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Short title.
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1 This Act may be cited as the Development Finance Bank of Ceylon Act.
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Establishment of the Bank
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2.
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(1) There shall be established, in accordance with the provisions of this Act, a Bank (hereinafter referred to as the “Bank”) which-
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(a) shall, until there are shareholders of the Bank, consist of the directors for the time being of the Bank, and shall, when there are such shareholders, consist of the directors and the shareholders for the time being of the Bank, and
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(b) shall be called the DFCC Bank.
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(2) The head office of the Bank shall be in Colombo. Such branch offices of the Bank as the board of directors may consider necessary may be established in places in Sri Lanka other than Colombo.
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The Bank to be a body corporate.
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3. The Bank shall in the name assigned to it by section 2 be a body corporate and shall have perpetual succession and a common seal and may sue and be sued in such name.
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Purposes of the Bank.
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4.
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(1) The purpose of the Bank shall be-
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(a) to assist in the promotion, establishment, expansion, carrying on and modernization, of industrial, agricultural and commercial enterprises, and
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(b) to encourage and promote the participation of capital, both internal and external, in such enterprises.
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5. In carrying out its purposes, the Bank may exercise all or any of the following powers:-
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(i) provide finance in the form of loans with or without security, or by purchasing or subscribing for shares or other securities, or by acquiring any other interest;
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(ii) underwrite new issues of stocks, shares, bonds, debentures and other securities;
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(iii) guarantee loans from investment sources;
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(iv) nominate a representatives of the Bank to serve on the governing body of any enterprise in which the Bank has a financial interest;
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(v) make funds available for re-investment by selling any investment of the Bank when and as appropriate;
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(vi) borrow funds for the purposes of the business of the Bank from sources either in Sri Lanka or abroad and give security for any loans obtained;
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(vii) to provide such services as management, technical secretarial and administrative advice and merchant bank services, and to assist in obtaining management, technical, secretarial, administrative and merchant bank services, to or for industrial, agricultural and commercial enterprises in Sri Lanka;
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(viii) act as agents for, and administer the funds of, such statutory bodies, Corporations, companies or other institutions as the board of directors may consider conducive to the attainment of the purposes of the Bank;
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(ix) invest idle funds and reserves of the Bank in appropriate securities;
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(x) acquire, hold, take or give on lease or hire, mortgage, pledge and sell or otherwise dispose of any immovable or movable property;
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(xi) accept, before the date on which it is due, any payment in respect of a loan granted by the Bank;
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(xii) open deposit accounts with any bank;
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(xiii) subject to such conditions as may be determined by the board of directors, to accept, discount, rediscount, buy, sell and deal in, bills of exchange, promissory notes, coupons, drafts, debentures, certificates, scrips, obligations and other instruments and securities, whether negotiable, transferable or not, of industrial, agricultural or commercial enterprises;
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(xiv) give any guarantee or indemnity to, and enter into any arrangements with, the Government, any local authority, or any body corporate or other person in order to obtain any rights, concessions and privileges that may seem to the Bank to be conducive to any object of the Bank;
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(xv) to issue bonds and debentures, convertible or otherwise and to accept term deposits from any person in such amounts and on such terms and for such periods as may be determined by the board of directors;
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(xvi) to establish subsidiary companies to assist it in carrying out its purposes and exercising and performing its powers and duties;
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(xvii) to participate in loans, equities, underwriting arrangements and guarantees with approved credit institutions;
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(xviii) to lease, let on hire, sell outright, or sell on a hire-purchase basis warehouses, godowns. stores and buildings, machinery, equipment and other goods;
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(xix) to convert a part or whole of its loans to industrial, agricultural or commercial enterprises and its subscriptions to bonds or debentures issued by any such enterprise into equity capital;
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(xx) to receive, in consideration of the functions the Bank may be performing such commission, brokerage, interest, remuneration or fees, as the Board of Directors may, from time to time, determine;
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(xxi) make appropriate provision for the welfare of employees or ex-employees of the Bank and of their dependants; and
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(xxii) to guarantee, deferred payments due from, or the performance of any obligation by, any industrial, agricultural or commercial enterprises;
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(xxiii) do all such other things as are incidental or conducive to the attainment of its purpose.
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Liability of shareholders.
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6. The liability of any shareholder shall be limited to the amount, if any, unpaid on his shares.
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Authorized share capital.
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7.
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(1) The authorized capital of the Bank shall be five thousand million rupees divided into five hundred million ordinary shares of ten rupees each.
