BSEC orders 44 firms, including 6 banks, to meet 30% shareholding rule
These companies have sponsors and directors who have failed to jointly hold at least 30% of the company’s paid-up capital
The Bangladesh Securities and Exchange Commission (BSEC) has issued directives to 44 listed companies, instructing them to comply with the mandatory shareholding requirement.
These companies have sponsors and directors who have failed to jointly hold at least 30% of the company's paid-up capital.
Among them, six banks are non-compliant with the 30% shareholding rule after Bangladesh Bank removed several shareholder-directors. This action was part of efforts to support the banks' recovery and distance them from controversial business practices.
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The banks are Al-Arafah Islami Bank, First Security Islami Bank, Global Islami Bank, Islami Bank Bangladesh, and Social Islami Bank — all previously controlled by the S Alam Group — as well as United Commercial Bank, which was dominated by the family of former land minister Saifuzzaman Chowdhury.
After the fall of the Awami League government last August amid a mass uprising, the Bangladesh Bank restructured these banks by appointing independent directors to their boards, leading to a decline in joint shareholding.
The central bank stated that it had to appoint independent directors due to the absence of investors holding a minimum of 2% shareholding.
Other companies instructed to comply include Active Fine Chemicals, AFC Agro Biotech, Aftab Automobiles, Agrani Insurance, Apollo Ispat, Aziz Pipes, Bangas, Bay Leasing & Investment, Bangladesh Thai Aluminium, Central Pharmaceuticals, C&A Textiles, Coppertech Industries, Delta Spinners, Familytex, FAS Finance, Fine Foods, Fu-Wang Foods, Generation Next, GSP Finance, and Indo-Bangla Pharmaceuticals Ltd.
Additionally, Information Services Network, Meghna Insurance, Mithun Knitting, Northern Jute Manufacturing Company, Olympic Accessories, Pharma Aids, Phoenix Finance, Peoples Leasing, Popular Life, Premier Leasing, Ratanpur Steel Re-rolling Mills, Salvo Chemical Industry, Sandhani Life Insurance, Shurwid Industries, Standard Ceramic Industries, Tallu Spinning Mills, and Union Capital Limited have also been instructed.
In February of last year, the BSEC took a new initiative in line with a directive issued back in 2020 to have sponsors, promoters, and directors comply and jointly hold at least 30% of a company's shares at all times.
The number of non-compliant firms rose from 25 in February to 39 by the end of September. Despite repeated directives, ultimatums, and mounting pressure from the BSEC, these companies have failed to meet the requirements.
Experts argue that this persistent non-compliance underscores the need for alternative strategies to ensure regulatory adherence in the sector. They highlight that the rule was designed to encourage entrepreneurs to remain actively involved in their companies.
By maintaining a significant ownership stake, they are expected to prioritise the company's growth and governance. However, when ownership stakes decrease, governance quality and overall company performance often suffer, they added.
Before implementing the directive, the BSEC had received numerous allegations from investors. In July 2020, then new leadership of the securities regulator directed 44 listed companies to ensure their sponsors and directors jointly held at least 30% of their companies' shares within 60 days. It also decided to take legal action against directors who failed to hold at least 2% of the paid-up capital individually.
Stock investors have alleged that many sponsors and directors continue to hold controlling power in companies even after selling off their shares. Stakeholders believe that if sponsors and directors maintain the minimum 30% shareholding, it could help ease the ongoing liquidity crisis in the capital markets by releasing a substantial amount of funds.
