DEVELOPMENT FINANCE CORPORATION

(1) There shall be established, in accordance with the provisions of this Act, a corporation (hereinafter referred to as the ” Corporation “) which-

(2) The head office of the Corporation shall be in Colombo. Such branch offices of the Corporation as the board of directors may consider necessary may be established in places in Sri Lanka other than Colombo.

(1) The purposes of the Corporation

(2) Any industrial, agricultural or commercial enterprise in Sri Lanka in which the Government holds not more than twenty per centum of the capital shall, for the purposes of paragraph (a) of subsection (1), be deemed to be a private industrial, agricultural or commercial enterprise in Sri Lanka.

(i) provide finance in the form of long-term or medium-term loans with or without security, or by purchasing or subscribing for shares or other securities, or by acquiring any other interest ;

(ii) underwrite new issues of stocks, shares, bonds, debentures and other securities ;

(iii) guarantee loans from investment sources ;

(iv) nominate a representative of the Corporation to serve on the governing body of any enterprise in which the Corporation has a financial interest;

(v) make funds available for reinvestment by selling any investments of the Corporation when and as appropriate ;

(vi) borrow funds for the purposes of the business of the Corporation from sources either in Sri Lanka or abroad and give security for any loans obtained ;

(vii) furnish managerial, technical and administrative advice and assist in obtaining managerial, technical and administrative services to private industrial, agricultural and commercial enterprises in Sri Lanka;

(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 Corporation;

(ix) invest idle funds and reserves of the Corporation in appropriate securities;

(x) acquire, hold, take or give on lease or hire, mortgage, pledge, and sell or otherwise dispose of any immovable or movable property;

(xi) accept, before the date on which it is due, any payment in respect of a loan granted by the Corporation;

(xii) open deposit accounts with any bank;

(xiii) draw, accept, or endorse bills of exchange for the purposes of the business of the Corporation;

(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 Corporation to be conducive to any object of the Corporation;

(xv) make appropriate provision for the welfare of employees or ex-employees of the Corporation and of their dependants ; and

(xvi) do all such other things as are incidental or conducive to the attainment of its purposes.

(1) The authorized share capital of the Corporation shall be twenty-four million rupees divided into two hundred and forty thousand ordinary shares of one hundred rupees each.

(2) The Corporation shall offer the shares referred to in subsection (1) to the public for subscription at such time or times, in such amount or amounts and in such manner as the Corporation may determine, and shall allot such shares.

(1) The general supervision, control and administration of the affairs and business of the Corporation shall be vested in a board of directors constituted in accordance with section 10.

(2) The board of directors may exercise all the powers and do all the acts which may be exercised or done by the Corporation.

(3) The board of directors may utilize the funds of the Corporation for the purpose of defraying any expenditure incurred in the management of the affairs of the Corporation, the transaction of the business of the Corporation, the remuneration of the directors and employees of the Corporation, and the exercise of the powers and the performance of the duties of such board under this Act.

(4) It shall be the duty of the board of directors to ensure that every application dealt with on behalf of the Corporation is considered strictly on its financial and economic merits irrespective of all other considerations.

(5) The board of directors shall take all such measures as may be necessary to ensure that any financial assistance rendered by the Corporation to any private industrial, agricultural or commercial enterprise is utilized for the purpose for which it is given.

(6) The Corporation shall not make an investment in or otherwise transact business with an enterprise in which a director of the Corporation 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 Corporation.

(7) The board of directors shall appoint a general manager of the Corporation, and he shall, subject to the direction of the board of directors, be the chief executive officer of the Corporation.

(1) The board of directors shall be constituted in accordance with the provisions of this section.

(2) So long as there is outstanding any loan made by the Government to the Corporation pursuant to the provisions of this Act, the Minister in charge of the subject of Finance, acting in consultation with the Minister in charge of the subject of Industries, shall be entitled from time to time to appoint one person as a director (hereinafter called the ” Government director”) of the Corporation, 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 the Minister in charge of the subject of Finance as aforesaid and shall not be bound to hold any qualification shares. Subject as aforesaid the Government director shall be entitled to the same rights and privileges and be subject to the same obligations as any other director of the Corporation.

(3) The Minister in charge of the subject of Industries shall be entitled from time to time to appoint one person as a director (hereinafter called the ” appointed director”) of the Corporation, 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 appointed 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 appointed director shall be entitled to have the same rights and privileges and be subject to the same obligations as any other director of the Corporation.

(4) The following shall be ex officio directors of the Corporation without the right to vote :-

The ex-officio directors shall not be required to hold any qualification shares.

(5) 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 Corporation after the Corporation 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 becomes vacant for any other cause, and any new shareholder-director shall be elected and hold office in accordance with the regulations of the Corporation made under section 11.

