BSEC appoints 5 independent directors to Ring Shine board amid takeover delay
The commission appointed these directors on Thursday for three years with effect from 26 January
The Bangladesh Securities and Exchange Commission (BSEC) has appointed five independent directors to serve on the board of Ring Shine Textiles Ltd, a company that is still awaiting the formal takeover by its new owners. This move aims to safeguard smooth operations and protect the interests of general investors until the transition to new ownership.
The commission appointed these directors on Thursday for three years with effect from 26 January. The existing board's tenure will expire on 26 January this year.
The new independent directors are — Dr Sheikh Mamun Khaled, Borhan Uddin Ahmed, Azhar Uddin Bhuiyan, Dr. Mohammad Sogir Hossain Khandaker, and Dr. Md Foroz Ali.
In August last year, the BSEC granted conditional approval for Wise Star Textile Ltd and five companies based in Singapore to acquire shares of Ring Shine, including those held by the sponsor and directors.
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However, the existing board of directors of Ring Shine Textile expressed concerns about the credibility of the six companies that are set to collectively take over a 38% stake in the textile firm.
Wise Star will hold only 2% shares of the company and the remaining 36% will be held by the other five companies.
Complexity transferring ownership
Even after five months of BSEC approval, the transfer of ownership of Ring Shine was not possible.
Company officials said the existing directors are delaying transferring their stake to new owners as they did not fulfil the terms of the Sales and Purchase Agreement (SPA).
According to the directors, the company has liabilities of approximately Tk100 crore to Bepza, along with an additional Tk35 crore in liabilities related to customs, VAT, and other matters. However, the new owners have not addressed these issues as per the takeover agreement.
Moreover, the current board offered lenders both personal and corporate guarantees, which underwent a transfer in conjunction with the change in ownership. The new owners declined to furnish this guarantee.
In the scenario of a company collapse post-change in ownership, all the obligations to banks will be assumed by those who provided the bank guarantees. Under these circumstances, the current owners have not consented to transfer these shares to the new owners.
Why existing owners are concerned
Ring Shine's existing board found that there is no record of Wise Star's commercial operations since its inception in 2021. Yet, it has a paid-up capital of Tk20,000 and an authorized capital of Tk3 crore.
Whereas, Ring Shine has been in active operations since 1998 and has a paid-up capital of Tk500 crore and authorized capital of Tk540 crore.
This massive paid-up capital difference is what made Ring Shine's directors frown and doubt Wise Star's financial strength to take over the operations of Ring Shine.
Also, it has been recently found that Wong Jammy Kwok Chan, who was the chairman of Wise Star, has resigned. Now, Wong Elisa Dai Wah is the chairman of Wise Star Textile, according to Ring Shine and BSEC sources.
At present, Wong Jammy Kwok Chan is the managing director of Queen South Textile, a listed firm on the stock exchanges.
Of the Wise Star Textile shares, 50% is held by Wong Elisa, and the other half by the company's existing Managing Director Wong Kwok Chuen.
Ring Shine's struggles
Ring Shine was the first big manufacturing company to raise Tk150 crore through an initial public offering (IPO) using the fixed price method in 2019. However, after listing, it could not do business properly due to several issues.
In January 2020, all its Taiwanese sponsor directors, along with many high-ranking officials, exited without any prior notice.
Because of the uncertainty created by their departure, the BSEC asked the Bangladesh Bank to freeze Ring Shine's IPO fund account. After that, the company faced hardships in operating its factory.
In September 2020, its production stopped because of the Covid pandemic.
The company said a working capital shortfall, a decline in orders from foreign buyers, and a raw material shortage led to the factory shutdown.
In January 2021, the BSEC restructured the company's board in a move to get it out of its worsening condition.
For this, the BSEC appointed seven independent directors to observe the company's overall condition and make a plan on how to operate it. In June 2021, the factory went back into production.
