BSEC to go tough to ensure 30% shareholding by owners

The companies that fail to comply with maintaining a minimum 30% shareholding of paid-up capital by sponsors and directors have to submit a comprehensive plan to the Bangladesh Securities and Exchange Commission (BSEC) by 30 September.

In its instructions issued for stock exchanges, the regulator has also said that at least two additional independent directors will have to be appointed to the companies subject to the approval of the commission within 15 days.

BSEC officials said when the shareholding portion of sponsors and directors reduces in a company, they do not concentrate on the business of that company. As a result, general investors suffer by holding that company's shares, they added.

BSEC Spokesperson Rezaul Karim said to protect general investors' interests, the securities regulator had given a deadline to those companies' sponsors and directors who had failed to comply with the 30% shareholding rules.

If a company fails to comply with the rules within the deadline, the regulator will take action as per securities rules, he added.

He said the BSEC will go hard-line after September this year against those companies that will not be able to comply with the rules. 

Around five companies submitted their comprehensive plan on how they comply with the rules, which is pending before the commission.

Four companies did not submit their shareholding reports to the commission for a year. Eight companies are trading in the Z category on the bourses.

Sponsors and directors are holding below 20% of the shares of nine companies, while below 10% of the shares are held by three companies, according to BESC data.

Before issuing their directive, the BSEC received these types of allegations from investors. Now the commission deems that all listed companies must comply with the rules properly so that sponsors and directors can concentrate on the company's affairs, they added.

According to the BSEC, 29 listed companies have not complied with the 30% shareholding of paid-up capital by sponsors and directors as of 31 May 2023. From December 2020 to May 2023, 15 companies have complied with the regulatory requirements.

As per the securities regulator's directive, sponsors, promoters, and directors must jointly hold a minimum of 30% of the paid-up capital of a company at all times.

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 was 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.

In July 2020, the new leadership of the securities regulator asked 44 listed companies to ensure that their sponsors and directors jointly held at least 30% of their own companies within the next 60 days.

The new commission has taken the initiative to strictly enforce a provision that requires the sponsor-directors of the listed companies to hold a certain number of shares.

It also decided to direct its enforcement department to take legal action against directors of listed companies who were not holding at least 2% of the paid-up capital individually.

Stock investors have alleged that many sponsors and directors are holding the controlling power at different companies even after selling off their shares.

Stakeholders said that if the minimum 30% of shares are held by sponsors and directors, it could help ease the ongoing liquidity crisis in the capital markets through the release of a substantial amount of funds.