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Low dividends seen as oppression of Sri Lanka minority shareholders

ECONOMYNEXT – Companies that pay poor dividends are oppressing the rights of minority shareholders, the former head of Sri Lanka’s main business chamber and a company chairman has said.

Charitha P. de Silva, a former chairman of the Ceylon Chamber of Commerce, said Sri Lanka lacked energetic shareholder groups that could challenge the board of companies which pay poor dividends.

In a letter to the Sunday Island newspaper, de Silva recalled what he called a “landmark order” in the Commercial High Court in a case where he challenged the Ace Cargo (Pvt) Ltd., subsidiary of Aitken Spence group, of which he had been chairman.

"Non-declaration of dividends for six consecutive financial years when there were substantial profits without a reasonable cause oppresses the minority shareholder’s rights," he quoted the judgement as saying.

"A shareholder has a legitimate expectation that he can earn an income from his investment when the company’s financial position is sound… I do not see any valid cause or justification for not declaring dividends during the relevant period."

De Silva said the judgement “supports the view that a dividend policy which is oppressive towards minority shareholders falls within the ambit of Section 224 of the Company’s Act".

The November, 2010 order “should serve as a wake-up call to boards that have been systematically oppressing their minority shareholders,” de Silva said.

“Unfortunately there has been no Shareholder Association in this country that has challenged such companies in Courts.”
(Colombo/August 2 2015)

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