Unusual and suspicious transactions took place in the capital raising-related share money deposit accounts of controversial Coppertech Industries that raised question about the increase in pre-IPO paid-up capital of the company, according to related bank statements.
The statements on share money deposit (money for selling shares) of the company displayed a number of unusual and suspicious transactions in creating paid-up capital of the company.
Before the approval of initial public offering of Coppertech by the Bangladesh Securities and Exchange Commission, the company’s paid-up capital was Tk 40 crore. Of the amount, Tk 30 crore was raised by selling shares through private placement.
After analysing the bank statements regarding raising Tk 30 crore through private placement, it seemed that the company deposited and withdrew a small amount of fund again and again to make an artificial paid-up capital.
The listing of Coppertech with the country’s bourses has been deadlocked as the company is facing allegations of financial data fabrication. The allegations prompted the Institute of Chartered Accountant of Bangladesh to investigate the matter.
‘A company cannot withdraw share money before it issues shares to investors. If a company does so, the fund withdrawn cannot be part of its paid-up capital,’ a BSEC official told New Age on Sunday.
He also said that the company could use the fund for business expansion only after allotment of shares to applicants.
According to the official, there are no rules regarding the issue, but it is a long-standing practice that a company cannot withdraw money from the share deposit account before issuance of shares.
‘If a company does so, we cannot get a real picture of paid-up capital formation by the company,’ he said.
Besides, the share deposit money should be credited to the names and accounts of the applicants, he said.
According to the IPO prospectus of Coppertech, the company collected Tk 30 crore against 3 crore shares at Tk 10 per share. The company issued the shares on June 6, 2018.
The company opened three bank accounts for collecting share money deposits from the interested investors. A total of Tk 20 crore was deposited in a Premier Bank account (A/C 0104-111-00079078) and Tk 6 crore in another Premier Bank account (A/C 0104-131- 0002925) while Tk 4 crore was deposited in a Social Islami Bank account (A/C 021-133-009988).
Of the Tk 30 crore, the company collected Tk 6 crore from the applicants through the Premier Bank account (A/C 0104-131- 0002925) in the period between September 17, 2017 and September 27, 2017.
After analysing the bank documents, it was found that the amount was deposited from only five accounts.
On September 17, 2017, the Premier Bank account (A/C 0104-131-0002925) was credited with Tk 30 lakh by A/C 10411178850 and Tk 28 lakh by A/C 10411178851 as share money. Coppertech withdrew Tk 42.97 lakh through five cheques on September 18, 2017. Two persons named Khairul Islam and Robin withdrew another Tk 14.16 lakh from the share deposit account on the same day.
On September 18, 2017, Tk 63 lakh was deposited again in the share deposit account. The company and four persons withdrew Tk 62.97 lakh from the account on September 19, 2017.
In that manner, Tk 6 crore was deposited in the account and withdrawn by the company before issuance of shares to investors.
The transactions raised suspicion that the company might turn a small amount of fund into paid-up capital worth Tk 6 crore by depositing and withdrawing the fund again and again.
The same pattern of transactions was seen in the Social Islami Bank account. In the case of another Premier Bank account in which Tk 20 crore was deposited, the total amount came from similar accounts.
Asked about the share deposit money, Coppertech’s company secretary SK Miraj Ali said he would make response to the query after examining related documents.
Later, he could not be contacted despite repeated attempts.
A senior official of Financial Reporting Council told New Age that withdrawal of share deposit money before share issuance was suspicious.
The BSEC and the DSE should investigate the matter, he said.
Market sources said it could be suspected that the company did not collect Tk 30 crore, rather it showed in the bank statements that it raised the amount as paid-up capital.
A company usually takes the fraudulent path of not depositing money in the names of applicants to swindle share-premium money, they said.
IPO-seeking companies sometimes sell placement shares at prices more than face value (or with premium) but keep it secret as the practice is illegal, they said.
Market experts said that the BSEC must look into the Coppertech’s matter seriously.
If its paid-up capital is found false, the company cannot be eligible to be listed with the stock exchanges, they said.
The BSEC has been facing criticisms from different quarters for approving mostly little-known and low-profile companies in last eight years.
The BSEC in December last year approved Coppertech to raise Tk 20 crore through an IPO. The company’s IPO subscription was held in April this year.
The paid-up capital of Coppertech was Tk 9.5 crore before June, 2018, but the company showed in the IPO prospectus that it utilised more than Tk 14 crore of paid-up capital before June, 2018.
The company showed utilisation of significant amount of paid-up capital in the civil construction. The company showed a very high cost of the construction that did not match with the market prices.
There were some other anomalies in the financial statements of Coppertech that instigated the Dhaka Stock Exchange to delay making a decision on the company’s listing with the bourse.
The ICAB failed to complete its investigation into the company’s financial reports as the company’s auditor Ahmad and Akhtar did not cooperate with it.
Following the unusual response from the auditor, the ICAB decided not to renew its licence for auditing.
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