Bangladesh Securities and Exchange Commission (BSEC) is mulling fresh directives to protect affected investors of companies facing compulsory delisting from the Dhaka Stock Exchange.
The move comes in the wake of rising fears after the bourse binned two junk entities and also moved to seal the fate of 15 more dud companies in the last few weeks.
The commission felt the need to protect investors from errant companies who could get away without paying the shareholders. The regulator may issue a directive to minimize losses of minority shareholders to some extent.
However, BSEC officials are not offering any details on what these measures might be. Minority shareholder protection in case of delisting is enforced by many countries, such as regulations that mandate exit opportunities for shareholders.
BSEC Commissioner Swapan Kumar Bala said the stock exchange can delist companies and the decisions were made under the existing laws.
“But we are working to clarify the shareholder protection aspect of this. The commission is thinking about issuing a directive soon,” he said.
Dhaka Stock Exchange on July 18 delisted Rahima Food Limited, Modern Dying and Screen Printing Limited as the share prices of the companies continued to surge abnormally despite being out of operation for a long period.
General investors hold 7.4 million shares in Rahima Food and 1.3 million shares in Modern Dying, which have become a major concern for the market.
On August 6, the bourse also decided to take punitive measures against 15 more non-compliant and non-performing companies to bring discipline to the capital market.
According to the DSE web site, performance of the 15 listed securities will be reviewed by the exchange in line with listing regulations, as the issuers have failed to declare dividends for a period of five years from the date of declaration of last dividend or the date of listing with the exchange.
The companies are Meghna Pet Industries, ICB Islamic Bank, Dulamia Cotton Spinning Mills, Samata Leather Complex, Shyampur Sugar Mills, Zeal Bangla Sugar Mills, Imam Button Industries, Meghna Condensed Milk Industries, Kay & Que (Bangladesh), Savar Refractories, Beximco Synthetics, Jute Spinners, Shinepukur Ceramics, Sonargaon Textiles and Information Services Network Limited.
The sudden strict move by the DSE spread fear among the investors that caused the junk stocks to slide continuously.
Investors of Rahima Food and Modern Dying say the sudden delisting will affect them. They are concerned about getting their invested money back and urged the regulator to recover their investments from directors of the delisted companies. They demanded that the BSEC introduce new laws if necessary in order to do this.
BSEC officials said that there are no laws in the country to guard the interest of investors who become affected when the company is delisted from a stock exchange.
The Company Act should have provisions that dictate how the company’s promoters return investors’ money if the company faces compulsory delisting, they said.
Some companies may deliberately want to get delisted to bypass minority shareholders rights amid loopholes in laws.
The commission, within its limited sphere, felt the need for protecting the affected investors’ interests and is planning to form a directive to this end, the BSEC officials said.
On the other hand, former president of Dhaka Stock Exchange (DSE) Ahasanul Islam Titu said investors need to be more cautious about the kind of companies they put their money into.
“There are three categories for evaluating the performance of listed companies. The companies that are being delisted are from the lowest category ‘Z’,” he said.
“The investors need to be more aware and stay away from investing in junk companies,” he said.
