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The Financial Express

Regulator creating rules to tighten corporate governance

It carries code of conduct for directors to ensure transparency, strategy to avert inside-outside risks


Mohammad Mufazzal | Published: December 26, 2017 10:31:50 | Updated: December 27, 2017 10:59:15


Regulator creating rules to tighten corporate governance

The securities regulator has drafted corporate-governance guidelines with the code of conduct for directors to ensure transparency in board affairs alongside accelerating a company's growth.

Officials said the draft rules of the trade also include a provision of furnishing explanation on declaration of stock dividend and significant deviation from any parameter between the quarterly periods.

The Bangladesh Securities and Exchange Commission (BSEC) has sought public opinion on the draft of corporate-governance guidelines, meant for disciplining activities of business houses.

After receiving public opinion, the regulator will finalise the guidelines governing corporate entities.

The draft states that a company's board of directors shall lay down a code of conduct for all board members and senior management of the company.

The company's code of conduct will cover, among others, prudent conduct and behaviour, confidentiality, conflict of interest, compliance with laws, rules and regulations, and protection and proper use of company assets or property.

Prohibition on insider trading, encouraging the reporting of any illegal or unethical behaviour, competition, corruption and bribery, entertainment and gifts are also constituents of company code of conduct.

"The company will have to disclose its dividend policy focusing the rights of ordinary and minority shareholders and equitable rights in dividend on ordinary shares," says the draft of the corporate-governance guidelines in the making.

In case of declaration of stock dividend for the year, the company shall explain the reason for declaring stock dividend and utilisation of such retained amount as capital (stock dividend). It has to be disclosed in the annual report.

While disclosing quarterly statements, the company shall provide reasons for significant deviation from any parameter between the quarterly periods.

"The exchange shall review the annual reports and the reports on compliance of corporate governance of the listed companies within thirty days of receiving such reports," adds the draft on the rules of the trade.

The company must have an official website linked with the website of the stock exchange. The issuer shall keep the website functional from the date of listing.

The website of the company shall contain the basic information including company affairs along with details of its business, terms and conditions for appointment of independent directors and code of conduct for board of directors and senior management.

For making policy and implementation of environmental and social responsibilities (ESR), the company has to constitute a committee which will be responsible for making policies on environmental issues in line with the provisions /directives/ notifications/ requirements as per respective government authority as applicable for the respective industry and service sector.

Apart from overseeing the financial-reporting process and all the related party transactions of the company, the audit committee will also report on, if any, suspected or presumed fraud or irregularity or material defect identified in the internal audit and compliance process or in the financial statements.

A company will have to constitute a risk-management committee to assist the board of directors as well as audit committee in framing risk strategy.

And the disclosures of risk factors shall include, among others, internal-and external-risk factors.

The internal risk factors may include credit risk, liquidity risk, risk associated with the issuer's interests in subsidiaries, joint ventures and associated and significant revenue generated from limited number of customers.

The proposed corporate-governance guidelines also have a provision of formation of, among others, risk-management committee (RMC) and executive committee.

mufazzal.fe@gmail.com

 

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