|
The deliberate practice to defraud the payee by numerous
fraudulent persons has prevailed over the years. The banks however now
take stringent measures confidentially before opening of current
accounts for new customers to assess their suitability.
Before deciding to open current accounts they are screened in order
to find their credibility and if it is for a business ,the viability of
the business to decide whether the current account should be opened or
not.
The proposed new account holder has to be introduced by another
recognised constituent who has had a good rapport, preferably in the
same branch of the Bank or any other branch of the same Bank.
In the modern era with the opening of more and more new banks, in
order to increase the clientele of the newly opened banks, a lot of
canvassing is done to attract people to open individual and joint,
partnership, business and limited liability company accounts.
The new banks show a little bit of leniency initially in deciding to
open accounts for new customers.
However subsequently when they find when the new clients too resort
to the practice of issuing 'dud' cheques they too become more vigilant
and tactful when deciding to open accounts for new clients. They place
the proposed new clients on serious enquiry.
The authorities of the banks can use their discretion to warn those
who are in habit of issuing 'dud' cheques often and then send them a
notice under registered cover that his personal or the business account
would be closed in seven days time and to return all un used cheque
leaves in their possession.
This could be possible only to those unscrupulous customers who do
not enjoy any credit facilities.
But the customers who enjoy permanent overdraft and credit facilities
obtained against the security of mortgage of movable and immovable
properties or on the security of two income tax payers, the accounts
that they maintain cannot be closed, until the facilities are fully
settled.
But if they continue to issue 'dud' cheques without making any prior
arrangements with the bank officials, they have to be severely warned.
The bank can even decide to refrain from issuing them with new cheque
books.
In the context of the above the only solution to prevent issuing of
'dud' cheques is to initially warn such errant account holders and then
send notice to close their accounts for bad conduct. Otherwise naturally
it directly creates instability and havoc with the credit operations in
business and disturbs the entire economy.
The end result of this unscrupulous acts of cheating the retail,
wholesale dealers, entrepreneurs,the legitimate business community would
to a great extent make way to disrupt the economy and retard the growth
of the country's economy.
At present the Credit Information Bureau of Sri Lanka coming under
the purview of the Central Bank of Sri Lanka,it is learnt that the names
of those account holders who's accounts have been closed for
unsatisfactory conduct are not reported to them to notify the banks if
such information is requested for by banks.
This should be implemented. At present only the names of individuals
and organisations who figure in the bad books of the banks as defaulters
of credit facilities are reported to the CRIB.
That too it is learnt if the amounts outstanding are only large in
magnitude. The officials of the Central Bank of Sri Lankas' Bank
Supervision Department must at least now commence an expeditious
exercise to collect data from all banks of these unscrupulous debtors
and make available to all banks for scrutiny before accounts are opened.
This subject has now reached to unprecedented heights and serious
proportions and requires instant action to bring in correct discipline
among the banks' large clientele to prevent 'the bane of the economy'.
because of willful debtors.
Sunil Thenabadu,
Mount Lavinia
The new Companies Act No. 07 of 2007 was certified on March
20, 2007 and came into legal existence on May 3, 2007 through a gazette
notification replacing the previous Act No 17 of 1982.
The (new) Act brings into existence a number of new provisions that
are now applicable.
The aim of this letter is to highlight few of key provisions, as
given briefly below, which could have significant impacts on your
company in the near future and assist you do deal with those issues in
an efficient and effective manner.
1. Satisfying the "Solvency Test" for "Distributions" in accordance
with Section 56 and 57 of the Act.
As per the Section 56 (2) of the Act, the board of a company may
authorize a distribution where it is satisfied that the company will,
immediately after the distribution is made, satisfy the solvency test,
provided that such board obtains a certificate of solvency from the
auditors.
Further, Section 57 (1) states that, a company shall be deemed to
have satisfied the solvency test, if;
a) It is able to pay its debts as they become due in the normal
course of business; and
b) The value of the company's assets is greater than
i) the value of its liabilities; and
ii) the company's stated capital
Therefore, in essence what would remain after the above adjustments
are reserves of the company except share premium which would have been
reclassified as stated capital under Section 58. Thus, the challenge
here is how a company enhances their solvency position if it does not
satisfy the solvency in terms of Section 57 (1).
