The Bangladesh Securities and Exchange Commission on Tuesday finalised public issue rules, putting a two-year lock-in on placement shares despite a demand for 3-year lock-in from most of the stakeholders.
The commission also cancelled the option of declaring bonus dividend by mutual funds. The closed-end and open-end mutual funds can declare cash dividend only from now on.
The stock market regulator made the decision at a commission meeting presided over by BSEC chairman M Khairul Hossain, a BSEC press release said.
The BSEC brought a number of other changes to the public issue rules 2015.
According to the new public issue rules, the shares held by a company’s sponsor-directors and shareholders having 10 per cent and above of the company’s shares will face a three-year lock-in period.
But the shares held by placement shareholders and alternative investment funds will face a two-year lock-in period.
The period would be counted from the first trading day of the issue on the stock exchanges.
The BSEC backtracked on its previous position of putting a three-year lock-in on all the shares issued by a company before its initial public offering.
It seems that the commission entertained the suggestion put forward by the merchant bankers as only the merchant bankers urged the commission to set the placement share lock-in period at two years.
The BSEC also backtracked on its previous position over requirement of utilising entire fund raised before the IPO for seeking public issue.
The BSEC now directed that a company must utilise 80 per cent of its pre-IPO paid-up capital for seeking public issue.
Most of the capital market stakeholders proposed a three-year lock-in for placement shares considering the recent volatility at the market as the market could not absorb huge selling pressure from the placement-share holders.
According to the new rules, the eligible investors including financial institutions must have to invest a certain amount of fund at the secondary market to get the IPO quota facility reserved for them.
The commission will set the amount in the consent letter of every IPO.
If an EI does not invest the BSEC-set amount at the secondary market, the EI will lose the IPO quota facility.
The size of the public issue under the fixed price method must be minimum Tk 30 crore or 10 per cent of the company’s paid-up capital, whichever is higher.
The size of the public issue under the book building method must be at least Tk 75 crore.
The commission also abolished the condition of one-year positive net operating cash flow for issuing IPO by a company.
According to the new rules, the bidder must buy the amount of shares he/she bids for and at the prices he/she quotes for.
The name and price quotation of any bidder in book building would not be displayed.
The IPO quota facility for the general investors has been raised to 50 per cent from 40 per cent under the fixed price method of IPO and it has been increased to 40 per cent from 30 per cent under the book building method.
The quota facility for the eligible investors has been cut to 50 per cent from 60 per cent under the book building method while it has been reduced to 30 per cent from 40 per cent under the fixed price method.
The BSEC at the meeting also allowed Bank Asia to float non-convertible floating rate subordinated bond worth Tk 500 crore.
The face value of each unit of the bond will be Tk 1 crore and the bond will be fully redeemable in seven years.
Only corporate bodies, financial institutions, corporate institutions and other eligible investors will be allowed to subscribe the bonds through private placement.
The purpose of the issue is to strengthen the bank’s capital base and meet its capital requirement under Tier-II.
Green Delta Insurance Company Limited acts as the trustee for the bond while Standard Chartered Bank is the mandated lead arranger for the bond.
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