SEC gets tough on Kalpitiya Beach Resort

While expressing its “grave concern”, the Securities and Exchange Commission (SEC) has issued directives to Kalpitiya Beach Resort PLC with regards to the proceeds the company collected during its Initial Public Offer (IPO) and the non-construction of a resort hotel as intimated in its IPO prospectus. 
Accordingly, the company was directed to hold an Extraordinary General Meeting (EGM) on or before May 10, 2015, to apprise shareholders of its true financial position and to pass a resolution on an alternative course of action with regard to the IPO proceeds collected from the public.
The company was also directed to accompany the EGM notice with a report prepared by the company auditor/accounting firm together with the necessary supporting documents, which will be duly approved by the director board, to provide the shareholder with adequate information to enable them to make an informed decision in voting the resolution.
Kalpitiya Beach Resort raised Rs.283.5 million through an IPO in 2011 to part finance the construction of Citrus Kalpitiya, a resort hotel.
The company also disclosed that the construction of the aforesaid resort would commence during December 2011, utilizing the funds raised through the IPO and would be completed within 24-30 months and the commercial operations of the project is scheduled to commence in early 2015.
The IPO prospectus of the company has given an undertaking in respect of utilization of IPO funds in a situation where the project is not carried out, that the company will call for an EGM of the shareholders to consider an alternative course of action.  
The company in December 2013 in a stock market filing said it was holding back its plans to set up a resort hotel in Kalpitiya temporarily as a result of the government delaying its plans to make Kalpitiya a top tourist destination.