Dominage Steel board Tk5.10cr over IPO fund diversion, fake proxy votes

The Bangladesh Securities and Exchange Commission (BSEC) has fined five directors and two former executive officers of listed company Dominage Steel Building Systems Limited a total of Tk5.10 crore for allegedly embezzling IPO proceeds, forging proxy votes and concealing material operational information.

In an enforcement order issued on 7 September, the stock market regulator fined Chairman Muhammad Shamsul Islam, Managing Director Mohammad Rafiqul Islam, and Directors Sujit Saha, Rakibul Islam and Abul Kalam Bhyian Tk1 crore each.

Former Chief Financial Officer Zillur Rahman and former Company Secretary Jamir Hosen Chowdhury were fined Tk5 lakh each.

The penalised individuals have been ordered to pay the fines from their personal funds within 30 days through bank drafts or pay orders, according to the order.

The action followed an inspection by the Dhaka Stock Exchange PLC (DSE) into Dominage Steel's operational premises, accounting records and use of IPO proceeds.

The investigation found that the company manipulated proxy votes at its 15th Annual General Meeting in December 2021 to falsely show 51% approval from public shareholders for changing its IPO fund utilisation plan.

Random verification by the probe team found that major institutional shareholders had not been informed about the proposed fund reallocation, while unauthorised signatures were allegedly used to secure proxy votes.

Without genuine approval from public shareholders, the board diverted IPO funds to purchase a cutter suction dredger, the investigation found.

Scrutiny reveals irregularities

Further scrutiny revealed irregularities in the dredger's acquisition. Dominage Steel claimed it paid Tk14.73 crore to Arena Construction and Engineering Limited, while maritime registration documents identified Sundarban Shipbuilders as the manufacturer and put the vessel's official cost at only Tk21.42 lakh.

Sundarban Shipbuilders later informed regulators in writing that it had neither built the vessel nor had any connection with the entity.

The dredger also remained completely idle for nearly three years after its acquisition, generating no revenue and without its mandatory survey certificates being updated.

The investigation further found that Dominage Steel's manufacturing plant in Palash, Narsingdi had been closed for seven to 10 years, meaning it was non-operational even before the company was listed on the stock exchange in November 2020.

Its second facility in Ashulia was also found completely closed during a physical inspection. The company had failed to disclose the operational status of both facilities as price-sensitive information, according to the BSEC.

The commission also found that the board had embezzled around Tk3.27 crore from Tk5.83 crore allocated for factory expansion by substantially overstating civil construction costs.

During formal hearings, Dominage Steel management denied the allegations, arguing that the AGM resolutions were validly passed, the dredger purchase complied with turnkey contract norms, and the factories operated on an order-based rather than continuous basis.

The commission rejected the explanations as unconvincing, ruling that the company's fraudulent activities, false disclosures and breaches of securities laws had severely harmed public investors' interests and undermined capital market integrity.

In August, the BSEC conditionally approved a proposal by Dominage Steel to sell around 30% of the shares held by its sponsors and directors to Akij Resources Limited.