BSEC yet to finalise draft M&A rules

HM Murtuza | Published at 10:41pm on November 18, 2016

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A file photo shows the Bangladesh Securities and Exchange Commission office in Dhaka. The Bangladesh Securities and Exchange Commission is yet to finalise draft merger and acquisition rules despite forming a four-member body for the purpose about six months ago. — New Age photo

The Bangladesh Securities and Exchange Commission is yet to finalise draft merger and acquisition rules despite forming a four-member body for the purpose about six months ago.
The capital market regulator has been considering for couple of years to formulate a set of fresh rules with a view to dealing with merger and acquisition of companies, BSEC officials said.
As the Securities and Exchange Commission (Substantial Share Inheritance, Acquisition and Takeover) Rules 2002 has become obsolescent, the regulator has taken the move to formulate fresh rules, they said.
Besides, calls for a complete set of rules from different quarters including the government high ups and market stakeholders also prompted the BSEC to formulate new rules, they said.
In September this year, planning minister AHM Mustafa Kamal at a discussion stressed that there should be a set of rules for merger and acquisition to give businesses clear guidelines in this regard.
In September, the country’s premier bourse, Dhaka Stock Exchange, faced an embarrassing situation in connection with Summit Purbanchol Power Company Limited’s merger and delisting fiasco and issued a letter to the BSEC seeking guidelines on merger.
The BSEC, which formed the four-member committee in May 4 this year and asked the body to furnish a report within 30 days, however, refrained from giving any guidelines to the bourse before finalising merger and takeover rules.
BSEC executive director Md Saifur Rahman told New Age, ‘As a number of committee members were abroad for official purposes, finalising its recommendation was delayed.’
Saifur, also the spokesperson of the BSEC, however, expected that the process would be finalised soon.
Currently, companies follow Companies Act, 1994 for the purpose of merger and acquisition.
The Securities and Exchange Board of India has recently enacted separate rules for this purpose.
The BSEC official said, ‘In essence, there is no scope for the commission to intervene in the merger and acquisition process under the existing rules. Court is the sole authority in allowing or regretting any merger or acquisition proposal made by companies.’
The BSEC only allows the issuer companies to issue shares based on the court approval, he said.
Although Securities and Exchange Commission (Substantial Share Inheritance, Acquisition and Takeover) Rules 2002 mentions some procedural requirement regarding merger and acquisition, most of them are not fit for compliance.
‘That’s why commission gives waiver to the issuer companies,’ the official said.
In all the recent merger cases, the companies declared that the merger would enhance their profitability.
In most of the cases, the profit of the entities declined or failed to satisfy investors.