BSEC offers exit plan for poor performers

Investors now protected from complete loss in case of delisting

The Bangladesh Securities and Exchange Commission (BSEC) recently issued a directive offering companies not performing well an exit plan that would help protect small investors in case of delisting.

When a company's performance goes down, it is either traded as a junk stock in the over-the-counter market or gets delisted. In any case, the investors get next to nothing from their stocks.

United Airways is one such case as it was delisted last month by order of the market regulator.

After the delisting, general investors, considering the face value of their stocks, incurred losses of around Tk 786 crore.

Meanwhile, Beximco Synthetics applied to delist itself from the stock market last September.

With the new directive though, either the regulator or company itself will be able to delist the company in question by paying back its investors, according to BSEC Spokesperson Rezaul Karim.

Those who want to keep a stake in the company will have to buy out the other investors so that when it is delisted, any new investors will not be impacted while the existing ones would get their money back, Karim said.

"The BSEC came up with this exit plan in order to protect investors," he added.

Under the directive, listed companies from a bourse's main trading board, delisted securities trading in the over-the-counter market, delisted securities trading under the alternative trading boards and all other securities are eligible for the exit plan.

Any company that has not been in commercial operation for more than two years, has incurred a net loss for three consecutive years, has accumulated losses that exceed its paid-up capital or fails to declare any cash dividends for three consecutive years is eligible for delisting, the BSEC said in its directive.

The BSEC can also delist a company for any involvement in money laundering, financing terrorists or any other illicit business as defined by the state.

The offer price for buying securities under the exit plan shall be any of the following: whichever is higher such as the face value or issue price at the time of the company's initial public offer, last trade price on (or before) the date of suspension of trade, net asset value (NAV) per share as per the last audited financial statements.

The stock exchange concerned shall then open and maintain a joint escrow account, featuring the managing directors of the respective bourse, only for making payments on the securities bought or acquired under the exit plan, said the directive.

The consideration for securities surrendered, sold or transferred under the exit plan shall be at offer price and settled in cash by making payments from the aforementioned escrow account.

The sponsors will initially deposit at least 50 per cent of the total amount of consideration calculated on the basis of offer price to the account maintained by the stock exchange concerned in cash, the directive read.

The remainder will be deposited either in cash or by a bank guarantee in favour of the stock exchange concerned.

Meanwhile, a suspense account would be opened to keep the shares of small investors.

The BSEC's initiative to form an exit plan is a good sign for the stock market, said stock investor Abdul Mannan.

Investors' confidence will rise if listed companies follow the directive as they will get at least some money back from a delisted company.

"In the recent past, some companies were delisted and investors got nothing," he added.

The commission shall accord its consent-in-principle within 30 working days of receipt of a complete application, if such an application is acceptable to the commission.

If the application is not acceptable, the regulator will issue a rejection letter, stating the reasons for such rejection, within 30 working days of receipt of the last correspondence with a copy thereof to the exchange.

On declaration of completion of the exit plan, the commission shall direct the stock exchange concerned to remove the securities from its trading systems if traded with any platform.

The stock exchange shall be responsible for ensuring all compliances relating to execution of the exit plan, the directive said. 


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