Delta Spinners asked to reconstitute board

The Bangladesh Securities and Exchange Commission (BSEC) has ordered Delta Spinners to reconstitute its board for having failed to leave Z category within stipulated two years.

When a company is unable to declare cash dividends for two consecutive years, hold annual general meeting on time, remains idle for six months, has a net operating loss for two consecutive years or if its negative balance of retained earnings exceeds its paid-up capital, then that company is placed in Z category.

"It has been observed that your company was placed in the Z category for around two years but you and your board of directors failed to improve the company's performance during that period," the BSEC said in a letter to the CEO and board of Delta Spinners on December 27.

The company, being an issuer of capital and listed with the stock exchanges, shall ensure its compliance with the conditions of the commission's notification issued on September 1, 2020.

The board of a listed company trading under Z category shall be reconstituted, within 45 working days from the first day of placement of the company in the category, by the existing board with the shareholders that are eligible for the positions, the notification said.

If the company fails to comply with the notification, then the commission will initiate all necessary and relevant legal actions to protect the interests of its investors, the BSEC said in its letter.

In case of failure to reconstitute the board for a continuous period of two years, the BSEC can take the following steps.

The sponsors and existing directors of the company shall not be allowed to represent or be elected as a director in the board of any listed company.

The commission shall appoint an auditor(s) at its own cost to conduct special audits of its financial statements and the affairs of the issuer company.

The commission may nominate any official as an observer to the affairs of the issuer company.

As Delta Spinners failed to declare cash dividends for the last four years starting from 2015, general investors whose shareholding is 67 per cent are not getting dividends for a long period, the regulator said.

"This is detrimental to the interest of the investors of the company and undesirable to the commission," it added.

The company was also directed to submit specific and detailed proposals along with appropriate action plans for improving its operational and financial performance.

"We are sending letters to all other companies who are in the Z category for a long time," said Rezaul Karim, spokesperson of the BSEC.

The BSEC has already formed a committee to oversee the reform of Alhaj Textile board and is also taking action against directors who fail to hold a minimum 30 per cent stake jointly in their own company.

"All the junk companies will get letters soon," he added.

Masudur Rahman, company secretary of Delta Spinner, did not respond for a comment by the time this report was filed yesterday.