Section 57 (2) (c) has a clear answer for this challenge, which
states that the board may take into account a fair valuation of other
methods of assessing the value of assets and liabilities.
Therefore, there is room for the revaluation of non current assets by
which a company could enhance their solvency position to comply with the
Section 57 (1) for any "Distribution".
2. Consideration for issue of shares to be fair and reasonable in
terms of the Section 52 of the Act
Section 52 states that, before issuing shares, the board shall;
a) decide the consideration for which the shares will be issued; and
b) resolve that in its opinion that consideration is fair and
reasonable to the company and to all existing shareholders
The above provision implies that the issue price for a share should
be fair and it should represent the true value of the company as at the
issue date. If the company is a quoted company, the issue price could be
based on the market price.
However, if the company has not been quoted, share valuation exercise
wold have to be undertaken with the revaluation of non current assets to
ascertain the "fair and reasonable" issue price per share.
Therefore, it is evident from the above two instances that the need
for the proper restructuring of the balance sheet of your company would
be required to avoid any impediment arising from these provisions of the
Act.
The revaluation of non current assets by professionally qualified
valuers would be a significantly important part of the restricting
process which in turn will have following advantages.
1. There would be a surplus arising from the revaluation of non
current assets, especially from land and buildings, enhancing the assets
base and the equity position of the company.
2. It would enhance the financial position of the company including
gearing and leverage status.
3. The solvency position would be enhanced
Kelum Heart Gunaratne,
Colombo 10
In your Business page (DN 16.8.07) you report, that over
200,000 foreign employment opportunities that come Sri Lanka's way being
wasted since Lankan youth do not have the skills to fulfill the
requirements.
I think Lankan youth have all the necessary skills but they lose out
by not having the language to express them. As a country we lost out big
time, when we introduced Sinhala only - a language spoken only in Lanka.
I was one of the lucky few who were taught in the English medium
(Sinhalese was taught as a second language).
My qualifications were good enough for British Universities to accept
and award me an Honours Degree and open the gates for foreign
employment.
Shaik Anwar Ahamath
Surgical gauze industry in Sri Lanka has existed since early
1970s providing an essential product to the Ministry of Health. All the
Governments and the Ministry of Health have always encouraged this local
handloom industry not only because it provides employment opportunities
to Sri Lankan folk but also as a policy to encourage local industry.
There are over 270 manufacturers who employ well over 5,000 locals
who are totally dependent on the income from this cottage industry. If
we elaborate this further, there are 5,000 families depended on the
income of these employees.
If we take a closer look at this there are support industries, which
are directly or indirectly involve and dependent on this surgical gauze
industry, namely suppliers of coir, polythene, carpentry, etc.
Any intention or move to jeopardise this industry by way of importing
or by calling open tenders from foreign suppliers would be a detrimental
to the short sighted policies of the State. Whoever claiming the import
of surgical gauze would benefit our country in any way is indeed myopic.
It is a well-known fact that country's economic growth is judged by the
GDP.
Sri Lanka being heavily import oriented would plunge deeper into
economic crisis if the authorities keep importing finished products from
other countries.
As a responsible Government they should encourage this local industry
by offering incentives or subsidies to protect the manufacturers of
surgical gauze. Even developed countries like USA, Japan and Australia
encouraged local production in various fields.
Similar to the garment industry if the surgical gauze manufacturers
are given adequate facilities and encouragement, these manufacturers
could develop and compete with other surgical gauze exporting countries
in the International arena.
In the event of such a decision to import surgical gauze, it would
indeed be a great blow to the rural community and the surgical gauze
industry in particular which will lead to a permanent closure of this
cottage industry eventually.
In the view of the above situation we earnestly appeal to all
relevant authorities to protect and safeguard the local surgical gauze
industry and protect the livelihood of those employees.
Udaya Abeysekera, Managing Director, Sisili Projects
Consortium,
Colombo. |
