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The long legal battle waged by Dr Sena Yaddehige and his associates against some shareholders and senior managers of the Richard Peiris Company has ended. The outcome of the case has been the installation of Yaddehige as Deputy Chairman.

This legal battle has been closely scrutinised by both local and foreign investors as it cuts into some fundamental issues, which affect the investor community. Most of the respondents in the case were foreign entities and investment funds. The case meant many were strapped by enjoining orders that prevented them from trading.

The multiplicity of orders and different suits brought by various individuals produced a Gordian Knot that was hard to unravel.

Quite simply, Yaddehige is a Sri Lankan born foreign investor who bought into a prominent local company, and was not given his due place on the Board of directors. There were other investors who had bought into RPC at the same time and some of the directors accused Yaddehige and others of illegally acting in concert to buy shares.

He had also bought into a holding company of RPC called Asia Capital. Yaddehige sought to get seats on the boards of both companies.

The battle, which at one stage went even before the Supreme Court, saw both sides trade allegations against each other. One of the allegations made against RPC was that although the existing members had sold shares, they remained managers and were paying themselves high fees.

Eventually Yaddehige, a British-resident got his dues and the investor community has expressed relief over the decision. RPC and Asia Capital are among the stellar companies in Sri Lanka. The Telge Pieris, family that started RPC, has a wonderful record of entrepreneurship in Sri Lanka that stretches back to the early 20th century. RPC and its brand Arpico is iconic in this country and their innovations have contributed immensely to the industrial development of Sri Lanka.

This recognition is international now because one of the region's best companies Bajaj Auto has made RPC a partner in assembling vehicles for export to a third country.

That is precisely why foreign investors are very keen on investing in RPC. The unspoken issue in the battle over RPC was that of family-controlled companies. In Asia there is a strong tradition of these family-owned enterprises. From the Tatas, the Birlas and Goenkas of India to Li Ka Shing of Hongkong and the Chongs of Tanjong fame in Singapore, business families have been the bedrock of the private sector in our region.

At the same time the family companies that have evolved and grown are those which have encouraged new blood to be infused into their concerns. They have welcomed the presence of overseas funds and have used modern managerial techniques to enhance their efficiency. External inputs also enforce better corporate governance practices that make these firms even more attractive and valuable to both investor and society. The ever-strong Tatas and Goenkas are prime examples of these developments.

At the same time family companies which do not allow outsiders in, have suffered. One example is the Tanjong group, which is locked in a testamentary case involving its patriarch and his descendants and is now in danger of losing its once dominant position as a vehicle assembler for the Malaysian and Singaporean markets.

In reforming our economy one of the matters we have to take into consideration is the protection given to the old-fashioned family company.

There is talk in government circles of amendments to the Companies Act, which will throw the field open. But there is also some evidence of lobbying by powerful groups to have these proposed amendments shelved. If there is to be true reform then the protection to family-owned businesses would have to be eroded. Stock-market raiders will have to become a reality and this would encourage companies to be lean and mean and have strong bottom-lines.

It will also lead to more professionalism and in this era of globalisation, more of our venerable old companies will be thrust into the modern world, all to the advantage of the country as a whole.

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