The Bangladesh Securities and Exchange Commission (BSEC) issued a directive yesterday repealing one criterion and adding a new one for companies to be listed as junk.

The stock market regulator repealed the criterion stipulating that a listed company will be downgraded to Z category if it violates any securities rule.

This effectively worked in favour of 25 companies which were on the way to be downgraded.

The new clause says that if any company fails to pay 80 percent of dividends it had declared earlier within the stipulated time, it will be downgraded to Z category.

According to regulations, all listed companies have to provide dividends within one month of their annual general meeting, where the dividend gets approval from general shareholders.

Other criteria remain the same.

One is that a company will be categorised as Z category if it fails to declare any dividend for two consecutive years, or if it fails to hold an annual general meeting.

If the company faces any legal proceedings before the court regarding the AGM, in that case, it will get a maximum two years' time for downgrading to the junk category.

If a company remains closed for six months, or if its negative balance of retained earnings exceeds its paid-up capital, the company also will be downgraded to Z category.

In case, any company declares and disburses interim cash dividends which is justified with its profits, the company will be upgraded from the Z category.

No sponsor or director of a Z category company, excluding banks, insurance companies, and non-bank financial institutions, shall be allowed to transact shares of the company without prior approval of the commission.