In summary, I, as a diligent shareholder scrutinizer, experienced a physical assault by Arittha R. Wikramanayake, a lawyer hired by Nestlé during their recent EGM aimed at delisting the company. Despite narrowly passing, I feel obligated to publicly expose the blatant violations of due process that occurred on June 30th. Numerous individuals can testify to the several other instances of disregard for proper procedures throughout this entire process.
During the meeting, it was alleged that Nestlé colluded with Capital Alliance and others to manipulate votes and manipulate the outcome of the EGM. Proxy forms improperly filled or left vacant heavily skewed the vote numbers in favour of delisting.
To effectively convey the events, I will provide a chronological account of Nestlé’s conscious efforts, along with the involvement of related parties, during the recent AGM/EGM.
The Nestlé meeting was initially postponed and the venue changed to frustrate and discourage shareholder attendance. Additionally, the meeting was scheduled on a non-market day, running from 2 pm to 9 pm! Many shareholders, although recognizing the injustice in hindsight, would choose not to attend the meeting.
Regrettably, I arrived slightly late for the initial AGM meeting. Despite merely noting my NIC number, no official documentation was requested to verify my identity. While this may appear trivial, considering subsequent events and the allegations raised by numerous shareholders, it is worth noting.
The AGM procedures were rushed at crucial moments, without allowing dissenting voices to raise objections. Proposals were put forward by the chair and reluctantly seconded by the same individual repeatedly.
At the time for questions, it was pointed out to the chair that shareholders were not provided with an opportunity to object to a proposal before a vote could be called. This was an early indication of the events that would unfold.
AGM switches to EGM
Through inquiries, shareholders learned that Nestlé had achieved significant profitability despite challenging economic conditions. The company had entered a phase of profitability from past capital investments, with earnings per share of Rs 113.09, which could have exceeded Rs 200 without one-off events. Dividends were expected to increase compared to historical levels. Shareholder funds had been used to finance this expansion.
After the conclusion of the AGM, the EGM proceedings were scheduled to commence. However, proxy holders, even though registered for both meetings, were instructed to leave unless they possessed the appropriate wristband. The officials responsible for the EGM had failed to provide the necessary wristbands to these proxy holders.
This delay was deliberate and aimed at manipulating the outcome through a strategic combination of delay and rushed proceedings, intending to compel individuals to accept the predetermined outcome orchestrated by Nestlé.
Interestingly, not a single question raised during the EGM favoured the delisting process. Many concerns regarding the questionable valuation methods and explicit references to bought votes went unanswered by the Board. Reluctantly, the Board disclosed the figures of those who opposed the motion via proxy, after confidently stating in their opening remarks that the election had already been won by the Proxy Votes favouring delisting.
One shareholder, who anticipated being contacted by Capital Alliance for guidance on voting, was dismayed to discover that they were excluded, while those around them, seemingly indifferent to the vote’s outcome, received calls soliciting their proxy forms.
Shareholders were under the impression that the vote would be conducted by a show of hands. The fiduciary responsibility of major investment advisors within the industry should be questioned for not adopting the same approach as Capital Alliance in providing voting advice through proxy votes. Amidst the confusion surrounding the proceedings, a shareholder proposed postponing the election to a more suitable date. I seconded this motion, but the Chair Suresh Narayanan rejected it.
Appointment of Shareholder Scrutinizers
During the proceedings, the Chair called for the appointment of two shareholder scrutinizers. Observing the gentleman next to me, an ex-employee of Nestlé, raising his hand, I recognized the need to act as a counterbalance in what was already a heavily biased and manipulated process. Despite expressing his opposition to the delisting in his question, this ex-employee had nothing but praise for the Board. I strongly suspect that he played a role in supporting shareholder concerns while covertly undermining the integrity of the process.
From the outset, I realized I was outnumbered, standing alone for due process. I felt profoundly unsafe as soon as I assumed this role. It is challenging to convey the nuances of body language, but I sensed a subtle hostility. The other scrutinizers were from Ernst and Young and Heritage Partners.
As a scrutinizer, I noticed issues with the box chosen by Nestlé to hold the votes. The tape used was inadequate, and there was no proper way to seal the box. To illustrate this to the audience, I delicately dismantled it, demonstrating that a more suitable box should have been sourced for such a critical moment in the company’s history.
The ex-Nestlé employee quickly made it clear that I should simply go along with the proceedings, disregarding any concerns I had.
