SEC rejects Hela Apparel request to defer trading suspension, leaving the listed apparel exporter facing an extended halt in share trading as regulatory concerns over corporate governance and financial reporting continue to intensify.
SEC rejects Hela Apparel request to defer trading suspension amid governance crisis
The decision by the Securities and Exchange Commission of Sri Lanka (SEC) follows the company’s request submitted in March seeking to postpone the regulatory action. However, the capital market regulator declined the application, resulting in the suspension of trading in Hela Apparel Holdings PLC shares with effect from June 18, 2026.
The company disclosed the SEC’s decision through a filing to the Colombo Stock Exchange (CSE), confirming that the suspension stems from multiple regulatory concerns. Among the primary reasons is the disclaimer of audit opinion issued in the independent auditor’s report accompanying the company’s annual report for the financial year ended March 31, 2025.
The suspension also reflects the company’s continued failure to comply with Colombo Stock Exchange listing rules relating to corporate governance. Regulatory authorities have increasingly emphasised the importance of governance standards among listed companies to safeguard investor confidence and ensure market transparency.
In a separate disclosure issued alongside the announcement, Hela Apparel revealed a significant deterioration in its governance structure. The company stated that its board of directors currently consists of only two members, substantially below the minimum regulatory requirement of five directors prescribed under listing regulations.
The reduced board composition has created wider governance challenges across the organisation. Several mandatory board committees, including the audit committee, remuneration committee, and related party transactions review committee, remain under-composed, with only one independent non-executive director serving on each committee.
The company acknowledged that the process of reconstituting both the board of directors and its various governance committees is still underway. Until these appointments are completed, the company remains exposed to continued regulatory scrutiny regarding compliance with listing obligations.
The governance concerns emerge against the backdrop of worsening financial performance that has placed considerable pressure on the apparel manufacturer’s balance sheet. According to the group’s interim financial statements for the nine months ended December 31, 2025, Hela Apparel reported a group loss of Rs. 7.59 billion, compared with a loss of Rs. 6.46 billion during the corresponding period of the previous financial year.
The widening losses were accompanied by a significant decline in revenue. Group revenue fell by nearly 29 percent to Rs. 43.95 billion from Rs. 61.55 billion recorded a year earlier, reflecting weaker demand, operational challenges, and continued pressure on the company’s business performance.
The deterioration in earnings has further weakened the group’s financial position. Total equity remained deeply negative at Rs. 18.80 billion as of December 31, 2025, worsening from negative equity of Rs. 10.96 billion at the beginning of the financial year.
At the same time, total liabilities increased to Rs. 58.42 billion, driven largely by short-term borrowings amounting to Rs. 28.18 billion. The growing debt burden has intensified pressure on the company’s liquidity and overall financial stability.
The combination of persistent losses, declining revenue, negative shareholder equity, and mounting liabilities presents significant challenges for management as it seeks to stabilise operations and restore investor confidence. Market analysts generally view prolonged negative equity as a critical indicator of financial distress, particularly when accompanied by governance shortcomings.
The SEC rejects Hela Apparel request to defer trading suspension decision underscores the regulator’s firm stance on enforcing listing standards and maintaining investor protection within Sri Lanka’s capital market. The action also highlights the importance placed on timely financial reporting, sound governance practices, and compliance with regulatory requirements for listed entities.
Going forward, the company is expected to prioritise rebuilding its board, restoring the required governance framework, and addressing the operational and financial issues that have contributed to its current position. Successful implementation of these measures will likely be critical before normal market confidence can be restored.
As SEC rejects Hela Apparel request to defer trading suspension, investors will closely monitor the company’s progress in strengthening corporate governance and improving its financial performance, while awaiting further updates on board appointments, regulatory compliance, and potential recovery initiatives.