been appointed to the board of CIESOT which is the biggest single shareholder of Ceylinco Insurance.

However, since the Company Law, Stockmarket Rules and Article of Ceylinco Insurance do not permit use of company money to purchase shares and use such shares to perpetuate control, Kotelawala and his ``merry gang’’ had to keep up the pretense that CIESOT was for the employees’ benefit. For this purpose a monetary payment has been made to the employees to hoodwink the authorities and the Ceylinco Insurance shareholders, the statement asserted.

The mere fact that CIESOT accumulated Ceylinco Insurance shares valued at Rs. 5.8 Billion (Rs. 5,800 million) using Ceylinco Insurance money while the employees were only paid a Rs. 14.9 million in 2OL2 i.e. 0.24% of the present value or 0.44% of the 2012 value of shares accumulated by CIESOT demonstrates the extent of the deception. It was a very small price to pay for such a large chunk of control, it noted.

lf the CIESOT Trust was for the benefit of the employees, depositing the money in a fixed deposit after disposing the shares would have netted the employees over Rs. 220 million in 2O12 and Rs. 400 million at the present value at 7% interest per annum, the statement said.

 "After Kotelawala was forced to yield control of Ceylinco Insurance, the present Board, the majority of which were handpicked and appointed by Kotelawala himself, continued to use CIESOT to continue control. He continued to be on the CIESOT Board, while holding 50% under his name. The balance 50% was transferred from Ratnadas to two other directors", the statement claimed.

When the Stock Exchange Rules required employee share ownership schemes to transfer the shares to the employees or sell them, Ceylinco Insurance opted to sell the shares rather than transferring them to the employees. This further demonstrates that CIESOT was never for the benefit of the employees, it noted.

Hapugoda’s statement further said:

"The CIESOT Trust was created on March 31, 2000 for granting a termination benefit to the eligible employees (who had completed five years as at March 4, 2000). CIESOT (Pvt) Ltd., was incorporated on the same day as a Trustee of CIESOT Trust. Kotelawala and his very close and loyal friend Jesudian Ratnadas held 10 shares each CIESOT (Pvt) Ltd.

"Under the Articles of Association of CIESOT (Pvt) Ltd., Kotelawala was appointed Chairman and cannot be removed from the post. He thereby ensured that he had shareholder control and entrenched himself as the Chairman of CIESOT (Pvt) Ltd.

"The CIESOT Trust sets out that the proxy in respect of the shares of Ceylinco Insurance held by CIESOT has to be executed by the Chairman of CIESOT (Pvt) Ltd., i.e. Lalith Kotelawala. It is through this web of deceit that Kotelawala ensured that he and he alone controlled the voting of the shares held by CIESOT.

"Kotelawala and his cohorts then proceeded to grant loans from Ceylinco Insurance of approximately Rs. 240 million to CIESOT to purchase shares of Ceylinco Insurance itself and CIESOT (Pvt) Ltd., using the those funds advanced by Ceylinco Insurance accumulated 4,57I,861 shares (22.86% of the issued shares of Ceylinco Insurance).

"This shows that the CIESOT Trust was a sham from the inception. The real purpose of CIESOT was to ensure control of Ceylinco Insurance by Kotelawala. At every single AGM since the inception, this vote (of CIESOT) has been used by the management of Ceylinco Insurance to retain power of the largest insurance company in Sri Lanka".

http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=103879

Do employees own 50% ownership of CIESOT ?
adabiz Top News May 28th, 2014 0 Comments 596 views

http://www.adaderana.lk/bizenglish/do-employees-own-50-ownership-of-ciesot/

The investigations by the Securities & Exchange Commission (SEC) into the factual ownership of 23 percent Ceylinco Insurance Company shares owned by CIESOT (Pvt) Ltd, have been concluded and the final report has been forwarded to the Attorney General’s Department for its opinion, very reliable sources revealed to AdaderanaBiz.

With the recent problems over the share ownership of CIESOT (Pvt) Ltd creating controversies, court had ordered the SEC to find out the real ownership of the particular shares and submit its report to court.

There is one argument that 50 percent of the shares of CIESOT (Pvt) Ltd is owned by Lalith Kotelawela and another argument that the 50 percent shares is not owned by Lalith Kotelawela but by the employees of Ceylinco Insurance Company.

The SEC report has put forward an argument that there are factors to suggest that 50 percent shares of CIESOT (Pvt) Ltd could be owned by the employees, say reliable sources.

While CIESOT (Pvt) Ltd holds the highest ownership of individual shares of Ceylinco Insurance Company, it totals to 4.4 million shares.

Apart from the debatable 50 percent shares owned by CIESOT (Pvt) Ltd, the balance 50 percent shares are owned by H.D.K.P. Alwis and E.T.L. Ranasinghe.

The report prepared on the share ownership of this company is to be submitted to courts by the SEC soon and court is to decide on the final ownership.

Meanwhile, a former Central Bank Deputy Governor Priyantha Fernando was recently appointed chairman of CIESOT (Pvt) Ltd. This appointment was in accordance with the order that the debatable 50 percent shares of this company be transferred to The Golden Key Credit Card Company Limited. Sources also say that there are moves to appoint Priyantha Fernando as chairman of Ceylinco Insurance Company.

Court had ordered that assets belonging to Lalith Kotelawela be sold to reimburse funds to the depositors of the now bankrupt The Golden Key Credit Card Company and the controversy over the ownership of CIESOT (Pvt) Ltd had arisen at this juncture.