Securities Council engages DDL in court
Stabroek News
June 25, 2004
The Guyana Securities Council (GSC) has obtained a variation of the orders granted against it on July 9, 2004 as a result of legal action taken by Demerara Distillers Ltd (DDL) preventing GSC from carrying out its mandated functions.
Additionally, DDL has been granted 14 days leave by the court to file an affidavit in response to a motion filed by GSC in a bid to discharge the aforementioned orders granted in favour of DDL by the Chief Justice.
The variation, Stabroek Business understands, limits the June 9 orders to the subject matter as articulated under the Securities Industry Act's Section 58 (3). This section refers to the timely reporting of material changes in a public company's assets.
DDL had successfully applied for an injunction preventing the council from trying to stop the company's Annual General Meeting, which went ahead on July 11.
Now the council is trying to get DDL to divulge information it says should have been included in the report and to the council and wants the report supplemented within three weeks of any order the court may make. A group of shareholders has also gone to court asking that related information be released as required under the Companies Act and DDL has said it would provide this within twenty days.
The application by the GSC and its Chief Executive Officer Cheryl Ibbott was filed through attorneys Stephen Fraser and Nigel Hughes. In an affidavit in support of the summons, Ibbott denies the claims contained in DDL's ex parte application.
Ibbott contends that upon receiving a signed copy of the annual report on or about May 11, 2004, the GSC had examined it and found it to be "inadequate and not in compliance with the Securities Industry Act, 1998."
According to Ibbott's affidavit, she had forwarded a letter dated June 2, in response to the annual report and had indicated it did not comply with the Securities Industry Act's Section 58 (3).
Ibbott notes that in its actions advising DDL to correct its annual report, the council was of the view that the disclosures were necessary for the protection of investors and the maintenance of an orderly market.
She goes on to say that the council was entitled to publish the notice in the newspaper advising the company not to go ahead with the AGM, under the provisions of regulation 8 rules 18,19 and 20 of the Securities Industries Act.
Ibbott also said DDL had failed to issue a press release regarding material changes in its affairs adding that on January 1, 2003, the company contributed 93.33% of the share capital of Decipher International Inc. She also states that in the last quarter of 2002, the company entered into a contractual arrangement with Kanda and Associates to form the joint venture, Demerara Distillers Ltd-Hyderbad. Further, that when DDL responded to the letter declaring that the aforementioned investments were not "material changes", it was in direct conflict with the published statement contained in the directors' annual report.
Ibbott states that DDL's lawyers said investments by them in sums totalling less than 1.5% of their net worth do not constitute a change in their business assets, which could reasonably be expected to have significant effect on the market value of their securities. As such the investments are not material changes within the meaning of section 58 (3) so as to impose on DDL the obligation to file with the council and to issue a press release concerning those transactions.
But Ibbott notes that material change, where used in relation to the affairs of an issuer, means a change in the business operations, assets or ownership of the issuer that could reasonably be expected to have a significant effect on the market price or value of the securities of the issuer. Ibbott notes that in the case of the Kanda initiative, "the potential for sale of the plaintiff's products in India, a country with a population of over one billion people... must be expected to have a significant effect on the market price of the plaintiff's securities."
Ibbott also has a number of questions about shareholdings in DDL by directors and their immediate families as well as the holdings of Trust Com-pany and Demerara Bank. She states that such shareholdings must be disclosed to the council and in the annual report.
She adds that neither the emoluments of directors Yesu Persaud and Komal Samaroo nor the fact they each hold an additional 23,334 shares in DDL has been disclosed in the annual report.
This matter has now been adjourned to July 14.