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(2) The Bank shall offer the shares referred to in subsection (1) for subscription at such time or times, in such amount or amounts and in such manner as the Bank may determine, and shall allot such shares.
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(3) The Bank shall not allot any shares under subsection (1) or register any shares-
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(a) in the name of any company, incorporated body or an individual, if such allotment or registration would result in such company, incorporated body or individual owing more than fifteen per centum, of the total issued share capital of the corporation;
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(b) in the name of a company and one or more of the following:-
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(i) any of its subsidiaries;
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(ii) its holding company;
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(iii) a subsidiary of its holding company; or
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(iv) a company, in which such company or its subsidiary or its holding company or a subsidiary of its holding company, has a substantial interest, if such allotment or registration would result in such company and one or more of the persons referred to in sub-paragraphs (i), (ii), (iii) and (iv) owing, in the aggregate, more than fifteen per centum of the total issued share capital of the Corporation;
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(c) in the name of an individual and any one or more of the following:-
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(ii) a company in which he has a substantial interest or in which his close relation has a substantial interest;
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(iii) the subsidiary of a company referred to in sub-paragraph (ii);
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(iv) a holding company of a company referred to in sub-paragraph (ii);
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(v) a subsidiary of a holding company of a company referred to in sub-paragraph (ii);
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(vi) a company in which a company, referred to in sub-paragraph (ii) or its subsidiary or its holding company or a subsidiary of its holding company has a substantial interest; or
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(vii) an incorporated body other than a company in which such individual or his close relation has a substantial interest, if such allotment or registration would result in such individual and one or more of the persons referred to in sub-paragraphs (i), (ii), (iii), (iv), (v), (vi) and (vii) owning, in the aggregate, more than fifteen per centum of the total issued share capital of the Bank.
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A company or individual shall be deemed to have a substantial interest in a company or incorporated body other than a company within the meaning of this subsection where such company or individual owns more than fifty-one per centum of shares in such company or incorporated body, as the case may be.
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(4) For the purposes of subsection (3)-
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“close relation” in relation to a person, means a parent, spouse, or child of that person or the spouse of a child of that person;
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“subsidiary” shall have the same meaning as in the Banking Act, No. 30 of 1988.
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Commencement of business.
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8. The Bank shall not transact any business until at last sixty thousand of the shares referred to in section 7 have been fully subscribed and allotted.
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Management of affairs and business of the Bank
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9.
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(1) The general supervision, control and administration of the affairs and business of the Bank shall be vested in a board of directors constituted in accordance with section 10.
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(2) The board of directors may exercise all the powers and do all the acts which may be exercised or done by the Bank.
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(3) The board of directors may utilize the funds of the Bank for the purpose of defraying any expenditure incurred in the management of the affairs of the Bank, the transaction of the business of the Bank, the remuneration of the directors and employees of the Bank, and the exercise of the powers and the performance of the duties of such board under this Act.
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(4) It shall be the duty of the board of directors to ensure that every application dealt with on behalf of the Bank is considered strictly on its financial and economic merits irrespective of all other considerations.
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(5) The board of directors shall take all such measures as may be necessary to ensure that any financial assistance rendered by the Bank to any private industrial, agricultural or commercial [§ 5 ,1 of 1967 ] enterprise is utilized for the purpose for which it is given.
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(6) The Bank shall not make an investment in or otherwise transact business with an enterprise in which a director of the Bank is a partner, director or shareholder, or is in any other way directly or indirectly interested, unless the transaction is unanimously approved by the other directors of the Bank.
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(7) The board of directors shall appoint a general manager of the Bank, and he shall, subject to the direction of the board of directors, be the chief executive officer of the Bank.
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10.
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(1) The board of directors shall be constituted in accordance with the provisions of this section.
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(2) The Minister in charge of the subject of Finance shall be entitled from time to time to appoint any person as a director (hereinafter called the “Government director”) of the Bank, to remove such person from office and, on a vacancy being caused in such office whether by resignation, death, removal or otherwise, to appoint a director to fill the vacancy. The Government director shall not be liable to retire by rotation or be removed from office except by such Minister and shall not be bound to hold any qualification shares. Subject as aforesaid the Government director shall be entitled to the same right and privileges and be subject to the same obligations as any other director of the Bank.
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(3) The holder for the time being of the office of General Manager of the Bank shall be an ex office director of the Bank without the right to vote. The ex officio director shall not be required to hold any qualification shares.
