The Central Bank of Sri Lanka (CBSL) by way of directive has set out a maximum percentage of ownership on a finance company. The CBSL has also set out a ‘Prompt Corrective Action Framework’ for companies based on the capital adequacy ratio.
The directives aim to bring the maximum ownership to 50% of the issued capital carrying voting rights. Ownership is to be brought down to 75% by 2029 and 50% by 2033.
The directives were issued on 30 November.
The monetary board has also gained the power to limit below 50% the voting rights of a shareholder if they deem that the shareholder is not fit and proper or is exerting significant control over the company.
Capital thresholds for the prompt corrective action framework have been defined as dividing companies with over and below Rs 100 billion in assets. Companies below 12.5% (under Rs 100 billion) and 14% (over Rs 100 billion) will be deemed undercapitalized.
Undercapitalized companies may be subject to a host of provisions. Companies currently non-compliant with the Capital Adequacy Requirements will be subject to the provisions recommended by the CBSL.
Undercapitalized companies may be subject to a forensic audit as direct by the CBSL.
The CBSL has also set out investor suitability requirements for people looking to acquire these companies.
