Mackwood’s Majority Shareholders Cry Foul Over Ex-Ambassador’s Oppression & Misappropriations
(Lanka-e-News- 25.May.2016, 3.15AMM) Sri Lanka’s Commercial High Court of Colombo recently issued an interim order against former high Commissioner to the United Kingdom – Dr. Chris Nonis et al, in a case filed by majority shareholders of Mackwoods Securities for oppression, mismanagement and misappropriation of assets belonging to Mackwoods Group of Companies.
In a case recently filed the Commercial High Court of Colombo, the majority of the shareholders accounting for over 60% ownership of Mackwoods Securities(Pvt) Ltd - the holding Company of Mackwoods Ltd and its subsidiary and associate Companies; initiated legal action against Dr Chris Nonis, Chairman and certain other Directors, for alleged oppression of shareholders and mismanagement and misappropriation of Company assets belonging to the Mackwoods Group of Companies .
The 60.19 % majority shareholders of Mackwoods comprise, Mrs Mary Varma (Petitioner), Mrs Nirmali Samaratunga, and Mr F G N Mendis. They in addition have requisitioned an EGM (Extraordinary General Meeting) to appoint three directors nominated by them to the board of Mackwoods.
The Court has issued an interim order restraining Dr Chris Nonis and other Directors, namely - Shelendra Nonis Ranaweera, Lalith Fonseka and Lakshman Samarasinghe from appointing any directors and/or seeking to fill any vacancy on the board of Mackwoods, until the conclusion of the Extraordinary General Meeting requested by the majority shareholders and further issued an interim order restraining the same four directors from acting in contravention of the Articles of Association of the company.
The Petitioner revealed to courts that Dr Chris Nonis holds less than 29% of Mackwoods and his sister Shelendra Nonis Ranaweera and the other two directors do not own any shares of Mackwoods.
The petition was supported by M/s Romesh De Silva PC, Harsha Amarasekera PC and Attorneys-At-Law Kanchana Peiris and Shraepathy Attanayake, on the instructions of M/s D L &F De Sarams with Attorneys-At-Law Jivan Goonetilleke and Dasuni Wijayasiriwardene.
In the case bearing Case No. HC(CIVIL) 14/2016 CO filed in the Commercial High Court of the Western Province, Dr. Chrisantha Nicholas Anthony Nonis of No. 69/6, Kynsey Road, Colombo 08 is cited as the Second respondent whilst the holding company – Mackwoods Securities (Private) Limited, No. 10, Gnanartha Pradeepa Mawatha, Colombo 08 is cited as the First Respondent.
Third to Seven Respondents of the case are :- (3) Francis Lalith Fonseka, 191/2B, Thimbirigasyaya Road, Colombo 05. (4.) Lakshman Leelaraja Samarasinghe, No. 30/3, Dehiwala Road, Pepiliyana. (5.) Shelendra Marianne Andrea Nonis Ranaweera, 69/4A, Kynsey Road, Colombo 08. (6.) Frederick Germain Noel Mendis, No. 57, Welikadawatte Road, Rajagiriya and (7.) Nirmali Suzanne Moira Samaratunga No. 37/2/A, Empire Residencies, No. 51, Braybrooke Place, Colombo 2.
Petitioner Mary Jean Varma (of Mezzanine Floor - M2, Green Path Residencies, Col. T. G. Jayawardene Mawatha, Colombo 03) states that Mackwoods Securities (Private) Limited was first incorporated on or about 31st of July 1957 under the name of Mackwoods Estates and Agencies Limited by the famous lawyer cum entrepreneur, the late Mr. N. S. O. Mendis. The founder Mr. N. S. O. Mendis had three children namely the Petitioner and the 6th Respondent and the late Mrs. Sriyani Nonis. The late Mrs. Sriyani Nonis is the mother of four children including the 2nd, 5th and 7th Respondents (i.e. Dr. Chris Nonis, Marianne Nonis and Nirmali Nonis) The said Mrs. Sriyani Nonis was the Chairperson of Company and of almost all of the companies comprising the Mackwoods Group of Companies (including Mackwoods holding, subsidiary and associate companies) until her demise on or about 13th of June 2005.
She further claims that soon after the death of Mrs. Sriyani Nonis, the Dr. Chris Nonis ‘assumed’ the position of the Chairman of Mackwoods although the appointment of Dr. Nonis as the Chairman was never formally approved and/or consented to by the majority shareholders or the Board of Mackwoods Securities. She states that since the date on which he assumed duties as Chairman, the 2nd Respondent (i.e. Dr. Nonis) has never stood for re-election at any of the Annual General Meetings (AGM) of Mackwoods Securities, as the provisions relating to retirement of directors do not apply to a director holding the post of Chairman; and that the 2nd Respondent also assumed the duties as Chairman in all the subsidiary and associate companies of the Mackwoods Group.
