SHAREHOLDERS of CL Financial are giving directors of CLICO until February 18 to make an application to the High Court for an order that the Central Bank ceases control of the insurance company and stop the sale of its traditional portfolio by that date.
In documents seen by Express Business, the shareholders said if the directors refuse to take the action, the shareholders will initiate the action for and on behalf of CLICO to stop the sale of its assets and the unlawful continued control of that company by the Central Bank.
This move, termed a derivative action, is in compliance with section 240 of the Companies Act, which states: “Subject to subsection (2), a complainant may, for the purpose of prosecuting, defending or discontinuing an action on behalf of a company, apply to the Court for leave to bring an action in the name and on behalf of the company or any of its subsidiaries, or intervene in an action to which any such company or any of its subsidiaries is a party.”
The legislation goes on to stipulate that derivative actions cannot be brought unless the High Court is satisfied the directors have been given reasonable notice of the complaint; that the complainant is acting in good faith; and that it appears to be in the interests of the company or its subsidiary that the action be brought, prosecuted, defended or discontinued.
The five-member CLICO board is headed by executive chair, Claire Gomez-Miller, and it comprises Charles de Silva, Martin Franklin, Ulric Miller and Delia Joseph.
The activation of the derivative action by the CL Financial shareholders follows their January 31 pre-action protocol letter to Finance Minister Colm Imbert, Attorney General, Faris Al-Rawi and Central Bank Governor Dr Alvin Hilaire. The pre-action protocol also calls on the Central Bank to relinquish control of CLICO and stop the sale of the traditional portfolio to Sagicor.
In their letter this week, the CL Financial shareholders cite section 44G(4) of the Central Bank Act, which states: “Where the Bank has, in pursuance of section 44D, assumed control of an institution, the High Court may, upon the application of the directors of the institution acting independently of the Bank, if it is satisfied that it is no longer necessary for the protection of the depositors or creditors of the institution that the Bank should remain in control of the business of that institution, order that the Bank cease to control the business of that institution as from a date specified in the Order.”
According to the shareholders, it is patently clear that there is no longer a need for the Central Bank to remain in control of CLICO in order to protect the depositors or creditors of CLICO. Nor is the financial system of Trinidad and Tobago in danger of disruption, substantial damage, injury or impairment to justify the continued exercise of control by the Bank over CLICO.
“That is why we are requesting that you, the directors make an application to the High Court pursuant to s.44G (4) for an order that the Central Bank ceases control of CLICO immediately from the date of the Order. If you fail to make this application, our clients shall make an application for leave to bring a derivative action in this regard in accordance with the said s. 240 (1) of the Companies Act,” according to the CL Financial shareholders document.
On the Companies Act requirement that those bringing derivative actions must act in good faith, the shareholders said their attempt to get the Central Bank to relinquish control of CLICO and stop the sale of its traditional portfolio “is being sought honestly and in a bona fide manner on behalf of the company. Our clients’ actions are devoid of any collateral purpose that amounts to an abuse of process.” They also argue that the relief sought by our clients is meritorious and completely within the ambit of the law.
The shareholders argued: “As it relates to the Central Bank’s control of the company, undoubtedly, if this is sustained then CLICO will be placed in an unfavourable position as it relates to servicing its creditors and ultimately extinguishing its debt. It can be seen that despite CLICO being solvent, and having attained this position of solvency since 2015, there has been no effort to have CLICO pay off its debt to the GORTT, resulting in the possibility of CLICO having to pay more money in the long term in respect of this debt.
“In respect of the proposed sale of the traditional insurance portfolio to Sagicor, the impact that this sale will have on CLICO is self-explanatory. For one, it means that CLICO as we know it, or in any form, will cease to have any existence as a company. Further, as indicated in the (First) Schedule, the preferred bidder in the form of Sagicor was the lower of the two (2) final bidders. This means that CLICO will not even get the benefit of realizing its highest potential on the market. Accordingly, any effort to have this unlawful sale curtailed can only be to the benefit of CLICO.”
The shareholders conclude their legal letter by stating: “In light of the foregoing, we hereby request that you respond to us within seven days to indicate clearly your position as it relates to bringing the requested action for and on behalf of the company. Please be advised that if you fail to respond to us, our clients shall have no alternative but to initiate legal proceedings without further notice.
“Our clients continue to reserve all of their legal rights in this matter. Please be guided accordingly.”