Finance Minister AMA Muhith wants to revise shareholding obligation for sponsor directors of both listed and non-listed companies in accordance with their respective proportion in the company’s paid up capital to prevent selling out shares at their will, officials said yesterday.
He wrote to Bangladesh Securities and Exchange Commission (BSEC) for taking necessary measures to implement the revised rules.
The demo official letter reads, most of the sponsor directors had released their holdings to make windfall profits in 2010 when the market was in peak, accelerating to the crash in the later part of 2010.
Over the last three years, the capital market remained stable after making the rules mandatory by the regulator, and the existing 2% stakes is too big for a company having large paid up capital, according to the letter.
“I personally talked to the BSEC chairman about the revision of the rules on shareholding by company directors and my personal opinion is to make shareholding for the sponsors in accordance with the paid up capital of the company,” said the letter.
The securities regulator on November 22, 2011 made mandatory for sponsors, directors and promoters of listed companies to hold at least 2% stakes individually and cumulative 30% of the paid-up capital of their respective companies.
The regulator had also directed the companies to comply with the directives within six months of issuance of the notification.
In more than three years, the BSEC directive has failed to succeed due to stay order as most of the directors and shareholders went to the court and filed writ petition challenging the BSEC’s directive.
On May last year, the High Court scrapped the BSEC’s provision for sponsor-directors to individually hold at least 2% shares in listed companies.
Hearing a petition filed by a sponsor shareholder of NCC Bank, the court had argued that the provision has superseded Banking Companies Act 1940 that governs the banking sector. It also observed that the parliament’s power of making laws cannot always be delegated into an agency.
Tofazzal Hossain, director of National Life Insurance, welcomed the move and said it would bring discipline in the board of directors in the banking and insurance sector.
He, however, opined that the rules should be canceled forever because it would bring nothing good for the companies.
Hossain was excluded from the board of directors of NCC Bank for not complying with BSEC rules in due time.