The Bangladesh Securities And Exchange Commission has sought clarification from the Dhaka Stock Exchange on the proposed strategic partnership with a Chinese consortium.
On Tuesday, the commission asked the DSE to explain the conditions the consortium had proposed as part of the deal to become a strategic investor of the premier bourse.
A DSE official seeking anonymity said the commission had found several inconsistencies in the Chinese proposal conflicting with Bangladeshi laws, and asked the DSE to explain them.
The DSE board of directors on February 19 decided to sell 25% of its shares to a consortium of the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE), considering it a strategic investor.
Later that week, the DSE submitted a proposal to the BSEC for approval of the deal.
The DSE official said the Chinese consortium has asked that the strategic partnership be formulated under UK laws, and disputes be resolved through London international arbitration laws.
It has also asked that the DSE board take approval from the consortium before including any other strategic partner.
The commission has formed a committee to review the proposal, which in its observations has said that these conditions are illegal and there are no scopes for considering them.
The Chinese have also asked for changes in the DSE charter to incorporate several conditions, including getting approval from the consortium on issuing new shares, change in the number of directors and other matters.
Asked for comments, DSE MD KAM Majedur Rahman said the exchange had received a letter from the commission on the matter.
“The points the BSEC has raised are not major issues,” he said.
“The Chinese wanted to formulate the deal under Hong Kong laws, but we proposed UK laws because those laws are similar to ours,” he said.
“If we want a new investor we will need their approval because they will be in the board,” Majedur said.
“The DSE does not want a second partner either, because it will create scope for conflicts,” he added.
In their proposal, the Chinese consortium proposed to buy 450 million or 25% shares of the DSE at a rate of Tk22 each.
It also offered technical support of Tk307 crore and asked for a seat on the board, adding that it would not seek any return on its investment for a period of 10 years.
A proposal was also received from the National Stock Exchange (NSE) of India, which offered a lower price than the Chinese consortium. NSE offered Tk15 per share for the same number of shares and demanded two seats on the DSE board. The Indian body did offer technical support, but it did not clarify how much money it would spend.
The DSE board said it considered the Chinese offer the best in terms of value and technical support.
According to DSE sources, the commission had put pressure on the DSE management to pick the NSE over the consortium as the strategic partner.
The DSE source claimed that the BSEC's challenge of the second strategic partnership condition was a further attempt to include the Indian exchange in the deal.