The Dhaka Stock Exchange has backtracked on its decision to form a separate category for companies in which directors do not hold jointly 30 per cent of shares in violation of the rules.
The stock market regulator, Bangladesh Securities and Exchange Commission, on May 21 gave the go-ahead to the country’s two stock exchanges — the DSE and the Chittagong Stock Exchange, for forming a separate category after receiving proposal from the DSE.
‘Now, the DSE itself does not want to form a separate category as it has realised that formation of a separate category for such companies is impractical and costly,’ DSE officials said.
They said to form a separate category, the DSE must change its listing regulations as the rules allow only five categories — A, B, G, N and Z.
Market experts said that the BSEC should assess feasibility and fallout of any proposal before giving nod.
It should accept a written proposal containing a detailed work plan, results and process of implementation, they said.
DSE director Rakibur Rahman, who mainly proposed such category, told New Age that the DSE at this moment was not prepared to make a separate category for the non-compliant companies.
Asked about his previous position and the BSEC order, Rakibur said that a separate category would be formed later and the bourse would discuss the issue with the commission.
According to DSE officials, the bourse places companies in different categories in accordance with the BSEC rules.
Companies which do not provide dividends and do not hold annual general meetings are placed in the ‘Z’ category, they said.
‘The bourse is in confusion over how they would deal with the ‘Z’ category companies once the new category is formed,’ they said.
On top of that, the system has to be modified that would be costly and time consuming, they said.
The officials said that the bourse now wanted to prepare just a list of the companies and publish it on its web site.
There are currently around 40 listed companies whose sponsor-directors do not jointly hold 30 per cent of shares of their respective companies.
Earlier, the DSE requested the BSEC to allow the bourse to form a separate category for the non-compliant companies and impose some share trading-related restrictions on such companies.
According to the BSEC rules, all sponsors and directors other than independent directors of a company listed with any stock exchange must all time jointly hold minimum 30 per cent shares of the paid up capital of the company.
A per the rules, any non-compliant company cannot raise capital through any means including bonus shares.
The BSEC made the obligation in 2011 after the market crash in 2009-10 as it observed that the sponsor-directors dumped shares on the general investors, which was one of the reasons for the debacle.
The BSEC on May 21 this year tightened the rules imposing more restrictions.
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