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(4) There shall be not less than six and not more than eight other directors (hereinafter referred to as “shareholder-directors”). The Minister in charge of the subject of Finance shall appoint the initial shareholder-directors. At the end of each financial year of the Bank after the Bank is entitled to transact business, one of the initial shareholder-directors so appointed shall retire. The director who shall so retire shall be determined by the drawing of lots. Any successor to an initial shareholder-director who retires pursuant to this subsection or whose office become vacant for any other cause, and any new shareholder-director shall be elected and hold office in accordance with the regulations of the Bank made under section 11. An initial shareholder-director shall be eligible to be elected to succeed himself if qualified to be elected under subsection (5). A majority of the shareholder-directors shall at all times be citizens of Sri Lanka.
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(5) A person shall be qualified to be elected and hold office as a shareholder-director if and so long as he-
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(a) has, or is an officer, director or partner of a company or partnership which has, shares of the par value of not less than five thousand rupees in the capital of the Bank;
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(b) is not a Member of Parliament or a member of a Provincial Council or a local authority;
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(c) is not a paid employee of the Bank;
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(d) is not a person who, having been declared an insolvent or a bankrupt under any law in force in Sri Lanka or in any other country, is an undischarged insolvent or bankrupt;
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(e) is not found or declared to be of unsound mind under any law in force in Sri Lanka or in any other country; and
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(f) is not serving a sentence of imprisonment imposed by any court in Sri Lanka or in any other country: Provided, however, that the initial shareholder-directors shall not be required to have the qualification specified in paragraph (a) of this subsection until two months have elapsed after the first issue of shares.
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(6) The members of the board of directors shall elect one of the shareholder-directors to be the chairman of the board of directors.
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Regulations of the Bank.
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11.
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(1) The board of directors shall forthwith after the commencement of this Act make regulations dealing with those matters not provided for by this Act which, in the case of a company formed under the Companies Ordinance, would be dealt with in the articles of association.
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(2) Subject to the provisions of this Act, the shareholders may by special resolution amend or rescind any regulation made under subsection (1) or add any fresh regulation to the regulations so made. In this subsection, the expression “special resolution” means a resolution passed by a majority of not less than three-fourths of such shareholders as, being entitled so to do, vote in person or by proxy at a meeting of the shareholders of which not less than twenty-one days’ notice has been duly given to the shareholders specifying the resolution intended to be proposed at that meeting.
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(3) The regulations made under this section shall be the regulations of the Bank in regard to the matters to which they relate.
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(4) The regulations of the Bank shall have the force of law.
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Application of the provisions of the Companies Ordinance to the Bank.
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12. The provisions of the *(Repealed and replaced by the Companies Act, No. 17 of 1982.)Companies Ordinance shall, mutatis mutandis, apply to the Bank in regard to any matter for which there is no provision in this Act or in any regulation or the Bank:
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Provided, however, that the Bank shall not be required to be registered under such Ordinance nor shall the Registrar of Companies have any power with respect to the Bank.
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Borrowing from the Government.
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13.
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(1) for the purposes of its business the Bank may borrow from the Government, and the Government may lend to the Bank from the Consolidated Fund of Sri Lanka without charging any interest, the sum of sixteen million rupees. Any [§ 7, l of 1967] loan made under this subsection shall be repayable to the Government by the Bank in fifteen equal annual instalments the first of which shall be due in the twenty-sixth year succeeding the year in which such loan is granted by the Government, but the Bank shall have the right to prepay all or any part of any such loan at any time. Every sum in repayment of such loan shall be paid to the Secretary to the Treasury who shall credit it to the Consolidated Fund of Sri Lanka.
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(2) So long as there is outstanding any loan made by the Government to the Bank under subsection (1) the Bank shall set aside in each year in a special reserve fund a sum equal to not less than twenty per centum of the net profits of the Bank as shown in the Bank’s financial statement for that year, until the amount so set aside equals the amount of the Government loan then outstanding.
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(3) Amounts set aside in the special reserve fund under subsection (2) shall not be used for the business of the Bank but may be invested in accordance with the provisions of this Act.
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(4) If, while there is outstanding any loan made by the Government to the Bank under subsection (1), the liabilities of the Bank (excluding paid-up share capital) exceed the assets of the Bank by thirty per centum or more of the aggregate of the paid-up share capital of the time outstanding, all as determined by the auditors of the Bank, the Government shall have the right in its discretion to request the shareholders to replenish the capital and, if the capital is not replenished, to require liquidation of the Bank.
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(5) In the event of the liquidation of the Bank, no payment shall be made in respect of any debt to the State incurred by the Bank in pursuance of this section until the amount of the paid-up share capital of the Bank is distributed among the shareholders in accordance with the capital contributed to the Bank on their shares.
