A tax waiver introduced just before the fall of the Sheikh Hasina government in August 2024 has unlocked thousands of crores of taka worth of sponsor-director shareholdings from disclosure and trading restrictions, raising alarms among market participants about risks to minority investors in the stock market.
In July 2024, the National Board of Revenue (NBR) increased capital gains tax and doubled the source tax on sponsor-directors’ share transfers from 5 per cent to 10 per cent, moves that analysts say intensified pressure on an already fragile market.
At the same time, the revenue authority granted an unexpected exemption. Sponsor-directors of listed companies were allowed to gift shares to spouses, parents, and children without paying the 10 per cent source tax, triggering a surge in family transfers on the bourses.
The value of such transfers skyrocketed to Tk8,267 crore in FY2024-25, up from just Tk88 crore the previous year, while the number of shares transferred nearly quadrupled.
A year later, siblings were added to the list of eligible recipients, further widening tax-free transfers, despite Bangladesh being under an IMF programme and ongoing revenue collection challenges.
Before the waiver, over three fiscal years through FY2023-24, sponsor-directors of Dhaka Stock Exchange-listed companies had transferred 4.64 crore shares, generating roughly Tk15 crore under the 5 per cent source tax.
After the waiver, 27.72 crore shares were transferred in FY2024-25 alone, which could have yielded about Tk826 crore at the 10 per cent rate – yet the government collected nothing.
While tax experts and economists debated the NBR’s unusual generosity, stock market professionals pointed to a deeper structural shift – sponsor holdings effectively slipping out of disclosure and lock-in oversight.
Under securities rules, sponsor-directors and shareholders holding 10 per cent or more of a listed company must publicly disclose any change in holdings, and their shares remain subject to regulatory lock-in conditions before trading.
But once transferred to family members who are neither directors nor substantial shareholders, those holdings fall outside sponsor-level disclosure requirements.
According to the Dhaka Stock Exchange (DSE), 87 per cent of shares transferred in FY2024-25 went to spouses, parents, children or siblings who did not fall under sponsor or substantial shareholder categories.
Chattogram Stock Exchange Managing Director M Shaifur Rahman Mazumder said the regulatory consequence is immediate.
“It means the transferred shares became lock free and need no regulatory announcement before trading,” he said.
DSE data analysed by TIMES of Bangladesh showed shares worth around Tk8,000 crore effectively moved into this disclosure-light zone through the transfers.
“It is like a loaded gun aimed at general investors,” said DSE Brokers’ Association of Bangladesh President Saiful Islam.
“We do not know the intention of each sponsor-director who gave away some of their stake to family members. But it paved the way for sponsor-directors to divest their family stake at a favourable time silently, keeping the general investors in the dark,” he added.
According to DSE data, Walton Hi-Tech Industries emerged as the biggest beneficiary of the waiver.
Its sponsor-directors transferred more than Tk7,500 crore worth of shares to family members in FY2024-25, with over Tk6,500 crore of those holdings becoming effectively lock-free as recipients were classified as ordinary shareholders rather than sponsor-directors.
The waiver helped Walton sponsor-directors avoid roughly Tk750 crore in taxes.
Officials of the Bangladesh Association of Publicly Listed Companies (BAPLC) said the exemption was never formally demanded by the organisation, despite long-standing requests for other fiscal incentives from listed companies.
Several NBR officials told TIMES of Bangladesh that Walton, known for its lobbying for pro-local industry tax policy, was behind the broader push for the exemption. Walton denied the allegation.
Midway Securities Managing Director Md Ashequr Rahman said sponsor-directors historically enjoyed discriminatory advantages over ordinary investors in Bangladesh’s stock market and the said waiver widened the gap further.
He questioned the logic of the exemption at a time when Bangladesh’s tax-to-GDP ratio had fallen below 7 per cent, far behind the double-digit ratios seen in India, Pakistan, Sri Lanka and Nepal.
“The upcoming budget is reportedly going to impose tax on property inheritance, and the share inheritance still continues to remain free; this is a rich bias,” he said.
He also pointed to another discrimination in the tax structure.
A shareholder without sponsor or director status but owning 10 per cent or more of a company must still pay the 10 per cent tax to unlock shares before selling them, alongside regulatory disclosures.
The waiver also opened another route for future revenue losses, according to Saiful Islam.
Under current rules, sponsor-directors’ acquisition cost is often calculated at face value, while the recipient’s acquisition value becomes the prevailing market price at the time of transfer, creating scope for lower taxable gains during future divestment.
For instance, Walton shares were transferred at market prices ranging between Tk450 and Tk650, while original acquisition costs for sponsors could be as low as Tk10 face value.
“A tremendous opportunity to minimise a potential capital gain tax,” said Saiful Islam.
He said the bigger concern is transparency.
“Let the government take care of its revenue. From the stock market, we need transparency in sponsor-director families’ actual shareholding and changes in their stake,” he added.
The trend has continued into FY2025-26, though without Walton-scale transfers.
Sponsor-directors of 18 companies have so far transferred shares worth Tk505 crore this fiscal year under the waiver, according to DSE data. Around Tk440 crore of those holdings became effectively unlocked after transfer.
The companies include Bangladesh National Insurance, Crown Cement, GPH Ispat, LankaBangla Finance, Legacy Footwear, Lovello, Monospool, NCC Bank, Pioneer Insurance, Premier Cement, Salvo Chemical, Shahjalal Islami Bank and SouthEast Bank.
Market participants identified three consequences of the waiver – around Tk870 crore in lost revenue over two fiscal years, over Tk7,350 crore worth of locked shares becoming freely tradable, and a heightened risk of undisclosed divestment during future market peaks.
“The stock market is depressed. A bull run usually triggers divestment intention at the market peaks,” Saiful Islam said.
“It will be unfortunate for the general investors if the lock-free shares of the sponsor-director families are sold keeping the market in the dark.”
BAPLC President Riad Mahmud acknowledged the risk but said the policy also helps address a deeper succession challenge in family-owned businesses.
He said second and third-generation entrepreneurs, often educated abroad, are increasingly reluctant to return due to Bangladesh’s business environment.
“Onboarding them successfully appeared to be a challenge for a large number of entrepreneur families,” he said.
Without the waiver, he added, many entrepreneurs were not serious about succession planning, which risked disrupting continuity in listed companies.
“I don’t think the waiver was baseless,” he said.
Walton Hi-Tech Industries in a statement said its shares were transferred in “full compliance with all applicable laws.”
It said the transfers served two purposes – encouraging the next generation to participate in the business and meeting technical compliance requirements arising from changes in securities regulations after the company’s listing, which involved offloading less than 1 per cent of shares.
Later, the regulator required the company to ensure at least 10 per cent free-float shares in the market that are not locked and can be sold without triggering regulatory disclosure requirements.
Its sponsor-directors now own 67 per cent of the company officially and the gift recipients make up most of the 31.79 per cent stake of “general shareholders.”
“We opposed Walton’s listing with such a thin floating that risked speculative price hikes, but the regulator then did not lend an ear,” said DSE Director Minhaz Mannan Emon.
The structural change in stakes increased the risk of insider trading, and all their trading activities should be reported, he added.
