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Delivering
the order in three connected fundamental rights petitions,
on 8 July 2008, the Supreme Court presided by Chief
Justice Sarath N. Silva, P.C., and comprising Justice
Nimal Gamini Amaratunga and Justice K. Sripavan, has
affirmed the Direction on Corporate Governance for licensed
banks issued by the Monetary Board of the Central Bank
of Sri Lanka on 26 December 2007, and upheld the principles
that there should be limits on the age, length of service,
and number of directorships that could be held by directors
of licensed banks subject to certain exemptions.
The Court also made order in respect of the transitional
provisions in relation to three areas, which had been
contested in Court under the fundamental rights petitions.
These contested issues, the transitional provisions
as currently constituted, and the amendments ordered
by the Supreme Court, are set out below.
Maximum age of
Directors
The Monetary Board Direction provides for a maximum
age for a bank director at 70 years, while transitional
provisions allowed for those bank directors between
70 and 75 years of age as at 1 January 2008, to continue
to serve until 31 December 2009, and for those bank
directors over 75 years of age as at 1 January 2008,
to continue to serve until 31 December 2008. In addition,
founding directors and incumbent chairmen were conditionally
exempted from the retirement age limits for a further
period of five years from 1 January 2008.
In this context, the Supreme Court, while confirming
the maximum age limit of 70 years, has ordered a general
exemption in respect of bank directors who have reached
the age of 70 as at 1 January 2008 or who would reach
the age of 70 prior to 31 December 2008, to continue
in office for a further period of up to 3 years from
1 January 2009.
Total period of service of a Director to be 9 years
The Monetary Board Direction provides for a period of
service of a bank director to be limited to 9 years,
while founding directors and incumbent chairmen were
exempted from the application of such limit for a further
period of five years from 1 January 2008.
In
this regard too, the Supreme Court has upheld the limit
of 9 years, while ordering that a bank director who
has completed 9 years as at 1 January 2008, or who completes
such term at any time during the year 2008, to be entitled
to continue for a further period of up to 3 years commencing
1 January 2009.
Directorships in other companies
The Monetary Board Direction provides for a limit of
20 companies in which a bank director could serve as
a director, while the existing transitional provisions
exempted founding directors and incumbent chairmen from
such limit for a period of five years from 1 January
2008.
In this matter too, the Supreme Court upheld the limit
of directorships of a bank director to 20 companies,
while ordering that a maximum period of three years
from 1 January 2009 be granted to any such directors
to comply with the Direction and notify the Monetary
Board accordingly.
The Court also directed the Monetary Board to include
a general provision that, if for any reason such as
ill health or other incapacity, the Monetary Board considers
the exemptions referred to above should not be granted,
the Monetary Board to notify such grounds to the director
concerned and after a hearing, the Monetary Board may
limit the period of exemption.
The Supreme Court further ordered the Monetary Board
to issue an amended Direction incorporating the changes
as directed by Court.
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