Securities and Exchange Commission drafts stricter corporate governance framework for listed firms
One-third of directors to be independent, previously required one-fifth.
The Bangladesh Securities and Exchange Commission (Bangladesh Securities and Exchange Commission) has published a draft of sweeping new corporate governance rules that introduce stricter oversight and tighter controls on listed companies, with a focus on strengthening transparency, accountability and investor protection in the capital market.
The proposed framework marks a shift from the existing corporate governance code issued in 2018 by significantly tightening board composition requirements, expanding independence standards, and imposing stricter eligibility and shareholding rules for directors and key executives.
It also introduces enhanced restrictions on cross-directorships between listed companies and major market infrastructure institutions such as exchanges, depositories, clearing entities, brokers and merchant banks.
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According to the draft, the new rules will apply to all companies with ordinary shares listed on the main board, SME board and alternative trading board (ATB) of the stock exchanges, as well as any public interest entity.
The draft, released today (14 May), has been opened for stakeholder feedback until 31 May. The regulator said it will review the comments before finalising the framework for implementation.
Board structure and shareholding requirements
Under the proposed framework, the board of directors of a listed company must consist of no fewer than five and no more than 20 members. For SME-listed companies, the ceiling will be 10 directors. Each board will be required to include at least one female director.
All sponsor-directors – excluding independent directors – must collectively hold at least 30% of a company's paid-up capital. Each director will be required to hold a minimum of 2% of shares, while nominated directors must hold at least 5%.
Independent directors and eligibility rules
The proposed rules increase the minimum requirement for independent directors. At least three directors, or one-third of the total board, whichever is higher, must be independent. This marks a shift from the existing requirement, which mandates at least one-fifth of the board to be independent directors.
The draft bars individuals who are currently directors of stock exchanges, depositories, central counterparty institutions, stock brokers, stock dealers, or merchant banks from serving as directors of listed companies. The only exception is where they are appointed as independent directors representing a holding company.
Senior management structure and compliance
Every listed company must appoint a managing director (MD) or chief executive officer (CEO), a company secretary (CS), a chief financial officer (CFO), and a head of internal audit and compliance (HIAC).
The draft specifies that individuals holding these positions will not be allowed to serve in executive roles in any other company simultaneously. However, the CFO or company secretary may hold the same position in another company within the same group – listed or unlisted – subject to prior approval from the Commission, for cost efficiency or technical expertise reasons.
In addition, the MD, CEO, CS, CFO, and HIAC cannot be removed from their positions without board approval. Any such decision must also be immediately disclosed to both the Commission and the stock exchanges.
The Commission said the proposed rules are designed to modernise corporate governance practices in Bangladesh's capital market and ensure stronger accountability across listed entities.
