Regulator issues ultimatum to 42 companies non-compliant with 30% shareholding rules

The Bangladesh Securities and Exchange Commission (BSEC) has issued an ultimatum to 42 listed companies who failed to comply with the mandatory rule on joint ownership of a minimum of 30 percent shares in their firms' paid-up capital. 

The commission has sent letters to the companies asking them to comply with the mandatory 30 percent shareholding rules within 60 days, sources said.

The purchase of shares must be announced within 15 working days. If any company fails to comply with the rules within this time; the commission will take regulatory actions. 

The BSEC in May last year amended the rules relating to the shareholding of sponsors and directors in the Securities and Exchange Ordinance 1969, but could not implement it as yet. 

The rules were originally introduced to ensure a significant stake of the sponsor and directors in companies so that they are motivated to ensure the health of the company. 

However, sponsors and directors of some of the 42 companies have been unwilling to buy the minimum number of shares in their firms as per the BSEC rules.   

Experts say sponsors and directors normally declare purchases of shares when their companies are doing well. As a result, share prices of the companies play a positive role in the capital market at the time. 

There is a downward trend in the market at present, and some sponsors and directors are not therefore complying with the BSEC rules, they added.

If sponsors and directors do not jointly own the required number of shares, investors may not have confidence in the shares of that company, analysts have said.

Under Section 2CC of the Securities and Exchange Ordinance, if sponsors and directors of a company fail to meet the 30 percent shareholding requirement they will not be able to execute any type of sale or transfer or transmission or pledge of shares until the acquisition of the required amount of shares, except the transfer of pledged shares in case of confiscation for loan default or transmission of shares in case of death. 

Additionally, the firm will not be able to raise capital through rights share offer or repeat public offer or bonus shares or amalgamation of companies or any other mode of raising capital.