Sponsors and directors of Z-category listed companies will no longer need prior approval from the Bangladesh Securities and Exchange Commission (BSEC) to transfer or transact their shares, with stock exchanges taking over the approval process.
The BSEC on Tuesday approved an amendment to its May 30, 2024 directive, allowing the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) to process such transactions under their existing listing regulations.
The change applies to sponsor-director share transfers in Z-category companies, including cases involving confiscation of shares following loan defaults and transmission of shares after a shareholder’s death.
Previously, these transactions required separate clearance from BSEC under a tighter regulatory framework introduced for Z-category companies.
The latest decision does not remove restrictions on sponsor-director dealings. Instead, it shifts the procedural responsibility to stock exchanges, which will ensure compliance with listing rules.
Z-category companies are listed firms facing financial, operational or compliance problems.
The 2024 directive imposed stricter controls on these companies, including restrictions on sponsor and director share transactions, to prevent insiders from exiting while companies remained distressed.
The amendment distinguishes between voluntary share sales and transfers triggered by legal or external circumstances.
In loan default cases, shares may be confiscated as part of the recovery process. In the event of a shareholder’s death, ownership is transferred to heirs or other entitled persons through legal transmission.
Market participants say requiring separate regulatory approval for such cases could delay legitimate transfers without adding significant investor protection.
The regulator had already allowed share confiscation for loan recovery and transmission after a shareholder’s death, while maintaining restrictions on normal sponsor-director sales.
The revised process keeps the broader safeguard intact: sponsors and directors of troubled companies remain restricted from freely disposing of their holdings, while routine administrative oversight moves to the exchanges.
