BSEC probe uncovers Tk72cr asset-stripping scandal at Ashraf Textile

An investigation by the Bangladesh Securities and Exchange Commission (BSEC) has revealed a massive asset-stripping scandal at Ashraf Textile Mills Limited, one of the country's oldest textile companies, which has been inactive for over a decade.

The probe found that despite being delisted from the Dhaka Stock Exchange (DSE) in 2009 and inactive since 2006, the company illegally sold land and properties worth Tk85.49 crore. The BSEC has found no trace of more than Tk72 crore of the proceeds, which have no bank records or transaction proof. 

The financial irregularities, along with violations of company law and shareholder rights, have made Ashraf Textile a glaring example of corporate misconduct.

Investigators discovered that 42 bighas of land in Tongi on the outskirts of the capital were sold for just Tk85 crore, while the market value was Tk136.54 crore – showing a gap of Tk51.54 crore. Similarly, a 20% stake in the Ashraf Setu Shopping Complex was sold at Tk1,272 per square foot, nearly half the prevailing rate. Of Tk9.5 crore earned from this deal, Tk5.35 crore remains unaccounted for.

The current board repeatedly sold company assets without seeking shareholder approval. Major decisions, including property sales, development contracts, and the shopping complex deal, were made without AGMs or board resolutions. The contract with Setu Corporation, under which the shopping complex was built, was also executed illegally, violating company law.

Ashraf Textile claimed that a large portion of the money from land sales went to pay provident funds, unused leave, and gratuities of former employees. But the BSEC found no supporting bank records or documentation. Investigators believe these claims were used to cover up embezzlement.

According to the BSEC, Ashraf Textile violated company law by not holding AGMs since 2009, selling land without board approval, signing unauthorised contracts, and disposing of assets without informing shareholders. The probe also found a lack of transparency and concealment of financial information. 

The regulator has recommended recovering Tk72.01 crore directly from directors and reinvesting the money in new projects, such as restarting Ashraf Textile's production. Until the funds are returned, the BSEC has suggested freezing or seizing the directors' shares.

The report also called for Ashraf Textile to publish updated annual reports, hold AGMs, and restructure its board. Financial statements must be republished to reflect a true and fair picture, while stricter corporate governance rules should be enforced to ensure transparency and protect investors.

Market insiders say the Ashraf Textile case shows how dormant or inactive companies can be used for asset misappropriation when shareholders and regulators are not vigilant.

They added that not holding AGMs or publishing audited accounts for over a decade, and selling assets without proper approval, violate company law. Strict action is needed to prevent such malpractice. 

How Ashraf Textile collapsed

Founded in 1962, Ashraf Textile was one of the country's first large textile mills, set up in Ashrafabad of Tongi with 12,400 spindles and a daily capacity of 420 pounds of cotton yarn. Nationalised during the country's independence but later returned to its owners, the mill eventually lost competitiveness due to outdated machinery, labour unrest, and mounting debt.

Rupali Bank, one of its creditors, failed to recover loan instalments, forcing Ashraf Textile onto auction lists. With no bank willing to extend fresh loans, the board shut the factory in March 2006, and the company was officially delisted from the DSE in October 2009.

The commission's enforcement action is underway. In addition, it has referred the matter to the Bangladesh Financial Intelligence Unit (BFIU) to address possible money laundering. BSEC officials told TBS.

This reporter tried to contact the company owner, Kamal Uddin, to obtain his comment, but his cell phone was found switched off.