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Frustrated over repeated breach of regulatory orders, the market watchdog warns companies against any further delay in complying with the minimum 30 per cent joint stakes of sponsor-directors.
In a letter sent to the managing directors of the non-compliant companies on Wednesday, the Bangladesh Securities and Exchange Commission (BSEC) did not mention any timeframe for them to meet the requirement but said it would take actions against 44 errant companies.
BSEC spokesperson Md. Abul Kalam told the FE that the regulator could right away take punitive measures as the companies had already become non-compliant.
"That's why the regulator asked the companies to comply with the provision immediately -- without giving a specific timeframe," he said.
Although the letter provides names of 44 companies, the FE identified three of them as securing the minimum shareholding of sponsor-directors, according to the website of the Dhaka Stock Exchange (DSE).
They are Bangas, Sandhani Life Insurance and Tallu Spinning Mills. The sponsor-directors of Bangas held 30.99 per cent shares as of February, while the sponsor-directors of Sandhani Life 31.67 per cent and Tallu Spinning 30 per cent as of April.
On this, a BSEC official said sometimes companies take into account shares of family members while considering stakes of sponsor-directors. "There might be any lapse in the determination of shareholding positions shown on the DSE website."
About possible regulatory actions, Mr Kalam said the directive regarding the shareholding of sponsor-directors was issued under the Securities and Exchange Ordinance, 1969.
On failure to follow the directive, the companies would initially face a hearing at the BSEC office.
Then, the securities regulator can impose a penalty worth at least Tk 0.1 million on the organisations. But they would be required to pay an additional amount of Tk 10,000 per day for the failure to pay the penalty within the stipulated time.
"The securities regulator can also remove the non-compliant directors from the boards."
A majority of the companies with less than 30 per cent joint stakes of sponsor-directors are junk stocks (Z category stocks).
The exceptions are mostly banks -- Islami Bank Bangladesh, United Commercial Bank, Global Islami Bank, National Bank, Social Islami Bank, Al-Arafah Islami Bank, and First Security Islami bank.
The non-compliant companies had previously been instructed several times to comply with the provision of minimum shareholding.
The condition that sponsor-directors must hold at least 30 per cent stakes jointly and 2 per cent individually was imposed following the 2010-11 stock market debacle in a bid to create a demand for stocks.
Also, it was perceived that sponsor-directors would feel more responsible in making the business ventures a success if they had significant stakes.
Meanwhile, the BSEC on Wednesday held a meeting with representatives from 22 listed companies that had failed to complete distribution of their approved dividends for one or more years between FY22-FY24.
"The companies have been asked to settle the issue as early as possible. Otherwise, the regulator is set to take punitive measures against them," reads a press release.
Asked, the BSEC spokesperson said the files of the non-compliant companies had already been referred to the enforcement department.
"The companies have been asked to come to the BSEC on completion of dividend distribution on an urgent basis," Mr Kalam said. Otherwise, they would receive a letter for hearing and subsequent measures, including penalty, would be taken against them.
The BSEC spokesperson also said some companies had failed to pay off dividends approved for FY22 while others for FY23 and FY24. A majority of the 22 companies represent junk stocks.
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