The employees of The Finance Company PLC (TFC), one of the oldest finance companies in the country will seek justice from court for the loss of employment due to the termination of the company’s licence, said a spokesman for the TFC employees union on Friday.
“We have been unjustly treated by the decision to terminate the licence of the company which the authorities failed to revive for over a decade. We are totally displeased with the drastic move which has led to the loss of several jobs at a critical time when the economy has been hit by a major crisis,” he said.
There was ample time for the regulator to put the house back on track and in order instead of winding down its operations which sets a bad precedence of the gross inability to resuscitate an institution which needed an investor to infuse fresh capital to continue operations, a union official said.
According to reports the gap in the balance sheet widened to Rs. 20 billion around last year from a Rs. 1.4 billion net asset base in 2009 when the institution was brought under the purview of the Central.
The employees’ union of the now defunct TFC had a paw wow with the authorities early this year where they were assured steps would be taken to revive the company and that it would not be shut down.
The Finance Company PLC (TFC) carried its business activities under the Finance Business Act No. 42 of 2011 (FBA) and was severely impacted by the failure of a number of financial institutions within the Ceylinco Group in 2008.
Since then, the financial status of the company deteriorated gradually, leading to a severe liquidity crisis.
A media release by the Central Bank last weekend stated: “All efforts made to revive the company through different strategies have failed and the continuity of current status will be further detrimental to the interest of the depositors and other stakeholders of the company. Further, the depositors of TFC were unable to withdraw their money over the past fifteen months.
“As previously informed by the press release dated 23rd October 2019, The Monetary Board of the Central Bank of Sri Lanka (MB) issued a Notice of Cancellation (NOC) of the finance business licence issued to TFC, in terms of the powers vested under the FBA, with effect from October 23, 2019, in order to safeguard the interests of the depositors and other stakeholders of TFC.
“TFC had failed to tender a valid objection to the MB against such NOC within the stipulated time in terms of the provisions available in FBA. “Accordingly, the licence of TFC can be cancelled after December 21, 2019 onwards in terms of the FBA. However, upon the request of the company, the MB allowed TFC to call for a fresh round of Expression of Interests to Department of Supervision of Non-Bank Financial Institutions 22nd May 2020 identify a credible investor with valid proof funds and a viable business restructuring plan to revive the operations of the company but TFC failed to identify such investor up to date.
“Therefore, the MB decided to cancel the finance business licence issued to TFC, in terms of the FBA with effect from May 22, 2020. TFC is not permitted to engage in finance business under the FBA with effect from such date.
The Director of the Department of Supervision of Non-Bank Financial Institutions of the Central Bank has decided to cancel the Certificate of Registration of TFC as a Registered Finance Leasing Establishment under the provisions of the Finance Leasing Act No. 56 of 2000.”
The Sri Lanka Deposit Insurance and Liquidity Support Scheme of the CBSL will take steps to pay compensation to the insured depositors under the applicable laws and regulations which would facilitate to settle 93% of the company’s total depositors in full (135,100 depositors out of 145,172 total depositors), while each of the remaining 7% depositors (10,072 depositors) will also receive Rs.600,000 as a part of their deposit amount and the remaining balance may be recovered in the process of liquidation subject to the priority of claims. - LF