Stockbrokers seek liquidation rules for delisted firms

Mostafizur Rahman | Published at 12:00am on January 20, 2019

Dhaka Stock Exchange Brokers Association has requested market regulator Bangladesh Securities and Exchange Commission to set liquidator with the task of liquidating a delisted company, paying back its loans and buying back its public shares.
It said that liquidation of a company after being delisted from the stock exchange was an international practice and the association was making the proposal following international standards.
DBA mentioned that India’s market regulator, Securities and Exchange Board of India, has regulations to liquidate delisted companies and keep the companies’ sponsors away from the capital market for a specific period of time.
It made the appeal as the country’s premier bourse has started delisting non-performing and erring companies from the market and the general shareholders of the companies risk losing their investments when the companies would be delisted due to lack of proper rules in this regard, DBA officials said.
On July 18 last year, DSE delisted two companies —Rahima Food and Modern Dyeing — and are reviewing 15 more companies to decide on their fate.
The officials said that it would be an opportunity for many companies to get delisted as they are not strictly bound by law to liquidate their assets or buy back shares after forced delisting.
The sponsors, directors and promoters of the delisted companies easily can sell their shares and assets and flee, giving nothing to the public shareholders, they said, adding that the lenders (banks and non-bank financial institutions) would find it tough to get their loans back.
Therefore, there should be liquidator with the task of paying back bank loans and other debts of the company and buying back shares from the public shareholders of the company, they said.
DBA president Shakil Rizvi told New Age that in line with the international practice, there should be liquidator in the market to make an exit plan for the delisted companies as some companies might be delisted for their poor performance.
‘We experienced bad incidents before when the regulator delisted a number of companies and sent them to the over-the-counter market and some companies disappeared and could not be traced still now. The shareholders had lost their shirt as they got nothing against their holdings,’ he said.
Former BSEC chairman AB Mirza Azizul Islam said that there must be liquidator and liquidation law to ease the delisting process without ruining the fortune of shareholders.
There is a need to delist some companies which are not in operation for many years to save the investors, he said.
He also said that if BSEC could not bring in liquidation law immediately, it should find out other options to force the companies’ sponsors to buy back shares at least at face value before delisting.
A senior DBA official said that they at a recent meeting with BSEC had proposed that the commission should set liquidator in line with Securities and Exchange Board of India and BSEC agreed to work on the issue.
DBA will sit again with BSEC soon with a written proposal, he said.
He said that they proposed that the promoters of the delisted companies would be required to purchase shares from the public shareholders at the fair value determined by independent valuer appointed by the stock exchange or the commission.
Until the promoters of the company provide an exit option to the public shareholders following value determined by the valuer, the company would face a number of obstacles to dealing with its activities, he said.
The company cannot transfer and sell any equity share and the promoters and whole-time directors of the company would not be eligible to become directors of any listed company, he said.
The official further said that the delisted company, its whole-time directors, promoters and group companies should be barred from accessing the securities market or seeking listing for any equity shares for a period 10 years from the date of compulsory delisting.