In an attempt to appear impartial, the ex-Nestlé employee suggested that votes be folded before placing them in the box. While this seemed like a procedural matter, it was presented to create an illusion of fairness.
He then took the two boxes, one designated for shareholders and the other for proxy holders, and positioned them far apart on the podium, making it difficult for the sole genuine scrutinizer (myself) to keep a close eye on both boxes, particularly when multiple voters were casting their votes simultaneously.
The voting process can only be described as disorderly. People lacked pens to write on, and no provisions were made to ensure that elderly shareholders had easy access to the ballot box. Shareholders were rushed to the back of the hall to obtain the necessary forms for voting at the EGM.
Tampering and Voting Irregularities
During the proceedings, an individual known to the ex-Nestlé employee mistakenly submitted his proxy voting form to the shareholder voting box. Upon realizing this error, he informed the ex-Nestlé employee, who proceeded to insert his hand into the ballot box and retrieve voting forms. Despite being overwhelmed with this information, I raised the issue with everyone I could, including the Company Secrtetary Keerthi Pathiraja, other scrutinizers, and even the Chairman. However, no action was taken, and no measures were implemented to prevent such tampering in the future.
At this point, I understood that my concerns would likely be ignored. Nevertheless, I made sure to inform as many relevant individuals as possible who were duty-bound to acknowledge the issue. However, beyond this point, I lacked the ability to ensure that votes had not been tampered with since I was unable to keep a close watch on both boxes.
Although we were informed that no registered shareholders would be allowed to leave the room during the voting process, the doors were opened to let someone known to the Company Secrtetary exit. I pleaded with the Chair to at least ensure that the door was closed after that person left, but my request was disregarded. Given the number of people present, the significant distance between the two ballot boxes, and the now-open doors, I could not verify whether everyone who voted was actually eligible to do so.
The issue of opened doors and the departure of shareholders/proxies will become significant when discussing the vote tally. Ultimately, the vote count failed to match, and members of the registrar’s team attributed this discrepancy to individuals who had left the room at a certain point.
Registrar’s Focus on Directors’ Proxy Forms
Despite the chaotic circumstances, shareholder and non-director proxies were able to complete their voting well ahead of the directors. The directors, needing to fill in a substantial number of illegitimate proxy forms to outweigh the legitimate votes against the motion, had a significant stack of papers in front of them. They began signing these forms in an illegible manner, receiving guidance from the Company Registrar on how to achieve the company’s desired outcome. Can a Director be called Independent if he is receiving instructions from an employee?
Proxy forms were signed multiple times with illegible signatures that did not match previous documents. All of these forms were then entered into the Proxy Ballot Box.
Counting of Ballots
If the preceding events seemed absurd, the counting process was even more bewildering. Scrutinizers were outnumbered by the counting staff and forced to huddle over a small table, struggling to identify any discrepancies. The process was so poorly managed that counting staff audibly complained about missing proxy forms. Despite the relatively small number of votes to be tallied (less than 700), confusion persisted during the latter stages. The proxy forms filled in by the directors were numbered, but there were significant difficulties in creating sequential documents, even though they had all been placed in the box together and folded jointly.
In line with his privileged access to the proceedings, the ex-Nestlé employee proceeded to inspect the proxy voting forms for errors. Observing his access to the documents, I also requested to review the documentation. I began verifying whether the proxy forms had the appropriate signatures, ensuring that the independent director had indeed voted as requested by the shareholder. This caused consternation among their side, despite their narrow lead in the vote count. I attempted to verify whether the signature belonged to the independent director.
Intimidation leading up to assault
Shortly after my attempts to inspect the proxy forms, I faced a barrage of people approaching me from behind, and the Company Registrar swiftly informed me that I was not permitted to view the forms. The forms were then taken away from me. Soon after, a group of individuals gathered behind me. Shareholders who were vocal critics of the meeting, who could have provided some sense of security, were forced to leave. The scrutinizers from the law firm Heritage Partners, who seemed disinterested in the proceedings, stood beside me. Joining them was Arittha R Wikramanayake, my assailant.
Wikramanayake positioned himself behind me in an attempt to intimidate, standing uncomfortably close. I made a lighthearted comment about how scared I was that such a powerful member of the legal fraternity was trying to intimidate me. I tried to continue with my limited role of overseeing the proceedings.
