BSEC to be tough about minimum shareholding

Directors of a listed company will not be allowed to sell their shares if sponsors and directors fail to hold a combined minimum stake of 30 percent in the firm.

The Bangladesh Securities and Exchange Commission (BSEC) took the decision at a meeting at its office in Dhaka yesterday, according to a press release.

The regulator also made it mandatory for companies to explain the reasons for issuing stock dividends instead of cash. It suspended a stock broker’s certificate for alleged misuse of investors’ money. The BSEC is set to be tough on the minimum shareholding issue as many firms are not paying heed to its previous directive. 

In 2011, the regulator issued a circular, ordering sponsors and directors to hold a minimum 2 percent of shares of a company individually and 30 percent jointly.

But, about 50 companies have failed to comply, prompting the regulator to decide on issuing a new circular.

As per the new obligation, sponsors and directors will not be able to sell, transfer or keep mortgage their shares if they do not hold at least 30 percent stakes collectively.

Such companies will be barred to issue right shares, repeat public offer and bonus share and merge with other companies in order to raise capital.

If a director fails to maintain at least 2 percent of shares, the directorship will fall vacant and the company will have to fill the vacancy within 30 working days. Companies that fail to maintain the minimum shareholding obligation will be segregated and formed in a new different category.

Companies will be allowed to issue stock dividends if they use the raised funds for business extension, modernisation, re-building, balancing, modernisation, rehabilitation and expansion (BMRE), and qualitative development.

Moreover, firms will have to inform its investors of the price sensitive information on how the funds will be used.

The BSEC said Alliance Securities & Management breached securities laws by providing money withdrawal opportunities to its directors and their families although there was not adequate money in their accounts.

It also transferred its consolidated customers account’s money of Tk 12.97 crore to the dealers’ account and opened a fixed deposit in a bank with the money, in a clear violation of the securities laws.  The regulator primarily decided to cancel the certificate of the brokerage and the decision will be executed later.