Commercial Bank of Ceylon allowed to seize Eastern Insurance directors’ shares

The Dhaka Stock Exchange (DSE) has allowed the Commercial Bank of Ceylon to confiscate 7,53,900 shares of three directors of Eastern Insurance Company Limited for defaulting on a Tk5 crore loan.

Earlier, Umme Kulsum Mannan, a sponsor-director of Eastern Insurance, Sunman Sweaters, director, and Alfa Textiles, a public shareholder director had taken the loan in lien of the said shares.

The shares shall be transferred to the bank within 30 working days outside of the DSE trading system, according to a disclosure on Tuesday. 

At the DSE, the prevailing market price of Eastern Insurance shares are Tk65 each. 

Of the said shares, 3,82,000 belong to Umme Kulsum Mannan, 2,01,100 to Sunman Sweaters, and 1,70,800 to Alfa Textiles. 

And, of the total shares of Eastern Insurance, Umme Kulsum holds 2.01%, Sunman Sweaters 2%, and Alfa Textiles holds 2.53% at present. 

As per rules, a company's director must have at least 2% holding of the company in order to hold their seat in the board. 

A DSE official, seeking anonymity, said if the shares are transferred to the lender, the holding of the three directors will decline to below 2%, which in turn will make them exit the board. 

"After Eastern Insurance directors defaulted on the loan, the Commercial Bank of Ceylon applied to the stock exchange for impounding their shares."

Therefore, as per listing rules, the shares shall be transferred as confiscation of loan default, the official added. 

However, Eastern Insurance Sponsor-director Major (retd) Abdul Mannan told The Business Standard, "Because the three directors couldn't repay the loan taken in lien of shares, the bank wants to confiscate those shares."

"But we told the bank that we would repay the loan instead," he added.

Eastern Insurance Company started its operations in 1986, and got listed on the DSE in 1994, and Chittagong Stock Exchange in 1996. Its paid-up capital is Tk43.11 crore.

In 2022, the private sector insurer made a profit of Tk15.39 crore, and paid a 22% cash dividend to its shareholders.