17 may lose directorship for failing woefully to hold minimum shares
Bangladesh Securities and Exchange Commission (BSEC) has decided to remove the directors who still do not hold at least 2 per cent shares of their listed companies although the regulator managed to get mandatory nine years ago.
Therefore, 17 directors from 10 listed companies, namely Bangladesh General Insurance, Eastern Insurance, Fuwang Ceramic, Imam Button, Intech, Meghna Life, Mercantile Insurance, Provati Insurance, Purabi General Insurance and United Airways may be removed for noncompliance.
On November 22, 2011, the BSEC issued a circular so that it is mandatory for directors of listed companies to possess at least 2 % shares individually and 30 per cent jointly.
Many directors didn't follow the directive, prompting the regulator to create another circular in August this past year, reminding them of their obligation.
As some directors continued to overlook the laws, the commission issued an order on July 2 this year, giving the nonconforming directors 45 days to carry the minimum shares or face the music.
It ordered 61 directors of 22 listed companies to comply. A number of them have previously obeyed the order but many did not. So, the regulator is going to issue a notice by announcing the posts vacant very soon, according to a BSEC source.
Twenty-five of the directors have previously purchased shares or were gifted the mandatory number of shares to keep their post intact.
Eighteen directors left the board as they did not meet up with the requirement on the minimum shareholding. The rest 17 directors neither bought the shares to meet up the quota nor left the board.
"We have seen an enormous zeal among many directors to check out the order. But those people who are not following the order would face the results according to laws," said Prof Shibli Rubayat Ul Islam, chairman of the BSEC, said recently.
"We will be tough about the noncompliant directors."
Some companies want to fulfil the requirement of holding 30 % shares jointly.
"We will consider if directors who've already started buying shares seek time to meet the requirement."
If the directors have not begun the procedure to keep at least 30 % shares of jointly, the regulator will need a tough measure, the chairman added.
"This is an excellent initiative," said Prof Abu Ahmed, a currency markets analyst.
"When sponsors hold most shares, they work for the business with much interest. Otherwise, they don't really value the performance of the company."
The order on the minimum share-holding must have been implemented much earlier, according to Ahmed. The strict policy of the commission has lifted the confidence of the investors, he said.
"The initiative must continue. Then it could ensure discipline in the market."
Investors also appreciated the BSEC move, saying it can help the commission gain acceptance among market intermediaries.
In 2011, some 14 directors from four listed companies visited the High Court challenging the BSEC order on minimum shareholding. The court rejected the appeal.