An initial shareholder-director shall be eligible to be elected to succeed himself if qualified to be elected under subsection (6).

A majority of the shareholder-directors shall at all times be citizens of Sri Lanka.

(6) A person shall be qualified to be elected and hold office as a shareholder-director if and so long as he-

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.

(7) The members of the board of directors shall elect one of the shareholder-directors to be the chairman of the board of directors.

Such election shall not take effect unless approved by the Minister in charge of the subjects of Finance and Planning.

(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.

(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.

(3) The regulations made under this section shall be the regulations of the Corporation in regard to the matters to which they relate.

(4) The regulations of the Corporation’ shall have the force of law.

(1) For the purposes of its business the Corporation may borrow from the Government, and the Government may lend to the Corporation from the Consolidated Fund without charging any interest, the sum of sixteen million rupees. Any loan made under this subsection shall be repayable to the Government by the Corporation 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 Corporation 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.

(2) So long as there is outstanding any loan made by the Government to the Corporation under subsection(l)-

(3) Amounts set aside in the special reserve fund under subsection (2) shall not be used for the business of the Corporation but may be invested in accordance with the provisions of this Act.

(4) If, while there is outstanding any loan made by the Government to the Corporation under subsection (1), the liabilities of the Corporation (excluding paid-up share capital) exceed the assets of the Corporation by thirty per centum or more of the aggregate of the paid-up share capital of the Corporation and the amount of the Government loan at the time outstanding, all as determined by the auditors of the Corporation, 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 Corporation.

(5) In the event of the liquidation of the Corporation, no payment shall be made in respect of any debt to the State incurred by the Corporation in pursuance of this section until the amount of the paid-up share capital of the Corporation is distributed among the shareholders in accordance with the capital contributed to the Corporation on their shares.

(1) The Government is hereby authorized to guarantee, on such terms and conditions as the Government may determine, loans raised by the Corporation 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. No guarantee shall be given under this subsection if the aggregate amount of all loans guaranteed under this subsection exceeds, or as a result of the loan to be guaranteed would exceed, the equivalent of seventy-two million rupees at the rate of exchange prevailing at the date of the loan agreement to which such guarantee would apply.

(2) All sums payable by the Government under any guarantee given under subsection (1) are hereby charged on the Consolidated Fund.

(3) All sums payable by the Corporation in respect of principal, interest and other charges on any loan to the Corporation 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-

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 corporation resident in Sri Lanka.

(4) For the purposes of subsection (3), the question whether an individual or a corporation is or is not resident in Sri Lanka shall be determined in accordance with the provisions of section 67 of the Inland Revenue Act (No. 28 of 1979.).

(5) Every guarantee agreement between the Government and the International Bank for Reconstruction and Development, or any other 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.

(6) In the case of any loan made to the Corporation 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.

(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 between the Government and the International Bank for Reconstruction and Development or any other international or foreign organization approved by the Government.

(8)-Notwithstanding anything in any other written law, no agreement, bond or other document executed by the Corporation in respect of any loan which may be raised by the Corporation from the International Bank for Reconstruction and Development, or from any other international or foreign organization approved by the Government, shall be subject to, or be charged with, any stamp duty or duties whatsoever.

(9) As soon as possible after the end of each financial year the Minister in charge of the subject of Finance shall cause to be laid before Parliament the report on the statement of accounts of the Corporation and of every loan, bond and guarantee entered into under this Act, during the course of that financial year.

(1) The accounts of the Corporation shall be audited by two qualified auditors annually appointed at a meeting of the shareholders of the Corporation.

(2) The shareholders shall determine the remuneration of the auditors of the Corporation.

(3) Each auditor of the Corporation shall be supplied with a copy of the annual balance sheet of the Corporation, 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 Corporation and shall be entitled to require from the directors and officers of the Corporation such information and explanations as may be necessary for the performance of his duties.

(4) Each auditor of the Corporation may. if he so desires, make a continuous audit of the accounts of the Corporation.

(5) Each auditor of the Corporation shall make a written report upon the annual balance sheet and accounts of the Corporation and shall in such report state whether he has or has not obtained ail 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 correct view of the Corporation’s affairs according to the best of his information and the explanations given to him and as shown by the books of the Corporation.

(6) The report of each auditor of the Corporation shall be transmitted by him to the board of directors.

(7) The board of directors shall cause a copy of the report of each 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.

(1) Every director, employee or auditor of the Corporation shall, before entering upon his duties, sign a declaration pledging himself to observe strict secrecy respecting all transactions of the Corporation and all matters relating to such transactions, and shall by such declaration pledge himself not to reveal any such transaction or matter except-

(2) Every director, employee or auditor of the Corporation shall decline to answer any question concerning the business of the Corporation if he cannot answer the question without infringing his pledge of secrecy under subsection (1).