Regulators, National Tea board served legal notice by shareholders
They claim a company board member is reportedly in violation of shareholding regulations while continuing to serve as a director
A group of shareholders of the publicly listed National Tea Company (NTC) has sent a legal notice to Bangladesh Securities and Exchange Commission (BSEC) Chairman Khandaker Rashed Maksud, alleging that an NTC board member is in violation of shareholding regulations while continuing to serve as a director.
The notice was also sent to the managing directors of the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE), the secretary of the Ministry of Finance, the managing director and 10 directors of NTC, and the Registrar of Joint Stock Companies and Firms.
The notice was issued on 30 January by Barrister Farabi Salauddin Tushib on behalf of 12 shareholders, including Nesar Uddin, Kohinur Ahmed, and Kazi Mursalin Ullah.
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BSEC Executive Director and spokesperson Mohammad Rezaul Karim told TBS that the relevant department of BSEC will review the legal notice. After receiving recommendations from the department, the commission will take appropriate action.
On Tuesday, NTC's share price closed at Tk184.40 on the Dhaka Stock Exchange, marking a decrease of 1.97%.
According to the company's shareholding reports from October and November last year, shareholder-director Md Shakil Rizvi holds 1.379% of the company's paid-up capital. However, as per BSEC regulations, a director must hold at least 2% of a company's shares. Since Rizvi does not meet this requirement, concerns have been raised about the potential impact on the company's management decisions.
In response, Md Shakil Rizvi told TBS that the commission has extended the subscription period, which is still ongoing. Finalization will occur once the subscription for the company's placement shares is completed.
On 17 October last year, the BSEC decided to extend the subscription period for NTC's placement shares until 31 March 2025. However, this extension is conditional. The company can only utilise the funds if the government maintains at least a 51% share in the company, according to the regulator.
The shareholders' legal notice also questions the legitimacy of the company's fundraising through a rights share issuance, alleging that the funds were not properly utilised. It calls for an investigation into the matter.
Additionally, the shareholders claimed that board meetings were held without fulfilling the required quorum. Special agendas were allegedly approved in these meetings through misuse of power and arbitrary decision-making by the board.
The legal notice further accuses the board of violating BSEC regulations and corporate governance principles, thereby putting the company and its shareholders at risk. The shareholders argue that BSEC has a responsibility to ensure that the company operates in compliance with laws and follows good governance practices.
In response to these concerns, the legal notice demands a full investigation into the NTC's board activities, appropriate legal actions to address the alleged violations, and the appointment of a new director by BSEC if necessary. It also calls for the immediate cancellation of all board meetings that were conducted improperly.
The shareholders urge the BSEC to take immediate steps to address these issues and ensure proper governance at the NTC.
In early December last year, the Ministry of Labour and Employment directed the NTC to immediately auction 22 lakh kilograms of tea to cover unpaid wages for its workers and employees.
Additionally, the company was instructed to submit a proposal to the Finance Division, through the Bangladesh Bank, to increase its single-borrower exposure limit with Bangladesh Krishi Bank. This move aims to provide the company with better access to financial resources, helping stabilize operations and ensure timely wage payments.
In April 2023, the NTC received BSEC approval to raise its paid-up capital by issuing 2.34 crore shares. Of these, the government, Investment Corporation of Bangladesh (ICB), and Sadharan Bima Corporation will receive 1.24 crore shares; sponsor-directors will receive 13.8 lakh shares; and general shareholders will receive nearly 96 lakh shares.
