The Dhaka Stock Exchange has proposed that sponsor-directors of non-performing companies should buy back shares of the public shareholders after delisting of their companies, and return the surplus capital to the shareholders following forceful liquidation of the companies.
The bourse has also suggested a two-year ‘rehabilitation period’ for the non-performing companies for giving them a chance for reviving their business before delisting.
The DSE in March sought approval from stock market regulator Bangladesh Securities and Exchange Commission regarding its proposals on procedures of delisting a company and amending clause 51 of the DSE listing regulation, 2015.
DSE officials said that the bourse made the proposal after the BSEC on October 15 last year asked it to make a proposal regarding delisting of a company as the current rules did not support it.
According to the proposed rules, if any issuer fails to hold annual general meeting for three consecutive years and keeps suspended commercial operation for a period of consecutive two years, the company might be delisted.
The stock exchange may, in appropriate cases, file criminal cases against the identifiable sponsor-directors of the company for the non-compliance with securities rules.
The stock exchange may also file petition for winding up of the company and pray to court for an order on the liquidators, in case any surplus assets due for returns to the public shareholders before any such return to the sponsor-directors.
The stock exchange must also appoint an independent valuer within seven days to determine the fair value of the delisted company and disclose the matter to the public.
The sponsor-directors of the company must acquire shares of the general public within three months of such delisting at the fair value.
The sponsor-directors of the company must be barred from directly or indirectly accessing to the capital market or seeking listing of any company for a period of three years.
However, the company must be given a chance of explaining the non-compliance and time to revive its business before the bourse goes for delisting the company, the rules said.
According to the rules, if the stock exchange considers that it is not possible for the issuer to effectively eliminate the ground for delisting or that the issuer is not willing to do so, the bourse can delist its securities.
But, if a company is willing to eliminate delisting grounds, the stock exchange will allow the company a maximum two-year time (to be called the ‘rehabilitation period’) to implement rehabilitation scheme and thereby eliminate the ground for delisting.
The bourse may suspend trading of the shares of the company during the period.
If the company fails to implement its rehabilitation scheme within the given time, the bourse can proceed to delist the company after getting regulatory consent.
The issuer must submit quarterly reports to the stock exchange about the progress of implementation of the scheme.
A failure to submit two consecutive quarterly reports will call for immediate de-listing unless the stock exchange in its discretion grants a time extension.
The BSEC and the DSE failed to make any decision on the non-performing companies which have been breaching securities rules and deceiving investors for years.
There are 50 companies in the ‘Z’ category on the DSE and the operations of most of the companies have remained closed or partially closed for years.
Most of the ‘Z’ category companies do not maintain basic regulatory requirements and do not provide dividends to their shareholders.
Despite having no business operations, the share prices of most of the ‘Z’ category companies often rise abnormally due to manipulation.
Many of the companies do not bother to declare financial accounts regularly and do not hold annual general meetings.
The DSE last year sent a list of 14 companies to the BSEC seeking approval to delist them, but the regulator suggested framing a comprehensive procedure for any forced delisting.
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