Bangladesh’s stockbrokers are pushing for a legal framework that would allow listed companies to buy back their own shares, arguing that the mechanism could help businesses manage capital more efficiently and make the stock market more dynamic.
The Dhaka Stock Exchange Brokers Association of Bangladesh (DBA), in a written recommendation sent to Commerce Secretary Md Ataur Rahman Khan on Wednesday, proposed including provisions for share buybacks in the proposed third amendment to the Companies Act, 1994. The recommendation was also shared with the Bangladesh Securities and Exchange Commission (BSEC).
A share buyback allows a company to repurchase its own shares from investors and remove those shares from circulation. The mechanism can help companies return surplus funds to shareholders, adjust their capital structure and improve earnings per share by reducing the number of shares against which profits are calculated.
For instance, if a company earns the same amount of profit after reducing its outstanding shares, each remaining share is entitled to a larger portion of that profit. Companies may also use buybacks when they believe their market price does not reflect their underlying value.
DBA’s proposal seeks to give listed companies a new capital management tool while ensuring regulatory oversight. Under the suggested framework, BSEC would have the authority to formulate rules, monitor transactions and ensure transparency and corporate governance. The move could change how listed companies manage excess cash and respond to market conditions.
However, buybacks also carry risks if used without proper safeguards, as companies could attempt to artificially support share prices. Clear rules on approval, disclosure and investor protection would therefore be essential, according to experts.
The recommendation comes as Bangladesh seeks to modernise its capital market and provide companies with tools commonly used in more developed markets.
DBA has also called for a separate framework for mergers and acquisitions involving listed companies, saying existing procedures often involve complex legal processes and delays.
A merger combines two companies into one entity, while an acquisition allows one company to take control of another. Such transactions can help businesses expand, improve efficiency or restructure operations.
The association wants BSEC to be empowered to create specific rules for listed company mergers and acquisitions, arguing that a specialised regulatory approach would allow faster decisions while protecting shareholders.
As the capital market regulator, BSEC is responsible for overseeing listed companies and ensuring market integrity. Giving the commission clearer authority over buybacks and corporate restructuring could create a more predictable framework for investors and businesses.
DBA President Saiful Islam said modern rules on share buybacks and mergers would help listed companies improve capital management and contribute to a more efficient market.
The recommendations are now before the government as it considers the third amendment to the Companies Act, 1994.
