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The securities regulator has decided to take legal action against 11 sponsor-directors and 33 external local shareholders of Ring Shine Textiles for their involvement in a financial scam related to the process of increasing the company's paid-up capital.
According to the findings of the securities regulator, these sponsor-directors and shareholders did not pay money for the shares they received under the private offer.
At a meeting on Wednesday, the Bangladesh Securities and Exchange Commission (BSEC) made the decision to take legal action against them as they breached the securities law and the anti-money laundering law, BSEC officials said.
The Ring Shine Textiles increased its paid-up capital to Tk 2.85 billion from Tk 99.5 million by issuing ordinary shares totalling Tk 2.75 billion to the existing sponsor-directors and 73 local shareholders under the private placement offer.
Afterwards the securities regulator found that the audited financial statements of the company for the periods between June 30, 2017 and June 30, 2020 did not reflect the 'true and fair' view of its financial performance.
During an investigation, the securities regulator found that 11 sponsor-directors and 33 external local shareholders did not pay money for the shares they received under the private offer.
Previously, the company reported to the stock exchanges that sponsor-directors hold 31.54 per cent stakes, institutes 16.23 per cent, foreigners 0.05 per cent, and general shareholders 52.18 per cent in the company as of December 31, 2020.
The commission is now going to take legal measures against the respective parties for the greater interest of the general shareholders and the stock market as well, the BSEC officials said.
Mohammad Rezaul Karim, a BSEC spokesperson, said the non-payment of money for the shares which were issued under the private offer is a financial forgery.
"Legal action will be taken against them as they breached laws by receiving shares without paying money," he added.
Recently, the securities regulator restructured the board of Ring Shine Textiles after dissolving the previous board.
After getting the restructured board, the company restored operations and now is witnessing 'improvements gradually', said the BSEC officials.
Ring Shine Textiles, presently an 'A' category company, was listed on the stock exchanges in 2019.