The market regulator Bangladesh Securities and Exchange Commission (BSEC) has posted certain proposals on its website to seek public opinion intended to make new rules on alternative investment for financing non-listed firms.
Private equity, venture capital, impact or any other type of funds will be called alternative investment fund. Such fund is a privately pooled investment vehicle which collects funds from eligible investors to invest in accordance with a defined investment policy.
The proposals intended to regulate venture capital companies are relatively new in the country.
The venture capital companies usually provide fund for start-ups with high potentials.
According to the salient points of the proposed new rules titled Bangladesh Securities and Exchange Commission (Alternative Investment) Rules, life or tenure of a fund will be 5-15 years.
However, the life of the fund may be extended for a period of up to two years subject to approval of at least three-fourth majority of the unit holders.
An alternative investment fund size will be at least Tk10 crore and subscription by the sponsors will not be less than 10% of the fund. Minimum investment by the fund manger must be at least 2% of the fund.
Any person connected to the fund, sponsors, shareholders and the fund manager will not be allowed more than 25% of the units of a fund at any point of time.
The sponsors will maintain a continuous investment of not less than 2.5% of the fund.
An alternative investment fund will be allowed only cash dividends to the unit holders. All investments in a fund will be locked in for a period of three years from the date of issuance of units.
For the eligibility to apply for operating fund, the applicant will require to have a paid-up capital of at least Tk5 crore, but for a fully-owned foreign entity or for a foreign fund management, applicants must have their paid-up capital of at least Tk150 crore, and for a foreign entity or foreign fund management subsidiary company, they must have Tk10 crore for paid-up capital.
Fund managers must have a minimum net worth of 75% of their paid-up capital, and in case, the net-worth of fund managers goes down below 75% of their paid-up capital, they must increase that to the required level within the next accounting year.
The fund manager’s annual fee will be Tk50,000 to pay through a bank draft one month withing the end of each financial year, and if failed to pay within the stipulated time, fund managers must be liable to pay Tk25,000 for each month of default.
Fund managers may raise capital for a fund from eligible investors through issuance of units in accordance with the rules and the minimum subscription to the units of a fund must be Tk50,00,000. Only private placement, but no public offer will be allowed.
No alternative investment fund will be subscribed by more than 200 investors.
For investment criteria, a maximum 25% of the fund must be invested in listed securities and investment in single listed securities will not exceed 5% of the fund.
No alternative investment fund can invest more than 25% of the fund to a single non-listed portfolio company.
The proposed rules have been posted on the commission’s website for getting opinion from public and shareholders before finalising the new rules.