Active Fine Chemicals bosses fined Tk20 lakh for non-cooperation with BSEC auditor

Three directors and the company secretary of Active Fine Chemicals have been fined Tk20 lakh – Tk5 lakh each – for not cooperating with a special auditor appointed by the Bangladesh Securities and Exchange Commission (BSEC).

They are Chairman Zia Uddin, Managing Director SM Saifur Rahman, Director Md Afzal and Company Secretary Mahbubur Rahman.

BSEC, in a letter on 27 March, asked the company to pay the fine within the next 30 days.

The letter read the regulator had appointed a special auditor – Howladar Yunus and Co – on 16 September 2021 to conduct an audit for the 2016-17 to 2019-20 financial years.

But despite repeated requests, the auditor complained that the company was not cooperating in the audit work. Later, on 15 January this year, BSEC directed the auditor to resume the audit. But even then the company has done the same.

When BSEC asked for an explanation, Active Fine said its officials were busy with income tax and import duty issues. And due to a lack of additional manpower, they couldn't assist the auditor.

"The company, therefore, applied for reversal of the audit decision. But BSEC did not take cognizance of the company's application. Instead, the company was fined under the Securities Act for violating BSEC guidelines," it added.

Meanwhile, on 8 February this year, BSEC formed a three-member enquiry committee to look into the complaints lodged to the regulator against Active Fine Chemicals.

The committee consisting of BSEC Additional Director Mollah Md Miraz-Us-Sunnah, Deputy Director Mohammad Ratan Miah and Dhaka Stock Exchange Manager Snehasish Chakraborty will submit its findings to the commission in the next 15 working days.

BSEC officials said the company has been in multiple irregularities in recent years. That includes non-compliance with the regulatory order for mandatory 30% shareholding by sponsor-directors, some qualified opinion on its account's elements by the statutory auditor, not arranging the annual general meeting of shareholders for the 2019-20 financial year, and most importantly its deteriorating financial performance.

A quarter of its shareholders are annoyed with the way the board of directors is steering the company, while some believe there have been serious financial irregularities. One of them lodged a written complaint to the BSEC against the company.

The company, listed in 2010, is the first local firm to produce active pharmaceutical ingredients (API), the value-added intermediary raw material for medicines.

Finding it in alignment with the government's vision for a strong backward linkage in the country's significant pharmaceuticals industry, investors had been well appreciating the company in the stock market.

But its years-long struggle to avail tax breaks amid the procedural complexity on top of too many questions regarding the company's accounts reduced Active Fine stock's appeal on the bourses.

Recently, the National Board of Revenue finally issued its much-sought order regarding the tax break to the API firm.

The company's profits drastically dropped in the last three years and nowadays it is swinging between losses and poor profits.