Growing Octopus

Ishara S. Kodikara | AFP | Getty Images Sri Lanka Prime Minister Ranil Wickremesinghe, center, speaks to supporters at the prime minister's official residence in Colombo on December 16, 2018, after he was reappointed as prime minister by Sri Lanka's president, the same man who fired him from the job nearly two months ago.

The securities watchdog is looking at expanding the Takeovers & Mergers Code to cover indirect takeovers. The securities watchdog is looking at expanding the Takeovers & Mergers Code to cover indirect takeovers. The Securities & Exchange Commission’s (SEC) powers are presently limited to companies quoted on the Colombo Stock Exchange. Hence its Takeovers & Mergers Code’s reach is also somewhat limited.

Under the code, when a buyer triggers the 30 percent threshold of a target company, the firm has to make a mandatory offer to the remaining shareholders. The code kicks in where such a takeover or merger is between one or more listed companies or where at least one of the parties involved in such a takeover or merger is a listed public company.

“But the issue does not apply to indirect takeovers and this is of much concern in the securities market,” notes Solicitor General C P R de Silva PC.

For instance, in an indirect takeover, there are no obligations to make a mandatory offer to the minority shareholders of a target company.

“It’s like a situation where a person who does not own any shar