Independent directors to monitor 30% stake compliance issue

The stock market regulator has started taking regulatory action against listed firms that have failed to comply with its directive that sponsors and directors must hold an at least 30% share of their companies' paid-up capital at all times.

The firms will form a committee of independent directors including two additional independent directors who will oversee the compliance issue.

Before that, the company's board of directors will appoint two additional independent directors subject to prior approval of the Bangladesh Securities and Exchange Commission (BSEC).

The directors will remain on the board till the end of their tenure.

Moreover, the committee will submit to BSEC its quarterly report on the progress of compliance – with the 30% shareholding requirement – within 10 days prior to the end of a quarter.

Asking not to be named, a BSEC official said 25 publicly listed companies have yet to ensure 30% shareholding by their sponsors and directors.

Of a total of 43 non-compliant firms, 18 have complied with the rules till last week while 14 have yet to move for compliance, he added.

According to BSEC's rule, listed firms have to conduct their annual general meeting (AGM) through a physical presence or via a virtual platform within 45 working days from the issuance of this directive in order for making sure that shareholders' rights are protected.

The board of the Central Depository of Bangladesh (CDBL) will form a three-member election commission headed by a chief election commissioner to conduct elections for the position of company directors.

CDBL will provide a list of eligible candidates to the company concerned that holds individually an at least 2% share of its paid-up capital and also publish a voters list along with other relevant information.

CDBL will also provide an e-voting platform for all shareholders in dematerialised form and the company will facilitate pre-registration for its investors.

The facility for e-voting will be an agenda-wise voting option against each resolution and remain open for one to three days prior to the meeting.

E-voting will be kept open till the closure of the meeting on the day of the general meeting.

The voting results shall be authenticated by CDBL and reported to BSEC for approval within 48 hours after the completion of the respective company's general meeting.

The stock exchange may appoint any official as an observer for the meeting and the election commission will resolve any dispute, if any, related to the election.

BSEC will act as the appellate authority regarding any decision of the election commission.    

Earlier, the stock market regulator finalised a proposed action plan to restructure the boards of companies where sponsors and directors failed to hold a 30% stake by 30 November this year.

As per the securities regulator directive, sponsors or promoters and directors must jointly hold a minimum 30% share of the paid-up capital of a company all the time.

The sponsors and directors of the companies in question are holding their positions in violation of a 2011 directive issued by the Bangladesh Securities and Exchange Commission (BSEC).

The regulator came up with the order in the aftermath of the stock market crash in 2010.

The move aimed at making the directors responsible and loyal to small investors as it was seen that many directors had sold off their shares right before the debacle.

On 29 July this year, the new leadership of the securities regulator asked 43 listed companies to ensure that their sponsors and directors jointly hold at least 30% shares in their own companies within the following 60 days.