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Borrowing from the International Bank for Reconstruction and Development.
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14.
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(1) The Government is hereby authorized to guarantee, on such terms and conditions as the Government may determine, loans raised by the Bank from the International Bank for Reconstruction and Development, or from any other international or foreign organization approved by the Government. The loans authorized to be guaranteed under this subsection may be denominated in foreign currency.
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(2) All sums payable by the Government under any guarantee given under subsection (1) are hereby charged on the Consolidated Fund.
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(3) All sums payable by the Bank in respect of principal, interest and other charges on any loan to the Bank from the International Bank for Reconstruction and Development or from any other international or foreign organization approved by the Government, or by the Government under any guarantee given under subsection (1) shall, notwithstanding anything to the contrary in any law of Sri Lanka, be paid-
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(a) without deduction for, and free from, any taxes, duties or fees now or hereafter imposed by or under any law of Sri Lanka, and
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(b) free from all restrictions now or hereafter imposed by or under any law of Sri Lanka:
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Provided, however, that the preceding provisions of this subsection shall not apply to any taxes, duties, fees or restrictions upon payments under any, bond or promissory note to a holder thereof other than the International Bank for Reconstruction and Development, or any other international organization or foreign organization approved by the Government when such bond or promissory note is beneficially owned by an individual or a bank resident in Sri Lanka.
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(4) For the purposes of subsection (3), the question whether an individual or a hank is or is not resident in Sri Lanka shall be determined in accordance with the provisions of section 54 of the Inland Revenue Act, No. 4 of 1963.
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(5) Every guarantee agreement between the Government and the International Bank for Reconstruction and Development, or any international or foreign organization approved by the Government pursuant to this Act and every guarantee given by the Government pursuant to any such guarantee agreement shall, notwithstanding anything to the contrary in any law of Sri Lanka, be valid and enforceable in accordance with their respective terms.
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(6) In the case of any loan made to the Bank by the International Bank for Reconstruction and Development, or any other international or foreign organization approved by the Government and guaranteed by the Government, the Government shall bear any loss, and be entitled to any profit, resulting from any revaluation of the Sri Lanka rupee in relation to the currency or currencies in which that loan is expressed or repayable in whole or in part. The amount of every such loss is hereby charged on the Consolidated Fund.
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(7) The President, or any person authorized in that behalf by the President by instrument under his hand, is hereby empowered, on behalf of the Government, to sign any guarantee agreement, to sign any guarantee agreement between the Government and the International Bank for Reconstruction and Development or any other international or foreign organization approved by the Government.
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(8) Notwithstanding anything in any other written law, no agreement, bond or other document executed by the Bank in respect of any loan which may be raised by the Bank from the International Bank for Reconstruction and Development, or from any other international or foreign organisation approved by the Government, shall be subject to, or be charged with, any stamp duty or duties whatsoever.
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DFCC Bank Debentures and Stock.
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14A.
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(1) The board of directors may create and issue debentures and stock, and the debentures and stock so created and issued shall in this Act be referred to as “DFCC Bank Debentures” and “DFCC Bank Stock”, respectively.
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(2) “DFCC Bank Debentures” and “DFCC Bank Stock” shall be issued, transferred, dealt with, redeemed and cancelled, in accordance with such terms and conditions as may be determined by the board of directors,
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(3) The Government may guarantee the repayment of the principal sum, and the payment of the interest on any DFCC Bank Debentures, and on any DFCC Stock, created and issued by the board of directors.
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(4) Any sum required for the fulfillment of any guarantee provided under subsection (3) shall be paid out of the Consolidated Fund.
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Accounts &c. to be laid before Parliament.
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14B. The Minister in charge of the subject of Finance shall as soon as possible after the end of each financial year, cause to be laid before Parliament, the report on the statement of accounts of the Bank and a statement of-
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(a) every loan raised by the Bank from the International Bank for Reconstruction and Development or from any other international or foreign organisations approved by the Government; and
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(b) every guarantee given by the Government, under section 14 or 14A, during the course of that financial year
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Accounts.
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15. The board of directors shall cause the accounts of the Bank to be kept in such form and manner as may be determined by such board.
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16.
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(1) The accounts of the Bank shall be audited by a qualified auditor annually appointed at a meeting of the shareholders of the Bank.
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(2) The shareholders shall determine the remuneration of the auditor of the Corporation.
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(3) The auditor of the Bank shall be supplied with a copy of the annual balance sheet of the Bank, and it shall be his duty to examine such balance sheet together with the accounts and vouchers relating thereto. He shall at all reasonable times have access to the books, accounts and vouchers of the Bank and shall be entitled to require from the directors and officers of the Bank such information and explanations as may be necessary for the performance of his duties.
