Non-executive directors cannot evade collective responsibility, Touchwood good example, says SEC chief

March, 11, 2014

Most companies appoint non-executive directors and these persons may assume that they are not directly responsible to any functions of the particular companies. This cannot be the case. Though they are non-executive directors, they too should bear collective responsibility with the board of directors. The issues with the forestry company Touchwood could be cited as an example, said Securities and Exchange Commission (SEC) head Dr. Nalaka Godahewa while responding to AdaderanaBiz.

He added that several irregular financial dealings have been revealed during the Securities and Exchange Commission (SEC) investigations into the crisis ridden Touchwood forestry company and necessary steps are being taken regarding these.

Dr. Godahewa told AdaderanaBiz that nearly 90 percent of the investigations have been completed by now.

“We have notified the Touchwood board of directors to immediately inform the commission of the details of some transactions under the purview of the SEC which the company had carried out without informing the share market. Apart from this, investigations into the other irregular dealings revealed during the commission’s investigations have been handed over to the Criminal Investigation Department (CID).

“One of the issues that we have observed during these investigations is this company having engaged in irregular practices like transferring, selling its assets to others without informing the stock market.

“The situation has somewhat been rectified due to the regulation that when deciding on the assets of the company the approval of the regulator has to be obtained,” said Dr. Nalaka Godahewa.

“In such issues the important fact that the board of directors of a company has to be aware of is that the board has to bear collective responsibility to every activity of the company. Even an independent non-executive director has to bear collective responsibility towards the company,” added the SEC chief.