SEC rejects Hela Apparel request to defer trading suspension after Sri Lanka’s capital market regulator refused the company’s request to postpone regulatory action, leaving the apparel exporter facing continued restrictions on trading its shares on the Colombo Stock Exchange.
SEC rejects Hela Apparel request to defer trading suspension amid governance and financial crisis
Hela Apparel Holdings PLC disclosed that the Securities and Exchange Commission of Sri Lanka (SEC) had rejected its application, submitted in March, seeking a deferment of the trading suspension imposed on its listed securities. The decision means the suspension, which took effect on June 18, 2026, remains in force as the company continues to grapple with significant corporate governance shortcomings and worsening financial performance.
In a filing to the Colombo Stock Exchange (CSE), the company said the SEC had declined its request to delay the enforcement action. The trading suspension was triggered following a disclaimer of audit opinion contained in the independent auditor’s report accompanying the company’s annual report for the financial year ended March 31, 2025.
The regulatory action also reflects the company’s prolonged failure to comply with Colombo Stock Exchange listing rules relating to corporate governance, an area that has come under increasing scrutiny as Hela Apparel’s internal governance structure continues to deteriorate.
In a separate disclosure issued alongside the regulatory update, the company acknowledged that its board of directors has been reduced to only two members, substantially below the minimum requirement of five directors prescribed under listing regulations.
The reduced board has also affected the functioning of several mandatory board committees. Hela Apparel said its audit committee, remuneration committee and related party transactions review committee are each operating with only a single independent non-executive director, leaving them significantly under-composed and unable to meet normal governance expectations.
The company noted that efforts to fully reconstitute the board and restore its governance framework remain ongoing, although no specific timeline was provided for appointing additional directors or restoring full regulatory compliance.
The governance challenges come at a time when the apparel manufacturer is also experiencing severe financial pressure. According to the company’s interim financial statements for the nine months ended December 31, 2025, the group recorded a net loss of Rs. 7.59 billion, widening from a loss of Rs. 6.46 billion during the corresponding period a year earlier.
Revenue also declined sharply as challenging market conditions continued to weigh on operations. Group revenue fell nearly 29 percent to Rs. 43.95 billion from Rs. 61.55 billion recorded in the same period of the previous financial year, reflecting weaker demand and ongoing operational difficulties across the business.
The sustained losses have further weakened the company’s balance sheet. As of December 31, 2025, Hela Apparel reported negative total equity of Rs. 18.80 billion, compared with negative equity of Rs. 10.96 billion at the beginning of the financial year. The deterioration highlights the continuing erosion of shareholder value as accumulated losses mount.
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 high debt burden has intensified pressure on the group’s liquidity and cash flows, raising further concerns over its financial stability.
The combination of governance deficiencies, regulatory action and mounting financial losses presents a significant challenge for the listed apparel exporter as it seeks to stabilise its operations and restore investor confidence. Compliance with Colombo Stock Exchange listing requirements and strengthening corporate governance will remain critical steps if the company is to move toward lifting the trading suspension and rebuilding market credibility.
The SEC’s decision underscores the importance placed by Sri Lanka’s capital market regulator on governance standards and financial reporting integrity. Until the company addresses the identified deficiencies and satisfies regulatory requirements, Hela Apparel’s shares are expected to remain suspended from trading on the Colombo Stock Exchange.