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(4) The auditor of the Corporation may, if he so desires, make a continuous audit of the accounts of the Bank. [§9.25 of 1993]
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(5) The auditor of the Corporation shall make a written report upon the annual balance sheet and accounts of the Bank and shall in such report state whether he has or has not obtained all the information and explanations required by him and whether, in his opinion such accounts are properly drawn up so as to exhibit a true and fair view of the Bank’s affairs according to the best of his information and the explanations given to him and as shown by the books of the Bank.
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(6) The report of the auditor of the Bank shall be transmitted by him to the board of directors.
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(7) The board of directors shall cause a copy of the report of the auditor of the Corporation together with a copy of the balance sheet and profit and loss account to which such report refers to be transmitted to each shareholder and to the Minister in charge of the subject of Finance.
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(8) In this section “qualified auditor” means-
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(a) an individual who being a member of the Institute of Chartered Accountants of Sri Lanka or any other institute established by law, possesses a certificate to practise as an accountant issued by the Council of such Institute; or
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(b) a firm of accountants, each of the resident partners of which, being a member of the Institute of Chartered Accountants of Sri Lanka or any other Institute established by law, possesses a certificate to practise as an accountant issued by the Council of such Institute.
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Corporation deemed to be a bank within the meaning of the Evidence Ordinance.
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16A. The DFCC Bank shall be deemed to be a bank within the meaning of Chapter VI of the Evidence Ordinance, notwithstanding the fact that it does not accept demand deposits, and accordingly, the provisions of that Chapter shall apply to, and in relation to, the Bank.
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16B.
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(1) Every person who-
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(a) knowingly allots, or registers, any shares in the Bank, to or in the name of, any person, in contravention of the provisions of section 7 (3); or
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(b) knowingly secures the allotment or registration of any shares in the Bank, to, or in the name of, any person, in contravention of the provisions of section 7 (3); or
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(c) being a director, employee or auditor of the Bank, discloses any matter relating to a transaction of the Bank to any person for any purpose other than a purpose for which he is authorised to disclose such matter by this Act,
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shall be guilty of an offence under this Act and shall upon conviction after summary trial before a Magistrate, be liable to fine not exceeding five thousand rupees or to imprisonment of either description for a term not exceeding one year, or to both such fine and imprisonment.
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(2) Where an offence under this Act is committed by abode of persons, then,-
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(a) if that body of persons is a body corporate, every director and officer of that body corporate; or
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(b) if that body of persons is a firm, every partner of that firm,
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shall be deemed to be guilty of that offence:
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Provided, however, that a director or officer of such body corporate, or a partner of such firm, shall not be deemed to be guilty of such offence if he proves that such offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.
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Duty to maintain secrecy.
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17.
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(1) Every director, employee or auditor of the Bank shall before entering upon his duties, sign a declaration pledging himself to observe strict secrecy respecting all transactions of the Bank and all matters relating to such transactions, and shall by such declaration pledge himself not to reveal any such transaction or matter except-
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(a) when required so to do by the board of directors, a court of law, or the person to whom that transaction or matter relates,
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(b) in the performance of his duties, and
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(c) in order to comply with any of the provisions of this Act or any other law.
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(2) Every director, employee or auditor of the Bank shall decline to answer any question concerning the business of the Bank if he cannot answer the question without infringing his pledge of secrecy under subsection (1).
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18. In this Act unless the context otherwise requires-
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“agricultural enterprise” means an agricultural or live-stock enterprise operated on a commercial basis;
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“board of directors” means the board of directors of the Bank;
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“commercial enterprise” includes an enterprise, not falling within the description of an agricultural or industrial enterprise, which shall be conducive to the economic development of Sri Lanka;
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“governing body” , in relation to any enterprise, means any body of persons by whatsoever name or designation called for the time being charged with the management or administration, or any part thereof, of such enterprise’s business or affairs;
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“industrial enterprise” means an enterprise for a productive purpose operated on a commercial basis;
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“loan includes any form of financial accomodation, howsoever described; and
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“local authority” means a Municipal Council, an Urban Council, or a Pradeshiya Sabha and includes any authority created or established by or under any law to exercise, perform or discharge the powers, duties and functions corresponding to or similar to the powers, duties and functions exercised, performed and discharged by any such Council or Sabha;
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“Provincial Council” means a Provincial Council established by Chapter XVIIA of the Constitution;
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“shareholder” means a shareholder of the Bank.
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