Wikramanayake attempted to provoke me into a confrontation. His colleague persistently questioned me about the number of shares I held. In a joking manner, I assured her that I was quite wealthy. Exploiting this remark, Wikramanayake berated me and mocked my claim of wealth.
I told him that, as a shareholder, I was doing everything possible to seek justice. I then insinuated that he benefited greatly from the quality of our legal system’s outcomes. Unaware of the correct law firm he was associated with (Heritage Partners), I mentioned “Nithya partners” (his former firm) and, in the heat of the moment, remarked that it was the kind of firm one would approach if they had committed a murderous crime and wanted to get away with it. He agreed, and at that moment, he struck me with a clear punch to my face. I did not respond physically in any way. The entire process was to my knowledge caught on film and witnessed by multiple individuals.
Unable to Proceed
Given my mental state and lack of feeling safe, I was unable to continue raising the numerous unresolved issues. I informed the Company Registrar, who was evidently aware of the situation as it had been displayed on the screen. However, he denied any such incident and advised me to focus on my job. The other counting staff also insisted that I should simply carry out my duties, which, at that point, meant refraining from taking any action.
Despite having been assaulted, the Company Registrar made a superficial gesture by asking all shareholders to sit down. No effort was made to check on my well-being.
Feeling powerless, there was nothing more I could do. In the interest of time, the vote count proceeded, and the assailant had been removed from my vicinity. It seemed that he was attempting to frame the situation as a personal confrontation, which clearly was not the case.
Those familiar with history may draw parallels to how members of the African-American community were silenced during housing hearings in a similar manner to what Wikramanayake was attempting to do. His goal was to provoke a reaction from me, but it only resulted in him becoming agitated himself.
At this stage, it became evident that no progress was being made in the vote count, as the auditing firm was unable to reconcile the values with those calculated by the Company Registrar. The entire process was conducted in an incredibly incompetent manner, with convoluted Excel layouts and counting mechanisms. It was only after significant insistence that the audit firm was provided with a ruler to aid in counting the countless lines of shareholder votes.
Informing the Chairman, I took the opportunity to approach him and describe the events that had transpired. However, he denied their occurrence and reiterated that I should focus on my responsibilities. I criticized the Board for the company’s incompetence in conducting a fair tally of such a small number of votes.
I urged the Chairman to schedule another vote on a more appropriate date, free from such malfeasance. Unfortunately, my request was denied.
The outcome of the vote proved to be uncomfortably close for the company. It appeared that a mere 5 votes against the motion could have potentially changed the result of the delisting process. Compounding this issue was the questionable nature of the votes in favor of the motion, as many of those who were paid to vote in a certain way had already left, leading to errors in attendance calculation and the vote count.
Despite multiple recounts, the auditors and the company secretary were unable to reach an agreement on the final count. Given the narrow margin, the company insisted that any vote in their favor should be counted positively, exacerbating the dispute.
With no progress achieved through the standard methods, I suggested that the audit firm examine the Excel file being used by the company for vote tallying. However, the audit firm expressed dissatisfaction with the computer software, as it did not resemble the software they had previously used.
In an attempt to find a resolution, I proposed that the audit firm take a print preview of the file and compare the positioning of shareholders with the physical file provided to them. However, a member of the audit firm noted that this method might not be reliable, as the positioning could remain the same even if names were deleted and replaced.
Acknowledging the futility of the process, I agreed that the entire system was beyond repair. After approximately 6 hours since the start of the meeting, close to 9 pm, we decided to conclude the counting and issue a tally. In good conscience I could not to sign off on the document. The auditors should be duty bound to state that the numbers did not tally.
Redoing the Vote
I strongly urge the company, the Securities and Exchange Commission (SEC), and the Colombo Stock Exchange (CSE) to take immediate action to redo the vote. Even by the standards of voting at company meetings, this situation is highly problematic. It should be rectified, especially considering the allegations of vote buying and the establishment of an unfair purchase price made by Nestlé prior to the meeting.
In addition to voicing my concerns, I seek advice on the appropriate course of action going forward preferably from a legal firm with some ethical standards. This situation should initiate a dialogue among relevant stakeholders. It sets a dangerous precedent for the conduct of future company meetings. If the Central Depository System (CDS) allowed proxy holders to be registered only for situations when shareholders are absent from the meetings, many of these issues could be resolved. This would promote transparency and drive business toward honest brokerages, law firms, and unit trusts that prioritize the interests of the entire investor community. I encourage the bar association to investigate the matter.