FE Report
The securities regulator has made holding of at least 30 per cent stakes of a listed company by its sponsors/directors mandatory to contain their aggressive sale pressure without caring for the market situation, officials said.
The sponsors/directors holding less than 30 per cent of shares of a company will have to acquire the rest portion of shares within six months of issuing the notification.
Presently, the sponsors/directors of 46 listed companies, out of the 232 companies listed with the bourses, own less than 30 per cent of shares comparing to their respective paid-up capital.
A notification issued by the Securities and Exchange Commission (SEC) Tuesday also said if the sponsors/directors of any listed company fail to hold at least 30 per cent of its stakes, the company will not be able to declare right shares and raise capital through repeat public offering (RPO).
The SEC Tuesday approved the notification regarding the issue at a meeting, chaired by its Chairman Professor M Khairul Hossain. A gazette on the issue will be immediately published in this connection.
SEC executive director and spokesperson Mohammad Saifur Rahman at a press briefing said the move has been taken in a bid to bring accountability among sponsors/directors as well as to stabilise the market.
“The regulator has been observing that the sponsors/directors of some listed companies create aggressive sale pressure whenever they want. As a result, the market experiences downtrend amid panicky situation.”
The DSE officials said sponsors/directors of the listed companies have sold shares worth around Tk 120 billion from May 2009 to September 2011.
Rahman said the sponsors/directors also enjoy greater benefits despite owning insignificant volume of shares. “The latest move will make them much more accountable towards their companies.”
As per the latest provision, in case of non-holding of the said portion of shares, the sponsors/directors will not be able to sell or transfer the existing shares and the bonus shares, which they may receive in future, until acquisition of 30 per cent of stakes.
The SEC notification also said individually each of the directors, other than independent director(s), of any listed company must hold minimum shares amounting to two per cent of the company’s total paid-up capital, and in total the directors have to own at least 30 per cent.
The SEC also incorporated a provision of selecting directors from the general shareholders.
According to the provision, any individual holding shares amounting to five per cent or more of the company’s paid-up capital must be entitled to be a director in its next annual general meeting (AGM) in case of casual vacancy of director(s) for non-holding the required portion of shares.
When asked, whether the SEC issued the notification following the proposals made by the bourses, the SEC spokesperson said the move of holding 30 per cent shares by the sponsors/directors came after a long procedure conducted by the regulator.
Before approving the notification, the securities regulator also took opinions from its lawyer Dr M Zahir. However, when asked, Dr Zahir refused to make any comment regarding the issue for his ‘poor health condition.’
Professor Dr Mahmood Osman Imam, a teacher of finance at Dhaka University, said giving six months deadline to the sponsors/directors for fulfilling the requirement of holding 30 per cent of stakes is very short.
“It will be good if they are able to fulfil the quota by the deadline. But I think the time is very short. At the same time, 30 per cent of stakes is very high also,” Professor Mahmood told the FE.
He also said the new provision might help some people to manipulate the market, as it would force the sponsors/directors to purchase the required volume of shares.