The company had 19 directors in its board when it was listed with the local bourses in 2011
Baraka Power Ltd has announced the appointment of four new institutional directors, alongside the appointment of a qualified independent director, to comply with securities regulations, demanding 30% shareholding by sponsors and directors collectively.
Baraka Power's kind of innocent non-compliance went back to 2012 when it went off-compliance to abide by another part of the securities regulation that says any shareholder director must hold at least 2% shares at a listed company.
The company, a non-resident Bangladeshi venture, had 19 directors on its board when it was listed with the local bourses in 2011.
At the end of 2011, the Bangladesh Securities and Exchange Commission (BSEC) announced that each listed company director must possess at least 2% shares of the company, otherwise, their chairs would be vacant.
The same regulation also said sponsors and directors will have to hold at least 30% shares collectively.
Any deviation from the regulation, popularly known as "2 and 30 percent shareholding rule", would result in non-approval of the company's repeat public offerings, right shares offering, and lately even the issuance of stock dividends.
Baraka Power complied with the first part of the regulation – regarding 2% individually – through the resignation of 13 directors holding less than 2% shares.
The remaining six directors were holding 18% of the company shares. For the remaining non-compliance with the 30% rule, the company failed to get its preference share offer approved last year.
Even the initial public offering by its power generation subsidiary, Baraka Patenga Power Limited, also faced a hiccup as the BSEC instructed to correct the mother company's shareholding structure and submit updated financials alongside the compliance report.
However, the former directors are still with the company as sponsor shareholders, and recently they have transferred their shares to four holding companies, each of which now has more than 2% shares at Baraka Power, according to Mohammed Monirul Islam, the company secretary of Baraka Power.
Four representatives of the holding companies will be on Baraka Power Board after the BSEC's approval, he added.
While talking to The Business Standard over the phone, he declined to name the institutional shareholders being onboarded as the list is yet to be communicated with the BSEC.
However, another official seeking anonymity informed that the four holding companies are NRB Ventures Pvt Ltd, Fusion Holdings Pvt Ltd, Baraka Apparels Ltd, and Karnaphuli Harbor Ltd.
A businessman with a sound educational and professional background is also going to join Baraka Power Board if approved by the regulator.
A large number of listed companies went off-compliance regarding 30% shareholding a few years ago when the BSEC said successors of a company sponsor would not be treated as a sponsor.
Sponsor shares are not being counted to make the 30% if transferred to even their son or daughters and if the transferee is not in the company board.
The BSEC has been fighting for ensuring directors' sufficient stake at listed companies that might inspire their commitment and hard work to maximise shareholders' value.
The regulator, once being challenged in court by listed company promoters, later won the legal battle.
Now, the BSEC is in a hard stance against the non-compliance with the 2% and 30% rule.