BSEC relaxes dividend transfer rules, cuts waiting time for fund deposit

The Bangladesh Securities and Exchange Commission (BSEC) has eased the dividend transfer process for listed companies and mutual funds.

In a directive issued recently, the BSEC stated that listed companies and mutual funds must transfer the declared amount of annual or final cash dividends to a dedicated bank account – called the dividend account – at least one day before the annual general meeting (AGM) for companies and one day after the record date for mutual funds.

This change replaces the previous rule, which allowed up to 10 days after declaration for the transfer of the dividend funds.

The dividend account must be used solely for disbursing declared dividends. If the final amount approved at the AGM is lower than initially declared, the issuer may withdraw the excess and transfer it to other internal accounts in compliance with laws and internal financial protocols.

The directive also requires companies and mutual funds to obtain a certificate from the bank concerned confirming the transfer of the declared amount to the dividend account. The certificate must be attested by the company's managing director, chief financial officer, and company secretary, presented at the AGM, and submitted to the respective stock exchange.

For interim cash dividends, the issuer must transfer the declared amount into the dividend account within 15 days from the record date.

Additionally, if the issuer is a banking company, the dividend account must be maintained with a different bank, not with itself. The directive also bars companies from keeping the dividend account in any bank where there is a common director between the issuer and the bank, to avoid conflicts of interest.

An executive member of the Bangladesh Publicly Listed Companies Association told TBS, "Under the existing law, once the dividend amount is transferred, the funds often remain stuck for a long time, which is not good for the company."

He added, "Even the change made in the rule is not entirely appropriate. Since companies have up to 30 days after the AGM to pay the dividend, it would have been better if the requirement to deposit the money came after the dividend is approved at the AGM."

He further said, "Many companies declare dividends but don't actually disburse them. This regulation was originally introduced to bring such companies under accountability."