Salman F Rahman to quit Beximco boards, paving way for restructuring

Salman F Rahman, former private industry and investment adviser to ousted prime minister Sheikh Hasina, has agreed to resign from the boards of Beximco Group companies, a move expected to break a nearly two-year regulatory and legal deadlock and clear the way for long-delayed board meetings and annual general meetings.

Salman, who has been in jail since August 2024 and is facing multiple criminal charges, agreed to step down following discussions with the government, according to sources familiar with the matter.

The group's three listed companies – Beximco Ltd, Beximco Pharmaceuticals PLC, and Shinepukur Ceramics PLC – have separately informed the Bangladesh Securities and Exchange Commission (BSEC) of Salman's intention to resign and sought regulatory approval to reconstitute their boards, according to letters obtained by The Business Standard.

According to BSEC sources, his resignation is expected to remove a major obstacle to the companies' board operations – allowing them to hold board meetings and AGMs.

The development has also eased uncertainty surrounding Beximco Group in the stock market. Shares of all three listed companies gained today (15 September) as the DSEX rose 93 points after falling for five consecutive trading sessions.

In its letter to the BSEC, Beximco Pharmaceuticals said Salman intends to resign from its board "in consideration that the businesses be allowed to operate without any hurdle and interference in the best interest of Beximco Pharmaceuticals, its shareholders and employees".

The company said its board would be reconstituted after completion of the required regulatory procedures.

Under the proposed structure, the Beximco Pharma board would comprise four directors nominated by foreign shareholders, one director from local financial institution IFIC Bank, three sponsor directors, two independent directors in line with the Corporate Governance Code and a newly appointed managing director.

However, the proposed restructuring faces a regulatory hurdle because Salman's exit would reduce the combined shareholding of the sponsor group below the required 30% threshold.

A person familiar with the matter said Beximco Group and related sponsor shareholders, including IFIC Bank, currently hold around 30% of Beximco Pharma, with Salman alone holding about 2%.

His departure would therefore reduce the sponsor group's combined holding to roughly 28%, below the regulatory requirement.

The BSEC has suggested bringing foreign shareholders onto the board or adding another shareholder to the sponsor group to address the shortfall, according to sources.

The company has already approached its foreign shareholders, but they have shown reluctance to join the board, a source said. Discussions are continuing to find a solution.

"The immediate challenge is to maintain the required sponsor holding if the existing foreign shareholders decline to join the board," the source said, adding that bringing another shareholder into the sponsor group could be one possible solution.

BSEC Chairman Masud Khan told The Business Standard that the commission would accept the board reconstruction proposals after the regulatory issue concerning the combined shareholding of Beximco Pharma's sponsors is resolved.

He also said it was clear that Salman F Rahman would no longer remain on the boards of Beximco Group companies.

For Beximco companies without foreign shareholders, the restructuring is expected to be relatively straightforward, with independent and other proposed directors to be appointed subject to regulatory approval, according to sources.

A source also said an understanding had been reached regarding the existing court proceedings, under which the relevant writ petition or stay order would be withdrawn, clearing the way for board restructuring.

The proposed Beximco Pharma board structure is expected to include three independent directors and three directors representing the sponsor side, the source said.

Beximco Pharmaceuticals, which is also listed on the Alternative Investment Market (AIM) of the London Stock Exchange, said the appointment of new directors would have to comply with applicable AIM rules.

According to the company's letter, proposed directors must undergo due diligence through the company's nominated adviser (NOMAD) before being appointed.

The standard due diligence process generally takes four to six weeks, and the company expects the full board reconstitution process to take around six to eight weeks.

Salman also intends to resign from the boards of Beximco Ltd, Shinepukur Ceramics and Beximco Securities for similar reasons, according to the letter.

Beximco's massive debt burden

The board restructuring comes as the conglomerate faces severe financial and operational difficulties.

According to a Bangladesh Bank report submitted to the High Court, Beximco Group had total outstanding loans and liabilities of Tk50,098 crore as of 30 November 2024.

Of the total, Tk25,524 crore – more than half – had already been classified as defaulted, while a substantial portion of the remaining liabilities was at risk of becoming defaulted.

Investigations by the Bangladesh Financial Intelligence Unit (BFIU) also found that large portions of the group's loans were obtained through irregular procedures, including through entities that were allegedly non-existent or merely paper companies. 

Some funds were also allegedly channelled into capital-market share manipulation.

Following the fall of the Awami League government and Salman's arrest, Beximco's debt portfolio and assets came under scrutiny from the courts and Bangladesh Bank, with options including receivership and asset sales being considered to recover funds.

The group's financial distress has also disrupted operations. 

Liquidity shortages, frozen operations and default classifications have made it difficult for some companies to import raw materials, while the government and state-owned entities have had to provide emergency support to clear workers' unpaid wages and other dues.

Nearly two years without normal board operations

The interim government appointed independent directors to Beximco for a three-year term after the conglomerate became embroiled in labour unrest, unpaid wages and salaries and mounting loan defaults.

The government also provided financial support to help clear workers' dues and tasked the independent directors with addressing the group's operational and governance problems.

Beximco subsequently filed a writ petition challenging the appointment of the independent directors. The resulting legal and regulatory uncertainty has effectively paralysed the companies' boards. 

The boards have not held regular meetings to approve or discuss financial results, while the companies have also failed to disclose quarterly financial performance, annual reports and monthly shareholding statements.