BSEC prepares new rules to regulate public interest companies

The Bangladesh Securities and Exchange Commission (BSEC) is working to introduce a comprehensive framework to define and regulate public interest companies (PICs), aiming to restore regulatory control over capital issuance and prevent misuse in the securities market.

The draft rules, which will be published soon for public opinion, seek to repeal a 2019 exemption that allowed non-listed companies to raise capital without prior BSEC approval.

Under Section 8(1) of the Securities and Exchange Commission Act 1993, the BSEC is tasked with ensuring proper issuance of securities, protecting investor interests, and developing the securities market. But the exemption granted in 2019 removed the need for non-listed companies to seek commission permission for capital raising, a senior BSEC official told The FE.

As a result, the regulator lost oversight over a large segment of capital issuance.

Currently, companies only submit a return of allotment to the Registrar of Joint Stock Companies and Firms (RJSC), which records the filing without examining or regulating the issuance.

According to the official, the absence of regulatory scrutiny created opportunities for misuse. In some cases, companies allegedly inflated their capital structure without adequate asset backing and later entered the market through initial public offerings (IPOs).

Proposed definition of public interest companies

Under the draft framework currently being finalised, the BSEC has outlined specific conditions for classifying companies as PICs and regulating their capital-raising activities.

According to the proposed structure, entities dealing directly with public funds or securities -- such as banks, financial institutions, insurance companies, stockbrokers, stock dealers and merchant banks -- would automatically fall under the PIC category regardless of capital size.

All listed companies would also be classified as PICs.

Financial thresholds for PIC classification

Companies meeting any of the following financial criteria may also be classified as PICs:

- Public limited companies with paid-up capital exceeding Tk 50 million.

- Private limited companies with capital above Tk 150 million.

- Companies with annual revenue exceeding Tk 1 billion.

- Companies borrowing Tk 200 million or more from banks or other public sources

Even privately held companies meeting these thresholds would be considered PICs due to their involvement with public money or stakeholders.

Capital raising rules under consideration

The draft framework introduces specific conditions linking company size with fundraising methods:

-- Companies with capital exceeding around Tk 500 million may be required to raise funds through an IPO, sharing ownership with the public.

-- Firms with capital between Tk 50 million and Tk 500 million could use qualified investor offers.

-- Private placements to outsiders would be limited to a maximum of 20 investors to prevent informal conversion of private offers into public fundraising.

Disclosure and Compliance Requirements

PICs would face mandatory public disclosures even if they do not raise capital via the regulator.

The disclosure standards include maintaining a functional website with details on the company, directors, audited financial statements, annual reports, and contact information.

The website may also be linked with the RJSC database for enhanced transparency.

Digital Approval System

To streamline the process, the commission is also exploring the introduction of a digital platform that would allow companies to apply for capital issuance approvals online.

"This will ensure that companies can apply from anywhere and receive approvals online, making the process faster and more efficient," said the official.

The Commission plans to finalise the proposals after further consultations and the draft rules will be placed for public opinion before implementation.

When asked, Md Abul Kalam, Director and Spokesperson at BSEC, confirmed that the commission is working on the draft rules and will publish them for public feedback.

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