May 7, 2007 (LBO) – Sri Lanka’s new Companies Act will force firms to better comply with listing rules and help clean up the ‘Default Board’ of the Colombo Stock Exchange, legal experts and officials said. The new law imposes tougher penalties for non-compliance with disclosure requirements and could have a deterrent effect on listed firms who have remained for years on the so-called ‘Default Board’ where miscreants are dumped into by the CSE.
Arittha Wikramanayake, Senior Partner of the law firm Nithya Partners, told LBO the new Companies Act would in effect force firms to comply with the CSE disclosure rules.
This is because company directors have to comply in terms of law and shareholders can compel them to comply – if not they can sue.
Wikramanayake, a former director-general of the Securities and Exchange Commission, said that previously regulators had been helpless with regard to willful defaulters.
The fines for non-compliance had been minimal and de-listing would have hurt small investors.
According to the CSE’s daily report 25 of the 236 listed companies are on the Default Board.
The CSE has so far taken an approach seen as rather lenient on defaulting