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SEC asks for legal steps against default cos PDF Print E-mail
Wednesday, 30 January 2008

Staff Correspondent

The Securities and Exchange Commission at a meeting on Monday asked the bourses to move for taking legal actions against the low-profile ‘Z’ category companies for violating rules, said officials.

‘The SEC has also asked us to halt share trading of any company immediately if it is known that the company has sold off its properties for any reason,’ said Salahuddin Ahmed Khan, chief executive officer of the Dhaka Stock Exchange.

He said the commission asked the bourses to conduct investigation into the actual status of the companies of which business operation had been remained closed for a continuous period of one year or more.

There are around 25 non-operational companies listed with the DSE, he said. Recently, the DSE investigation teams found anomalies in as many as eight ‘Z’ category companies. The investigation teams found that the companies either sold off their properties or remained non-operational without disseminating the information to the bourse, said DSE officials.

The eight companies are Quasem Silk Mills, Mona Food Industry, M Hossain Garments Washing and Dyeing, German-Bangla JV Food, Raspit Data, Raspit Inc, Petro Synthetic and Chic Tex, they said. Salahuddin said the bourse would have to examine legal provisions before going to take any action against the defaulting companies.

The CEO of the Chittagong Stock Exchange, AB Siddique, was also present at the meeting. ‘We are also investigating the actual business status of the low-profile companies listed with the CSE and located in the Chittagong zone,’ he said.

He also added the commission asked the bourses to examine legal provisions for taking actions against the defaulting companies. The SEC recently took a number of steps to bring back on track the defaulting ‘Z’ category companies for betterment of the country’s capital markets, said SEC officials. With this aim, on January 15, the SEC ordered suspension of trading or transfer of shares of the sponsors or directors of ‘Z’ category companies (excepting banks, non-bank financial institutions and insurance companies) until further instruction, and the following day directed the bourses to put circuit breaker on transaction of the shares of the ‘Z’ category companies.

The SEC officials said the commission took the moves for implementing a 2002 notification, which gives the SEC authority to discipline the defaulting companies listed with the bourses.

The commission after five years has regained authority to implement the notification as the High Court on December 3 last year vacated its previous stay order on the effectiveness of the SEC notification.

Under the notification, the commission can give a six-month ultimatum to errant companies to improve their situation or, in default, to reconstitute their boards by holding extra-ordinary general meetings.

The commission recently decided that the six-month period would start from the day of the higher court vacation order. Under the notification, the SEC can also dissolve the boards of directors of the companies and constitute new boards by involving general and institutional shareholders.

The new boards would be given a maximum of 24 months’ time to improve the situation of the companies.

In default, the companies would face liquidation in six months. Currently, 100 securities are being traded under the ‘Z’ category on the bourses, sources said.

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