The Petitioner also states that to the best of her knowledge and recollection, Mackwoods Securities holds 9,984,000 (99.84%) of the ordinary voting shares in Mackwoods (Private) Limited (bearing the company registration number PV 16788) of No. 10, Gnanartha Pradeepa Mawatha, Colombo 08; which itself has invested in the following Private and Public companies directly and/or indirectly including Public Quoted companies namely Agalawatta Plantations PLC, Mackwoods Energy PLC. Such companies include the following;
i. Mackwoods Plantations (Private) Limited
ii. Agalawatta Plantations PLC
iii. Mackwoods Energy PLC
iv. Claridge Asset Management (Private) Limited
v. Mackply Industries (Private) Limited
vi. Mackwoods Healthcare (Private) Limited
vii. Mackwoods Teas (Private) Limited
viii. AEN Palm Oil Processing (Private) Limited
ix. Paklan Latex (Private) Limited
x. Claridge Stockbrokers (Private) Limited
xi. Mackwoods IT (Private) Limited
xii. Mackwoods Infotec (Private) Limited
xiii. Taprospa Resorts (Private) Limited
xiv. Mackwoods Insurance Brokers (Private) Limited
xv. Mackwoods Real Estate (Private) Limited
xvi. Mackwoods Rubber Products (Pvt) Ltd
xvii. Mackwoods Foods (Pvt) Ltd
The Petitioner further states that whilst Mackwoods has an issued share capital of 407,000 ordinary voting shares, she holds 117,337 ordinary voting shares (approximately 28.83%) and together with the 6th and 7th Respondents hold an aggregate of 245,000 ordinary voting shares (60.19%) as against 118,000 (28.99%) held by Dr. Chris Nonis. As such she along with the 6th and 7th Respondent together accordingly held a majority of the shares of the 1st Respondent company, the Petitioner has averred.
The Petitioner claims that the 3rd, 4th and 5th Respondents have, from in or about the time that Dr. Nonis assumed duties as the Chairman, acted solely in accordance with his dictates, instructions and directions.
However nearly 60.19% of the shareholders are represented by only two (2) Directors (namely the Petitioner and the 7th Respondent) and approximately 39.81% of the shareholders are represented by four (4) Directors (namely the 2nd, 3rd, 4th and 5th Respondents), whilst Mackwoods Securities is entitled to have a maximum of 9 Directors in terms of Article 72 of its Articles of Association. As such the Petitioner further pleads that the Petitioner and the 6th and 7th Respondents, being the major shareholders of the 1st Respondent Company, accordingly do not at present have due and proper representation on the Board of Directors of the 1st Respondent Company.
Oppression and Mismanagement
The Petitioner pleads that to the best of her knowledge, in terms of the respective Articles of such subsidiary/associate companies, the Boards of Directors of such companies, which are controlled by the 2nd, 3rd, 4th and 5th Respondents, has the power to fill vacancies on the said Boards, without recourse to the shareholders. The Petitioner pleads however that such a course of action would be against the wishes and intention of the holders of the majority of the shares of the 1st Respondent company, i.e. the Petitioner and the 6th and 7th Respondents.
The Petitioner pleads that under the present management of the 2nd to 5th Respondents, the affairs of the 1st Respondent Company and that of its subsidiaries and associate companies are being conducted in a manner which is oppressive of its shareholders and also constitutes mismanagement of the affairs of the 1st Respondent Company.
Failure to hold Annual General Meetings
The Petitioner pleads that the Board of Directors of the 1st Respondent Company, which as aforesaid is controlled by the 2nd, 3rd, 4th and 5th Respondents, has failed and neglected to hold an Annual General Meeting since on or about 30/09/2008. The Petitioner pleads that though the last annual return filed by the 1st Respondent Company refers to the last Annual General Meeting having been held on or about 12/09/2013, or that the resolution in lieu thereof bore such date, the Petitioner pleads that to the best of her knowledge and recollection, no such Annual General Meeting of the 1st Respondent has been held since 2008 and no resolution in lieu thereof has been signed by its shareholders. The Petitioner pleads that the failure to hold an Annual General Meeting is contrary to the imperative provisions of the Companies Act No. 7 of 2007, and more specifically S. 133 thereof.
