The Bangladesh Securities and Exchange Commission (BSEC) on Monday proposed allowing listed companies to buy back their own shares under specified conditions and giving the regulator a formal role in mergers, acquisitions, demergers and restructurings involving listed companies.
BSEC Executive Director Md Abul Kalam made the proposals at a Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) consultation in the capital on the draft for the upcoming third amendment of the Companies Act, 1994. Section 58 of the existing law prohibits companies from buying their own shares.
A buyback would allow companies to use surplus cash to repurchase issued shares, reducing their capital base and giving them another way to manage excess funds. BSEC says it could also strengthen shareholder protection.
In no previous amendment, the capital market regulator’s proposals for share buyback were addressed. The commission submitted a detailed buyback framework in December last year, but it was not included in the current draft. It now wants at least listed companies to be allowed to buy back shares subject to conditions.
BSEC also wants to be a party to mergers involving listed and unlisted companies. Although the draft proposes changes to Sections 228 and 229 on corporate arrangements, it does not give the securities regulator a role when a listed company merges with an unlisted company or vice versa.
“When a listed company merges with an unlisted company or the reverse happens, the interests of listed-company investors are involved. Therefore, the regulator should have a say in such decisions,” Abul Kalam said. He proposed following the Indian model, saying protecting listed securities’ investors is BSEC’s responsibility.
The commission also proposed replacing “balance sheet” with “annual financial statements” and “board report” with “annual report” under Section 183. It also wants annual reports to be published and distributed digitally.
BSEC further proposed extending the period to 270 days from 180 days for which financial statements can be used in a prospectus for initial public offerings (IPOs), rights shares, bonds and other securities issues.
The current 180-day limit can expire before audits, regulatory approvals and Registrar of Joint Stock Companies and Firms (RJSC) filings are completed. In some cases, the audit alone takes about 120 days, Abul Kalam said.
Commerce and Industry Minister Khandakar Abdul Muktadir said the government would consider business and entrepreneurial views before finalising the law.
Enacted in 1994 and amended twice, the Companies Act needs to reflect artificial intelligence, automation and online information exchange, he said. Bangladesh could also draw on countries with effective corporate laws to simplify business and trade procedures.
The amendment is part of a broader action plan for challenges Bangladesh will face over the next three years as it prepares to graduate from least developed country status, Muktadir said.
Mohammad Mostafa Jamal Haider, director general of the Trade Organisation Wing at the Ministry of Commerce, said the draft seeks to simplify business operations, expand opportunities for small and medium-sized enterprises, increase information technology use, establish a legal basis for corporate social responsibility and strengthen corporate governance.
Business community leader Nihad Kabir proposed requiring companies with annual revenue above Tk50 crore to appoint a company secretary, allowing at least 21 days between announcing and holding an annual general meeting (AGM), and giving unlisted public companies greater freedom to appoint independent directors.
Mahbubur Rahman, president of International Chamber of Commerce, Bangladesh (ICC Bangladesh), said the Companies Act is the principal law governing companies and no other law should take precedence over it in regulating business operations.
Mohammad Nur e Alam, additional registrar at Registrar of Joint Stock Companies and Firms, said legal reform must be accompanied by stronger intellectual capacity and infrastructure at the agency.
Syed Nasim Manzur, managing director of Apex Footwear Ltd, stressed data security in online submissions to RJSC and called for greater professionalism among its officials.
Businesses sought another 30 days to submit sector-specific proposals. The consultation was chaired by FBCCI Administrator Md Fazlul Hoque where top business leaders attended.
