Chartered secretaries push for buyback provision in Companies Act

The chartered secretaries have stressed the need for incorporating the buyback provision in the Companies Act alongside their many other recommendations that could make the country's mother business law fit to the changing dynamics in the corporate world.

Buyback is an option for a company to reduce its paid-up capital through paying the interested existing shareholders from the company's surplus cash and get the shares surrendered.

The capital market often suffers depressions due to some companies' disproportionate paid-up capital growth over years in comparison with their business and profit growth.

In such a context, the capital market regulator has been trying to introduce buyback in the market since the 2010 crash when the then finance minister AMA Muhith had instructed the authorities to introduce a buyback system in the stock market.

The Bangladesh Securities and Exchange Commission (BSEC) has been planning to enforce mandatory buyback in the cases of listed companies' underperformance that hurt investors.

However, as the Companies Act does not allow any company to buy its own shares, BSEC had to plan for the alternative to put the pressure to buyback on sponsors and directors of some listed companies in cases of nonperformance.

In other countries, buyback helps cash-surplus companies slim their capital structure that yields higher net profits and assets per share and helps retain a healthy stock price that benefits shareholders.

Bangladeshi companies too should be allowed for such, regardless of their listing status, opined the corporate governance experts in a webinar.

The recommendation by the chartered secretaries who mainly work for ensuring corporate governance in business organisations spoke at a virtual seminar arranged by the Institute of Chartered Secretaries of Bangladesh (ICSB) on Saturday.

Chaired by ISCB's past president and the current chairman of its Professional Development Committee Mohammad Sanaullah, senior ICSB fellows M Naseemul Hye and S Abdur Rashid presented their keynote speeches addressing the shortcomings in the Companies Act, which has been modified four times, but yet to include many essential provisions recommended by experts.

The Bangladesh government's Additional Secretary and the Registrar of the Registrar of Joint Stock Companies & Firms (RJSC) Sheikh Shoebul Alam spoke as the chief guest at the event where ICSB President Muzaffar Ahmed delivered the welcome speech.

"In the context of globalisation policy, the Companies Act of this country needs to match with the present-day needs," said Naseemul Hye.

In 2020, the government upgraded the Companies Act mainly to allow one person companies and electronic mode for regulatory compliances.

But the last round of amendment did not address the expert calls for deeply incorporating the idea of corporate governance in the mother business act so that the most essential good practices to maximise shareholders' value and also secure a sustainability of the business itself become a must for all entities registered with the RJSC, instead of keeping corporate governance limited within the purview of capital market only.

In Bangladesh, only the listed companies are bound to follow corporate governance standards defined in the Corporate Governance Code-2018 by the Bangladesh Securities and Exchange Commission.

Even in neighbouring India, every company has to appoint a company secretary who looks after corporate governance which is not limited within only good accounting practices.

Keynote speakers of the ICSB seminar recommended following the superior examples and upgrading the Companies Act.

Bangladesh should make appointment of Company Secretaries mandatory for each company with Tk5 crore or more in paid-up capital and the professional must be a resident one.

Their recommendation also includes, complete paperless filing, communication and meetings, introducing hassle-free merger and acquisitions, RJSC's integration with other relevant organizations, getting further details of company promoters and directors, provision and protection of whistleblowers who reveals misconducts and scams within companies, and a maximum flexibility to allow future technologies without amending the act.