Due to AGMs not been held directors of the Mackwoods Securities who are scheduled to retire from office by rotation have not retired nor presented themselves for re-election, and the shareholders have thus been prejudiced by inter alia being deprived of the right to vote on such re-election and/or on the reconstitution of the board of Directors. Furthermore, the accounts and financial statements of the 1st Respondent Company have not been placed before the shareholders and have in any event not been approved by the shareholders and in any event, the audited accounts of the 1st Respondent Company have not been sent to the Shareholders.
Siphoning off money
The Petitioner further states that Mackwoods Group almost fully owns Mackwoods (Pvt) Ltd. (i.e. 999.94%) and thus controls Companies with an aggregate asset value in excess of Rs. 6 billion. One such subsidiary, Agalawatta Plantations PLC manages 15 estates which include tea, rubber and oil palm covering a total extent of 10,919 Hectares and employs approximately 6,750 persons and the approximate value of the total assets of Agalawatta Plantations PLC alone are Rs. 4,492,065,000/-. However that the affairs of the said Agalawatta Plantations PLC are being mismanaged by its board, which is controlled by the 2nd, 3rd, 4th and 5th Respondents, to such an extent that its business and operations are being run at a loss as is reflected in the 2014 Annual Report of the said Agalawatte Plantations PLC, despite the colossal value of assets at its disposal, and the value and potential of its business. 28.) The Petitioner pleads that the only plausible explanation for this is that the 2nd, 3rd, 4th and 5th Respondents are either guilty of siphoning off monies from the Agalawatta Plantations PLC, or are otherwise guilty of serious mismanagement of its affairs.
“The Petitioner pleads that the 2nd, 3rd, 4th and 5th Respondents have ensured that the profits or potential profits of the operational subsidiaries and associates of the 1st Respondent Company are siphoned off and/or otherwise disposed of, to the personal benefit of the said 2nd, 3rd, 4th and 5th Respondents, prior to such profits having to be declared to their holding companies. The Petitioner pleads that in such manner, the 2nd, 3rd, 4th and 5th Respondents have avoided making payment to the other shareholders of the 1st Respondent Company of dividends and/or returns in the value to which they are in truth and in fact entitled.”
Conflict of interest / other detrimental transactions
The Petitioner pleads that by virtue of being the Chairman of the 1st Respondent Company, Dr. Chris Nonis is also the Chairman of the 1st Respondent's other aforesaid subsidiaries and by reason of the control exerted by the 2nd, 3rd, 4th and 5th Respondents, they have been instrumental in and have caused several of such subsidiaries to enter into transactions to the detriment of such companies, to their own personal benefit. The Petitioner pleads that as the majority of the shares in such subsidiaries are held by the Mackwoods Securities, such transactions are detrimental to the Company.
Failure to hold EGM
The Petitioner states that she along with the 6th and 7th Respondent have, as shareholders of Mackwoods Securities, requisitioned an Extraordinary General Meeting of shareholders to appoint three (3) directors to the Board in order to fill the remaining three vacancies thereon. The Petitioner pleads that this was requested by the communication dated 12th May 2016 signed by the Petitioner and the 6th and 7th Respondents and was deposited at the registered office of the 1st Respondent Company on 12th May 2016. 57.) However, despite the above course of action, the Petitioner is apprehensive that the 2nd to 5th Respondents may delay and / or seek to stymie and thwart the aforesaid resolutions, abusing their powers in terms of Article 91 of the Articles of Association of the 1st Respondent Company. The Petitioner pleads that it is the common objective of the Petitioner and the 6th and 7th Respondents to seek to reconstitute the Boards of Directors of the Subsidiary/Associate companies of Mackwoods Group once their aforesaid three (3) nominees are appointed to the Board.
Interim relief sought
As such, the Petitioner sought from Court for orders and/or declarations that the affairs of the 1st Respondent are being conducted by the 2nd (Dr. Chris Nonis) along with 3rd, 4th and/or 5th Respondents in a manner oppressive of and/or to the Petitioner; in a manner which is against the interests of the 1st Respondent Company; that the affairs of the 1st Respondent Company have been mismanaged by the 2nd to 5th Respondents; that the 2nd, 3rd, 4th and 5th Respondents and/or any one of more of them are not entitled to appoint any directors and/or fill any vacancy on the board of the 1st Respondent company until the conclusion of the Extraordinary General Meeting requisitioned by requisition dated 12th May 2016; and that they are not entitled to act in contravention of the Articles of Association of the 1st Respondent Company.
The Petitioner also sought an interim order restraining the Dr. Chris Nonis along with 3rd, 4th and 5th Respondents and/or any one of more of them from appointing any directors and/or seeking to fill any vacancy on the board of the 1st Respondent company until the conclusion of the Extraordinary General Meeting.
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