BSEC review to become mandatory before court approval in corporate restructuring

The role of the Bangladesh Securities and Exchange Commission (BSEC) and stock exchanges is set to become more prominent in mergers, acquisitions, demergers and other corporate restructuring activities involving listed companies under a new draft regulation.

The securities regulator today (23 May) published the draft "Bangladesh Securities and Exchange Commission (Corporate Restructuring) Rules, 2026" and invited opinions, suggestions and objections within two weeks of publication.

According to the draft rules, listed companies will have to submit merger or demerger schemes to the BSEC and stock exchanges for review before seeking court approval.

BSEC said listed companies frequently engage in mergers, demergers, amalgamations, acquisitions and other restructuring activities, which require proper valuation, adequate disclosures and greater market transparency, particularly to protect minority shareholders.

Speaking to The Business Standard, BSEC Director and Spokesperson Abul Kalam said companies would first need board approval for any restructuring proposal before approaching the court.

"The approved draft scheme must then be submitted to the BSEC and the stock exchanges. After incorporating the observations of the regulator and exchanges, companies will have to obtain shareholders' approval before going to court," he said.

He added that the proposed rules would not curtail the authority of companies or courts, as the BSEC and stock exchanges would act as observers in the process.

According to the draft, any listed company undertaking restructuring with another listed or non-listed entity must submit the draft scheme to the commission and relevant stock exchange within 30 days of board approval, along with prescribed documents.

Boards of directors will also be required to record opinions on the rationale for the restructuring, fairness of valuation, adequacy of disclosures, impact on minority shareholders, potential share dilution, related-party transactions and market integrity concerns.

The rules also require disclosure of independent directors' opinions and explanations regarding compliance with securities laws, regulations and listing conditions.

After receiving observations from the regulator and stock exchanges, companies will have to place the revised scheme before shareholders and creditors for approval through a special resolution. Companies must also disclose price-sensitive information and announce a record date.

The restructuring process will remain subject to court approval, although the BSEC may become a party to court proceedings if necessary.

The draft rules also prescribe extensive disclosure requirements for restructuring schemes, including transaction consideration in cash, shares, assets or securities; share swap ratios; transfer of liabilities; tax obligations; contingent liabilities; employee status; provident fund and gratuity arrangements; and measures to protect minority shareholders.

Companies must additionally disclose whether the restructuring could lead to a backdoor listing or reverse takeover, along with the benefits accruing to sponsors and controlling shareholders, the extent of dilution for public shareholders and the valuation methodologies used.

One of the most significant provisions relates to valuation requirements. Companies undertaking restructuring must appoint independent valuers from among audit firms enlisted with the commission or registered merchant bankers.

However, those firms or merchant bankers cannot act as statutory auditors or corporate advisers to the companies involved in the restructuring.

The valuer must certify that the valuation, exchange ratio or swap ratio is fair and reasonable and does not prejudice any class of shareholders or creditors. The valuation also cannot be determined solely on the basis of market price.

The draft rules make it mandatory to apply at least two absolute valuation methods and two relative valuation methods.

For absolute valuation, the rules mention methods such as Discounted Cash Flow (DCF), Dividend Discount Model (DDM), Residual Income Model (RIM) and Asset-Based Model.

For relative valuation, the draft includes Price-to-Earnings (P/E), Price-to-Book (P/B), Price-to-Sales (P/S) and EV/EBITDA-based methods.

The draft further states that the discount rate used in valuation cannot be lower than the yield on 10-year treasury bonds. Revenue growth assumptions also cannot exceed the company's average growth rate over the previous five years unless justified by capacity expansion under a Balancing, Modernisation, Rehabilitation and Expansion (BMRE) project.

Companies will also have to obtain no-objection certificates from banks, financial institutions, bondholders, secured creditors and holders of Islamic Shariah-based securities.

The draft rules include a detailed checklist of documents, including audited financial statements for the past five years, asset revaluation reports, physical inspection reports, land documents, loan papers, tax records, VAT returns, related-party transaction details, inventory statements, bank statements and due diligence certificates.

The rules also require approval of restructuring schemes by at least 75% of general shareholders, excluding sponsors, directors and shareholders holding 5% or more shares.