Eastern Cables Ltd, a state-owned publicly listed company, and BRB Cable Industries Ltd, a private company, remain at loggerheads over membership on the former’s board of directors.
According to sources at the companies, BRB Cable wants to become a member of the Eastern Cables’ board of directors as it owns 30% of shares in Eastern Cables through its sister concerns and individuals linked with the state-run company.
However, after learning about the BRB’s intention to join the board, the Industry Ministry, the mother organization of Eastern Cables, wrote to Bangladesh Securities and Exchange Commission (BSEC), urging it to take steps to prevent BRB from joining the board.
As BRB is one of the biggest competitors of Eastern Cables and owns a significant portion of shares in Eastern Cables, it is essential for the Eastern Cables authorities to maintain confidentiality on its business strategies to retain its competitive edge in the market. Therefore, it is imperative that measures be taken to block BRB’s entry into the board, the ministry reasoned.
If any BRB official is included on the board, the Eastern Cables authorities fear that information might be leaked to its business competitors, which in turn will cause the company to incur huge financial losses.
As per the BSEC rules, any individual or institution shall be eligible to become a director of any listed company if s/he or the institution holds 2% of shares in that company.
“As an individual investor, I have every right to buy shares in a company within the legal framework. Since I am eligible to become a board member as per the law, I can demand membership in the board,” BRB Cable Chairman Md Mozibar Rahman told the Dhaka Tribune.
“By including me on its board, Eastern Cables could greatly benefit as I have vast experience in this sector.”
Mozibar added: “I think there should be experienced businessmen on the board of directors of any state-owned organization for its growth, as they have vast ideas about how to run a business professionally and properly.”
However, seeking anonymity, a high official of Eastern Cables said: “BRB Cable is currently leading the country’s cable industry while Eastern Cables is in the second position. That’s why we think that it would be a bad move to include BRB on our board of directors.
“So, to remain competitive in the market and protect interests of the company as well as other investors, Eastern Cables should not take any BRB Cable representative on its board.”
Asked about the Eastern Cables authorities’ concerns, Mozibar said: “I will be working to protect interests of both the companies, as I hold a significant stake in Eastern Cables.”
In response to the ministry’s letter, the BSEC, the stock market regulator, said that taking steps to block BRB’s entry into the board is beyond their jurisdiction.
If Eastern Cables does not want to include BRB in its board, it will have to bring an amendment to its memorandum and articles of association at an extraordinary general meeting, where all of it stakeholders must be present.
For the amendment to take effect, it will have to be approved by the Registrar of Joint Stock Companies and Firms, the BSEC said.
Row delays Eastern Cables’s AGM
Because of the ongoing row between the two companies, Eastern Cables is in a dilemma over holding its annual general meeting (AGM).
As per the securities laws, it is mandatory to hold an AGM within six months after the completion of a fiscal year. It could, however, be extended only with consent of the BSEC.
Eastern Cables’ fiscal year ended on June 30 last year, and the company recommended a 10% cash dividend for the year. But, the company has yet to hold its AGM to approve the recommended dividend and other issues.
“I am aware of the issue and working on it with the people concerned,” Eastern Cables Managing Director Ushamoy Chakma said.
Shareholders of Eastern Cables
Eastern Cables, a subsidiary company of Bangladesh Steel and Engineering Corporation, was listed with Dhaka Stock Exchange (DSE) in 1986 and with Chittagong Stock Exchange in 1997.
According to data on the DSE website, the government holds 51% of shares in the company, sponsors/directors 1.12%, institutional investors 13.75%, and general shareholders 34.13%.