Stock regulator to upgrade merger rules

Bangladesh Securities and Exchange Commission plans to upgrade its acquisition and takeover rules as the existing systems have become outdated.

The stockmarket regulator formed a four-member panel on merger and takeover and instructed it to come up with draft rules or recommendations in the next 30 workdays.

The decisions were made at a meeting of the regulator with its chief M Khairul Hossain in the chair, according to a statement.

Merger seekers find it difficult to comply with the existing system. The Substantial Share Inheritance, Acquisition and Takeover Rules of 2002 are not appropriate for the current market and need to be modernised, a BSEC official said.

Fixing share transfer price is one area of concern in the existing rules.

The transfer rate should be the historical high price of a company’s stock on a bourse or the last six months’ weighted average price, whichever is higher, according to the existing rules.

But the rules cannot be complied with, as most of the companies' share prices rose abnormally in 1996 before the market crash. Another clause states that a public notice will have to be published before acquisition or takeover. But the publication of such notice impacts share prices, especially for publicly-traded companies.

So, the commission often gives the companies a waiver on these issues. Presently, companies -- both listed and non-listed -- follow the Companies Act of 1994 for merger and acquisition. The court is the prime authority to allow or reject any merger or acquisition proposal made by any company, according to the law.

The stockmarket regulator only allows the issuer companies to issue or transfer shares based on the court approval.