A total of 47 companies listed with the stock exchanges lack compliance with the minimum shareholding requirement by their sponsors and directors.
As per a stock market regulator directive, all sponsors or promoters and directors of a listed company shall all time jointly hold minimum 30% shares of the paid-up capital of the company.
The sponsors and directors of the companies in question are holding their positions in violation of a 2011 Bangladesh Securities and Exchange Commission (BSEC) directive.
The stock market regulator came up with the order in the aftermath of the stock market crash in 2010. The move was aimed to make the directors responsible and loyal to small investors, as it was seen that many directors sold off their shares right before the debacle.
Recently, a meeting of the BSEC with different stakeholders, including merchant banks and Dhaka Stock Exchange, took a number of critical decisions to revive the ailing stock market.
In the wake of the meeting, the securities regulator has taken an initiative to strictly enforce a provision that requires the sponsor-directors of the listed companies to hold a certain amount of shares.
It also decided to direct its enforcement department to take legal action against directors of listed companies who were not holding at least 2% share of paid-up capital individually.
The investors of stock market have alleged that many sponsors and directors have sold off their shares but still are holding the controlling power of the company.
Meanwhile, stakeholders have said that if the minimum 30% shares by sponsor and directors could be ensured, it could help ease the ongoing liquidity crisis in the capital markets through the release of a substantial amount of funds in the stock market.
On top of that, corporate governance would be established in the company, they think.
Former BSEC chairman and economist AB Mirza Azizul Islam says: “Companies violating rules are not practicing corporate governance. So BSEC should take measures to ensure that directors of all listed companies individually hold minimum 2% share.”
“If listed companies do not follow the rule, small investors may lose their interest in the companies,” he warns.
According to the Dhaka Stock Exchange data, 47 companies’ sponsors and directors jointly have less than 30% stakes in their own companies.
The nine companies having less than 10% share held by sponsors and directors are Fine Foods, Intech Online, Familytex (BD), United Airways, Fu Wang Ceramics, Fu Wang Foods, IFIC Bank, Agni Systems, Shurwid Industries Limited.
Engineer Mahmudul Hasan, managing director of Shurwid Industries, has told Dhaka Tribune: "We must go by the regulators' order. We have already started trying to implement the minimum share holding by the directors. Hopefully, with the help of the regulatory body, we will be able to implement this directive. In this case, strategic partners can be taken."
Others companies lacking the compliance include Active Fine, Beximco Pharma, FAS Finance, Generation Next Fashions, Bangladesh General Insurance Company, Northern Jute Manufacturing, Al-Haj Textile Mills, Mithun Knitting and Dyeing, Eastern Cables, Peoples Insurance, Delta Spinners, Meghna Life Insurance, Apex Footwear, Bangladesh Export Import Company (Beximco Limited), Apollo Ispat Complex , Olympic Accessories, Uttara Bank, Dulamia Cotton Spinning Mills, Information Services Network, C & A Textiles, Salvo Chemical Industry, BDCOM Online, Peoples Leasing and Zaheen Spinning Limited.
Kay & Que (Bangladesh), Pharma Aid, Central Pharma, Metro Spinning, Olympic Industries, Bd Thai Aluminium, Bay Leasing & Investment, Maksons Spinning Mills, Aftab Automobiles, Emerald Oil Industries, Standard Ceramic Industries, Popular Life Insurance, Tallu Spinning Mills and Confidence Cement Limited also do not have the compliance.
DSE director Md Rakibur Rahman has told Dhaka Tribune that if the minimum 30% shares by sponsor and directors could be implemented, ongoing liquidity crunch in the capital markets would be addressed to a great extent.
BSEC Executive Director Md Saifur Rahman has said that the commission already took a number of measures against the sponsor-directors of a number of companies who violated the commission’s order about minimum shareholding by the sponsor-directors.
