BSEC issues directive on exit plan for delisting firms

The Bangladesh Securities and Exchange Commission (BSEC) has issued a directive on an exit plan for delisting companies and debt securities trading in the over-the-counter (OTC) platform or the alternative trading board (ATB).

The BSEC has the authority to direct any company to follow the exit plan for delisting from the stock exchanges.

The directive was issued after Beximco Synthetics, which had not been in production for a long time, recently applied to delist from the stock exchanges.

Sixty companies were under the OTC facility as of 1 October this year. Most of them are not in operation and have failed to pay dividends for a long time.

Additionally, 38 companies are trading under the Z category at the Dhaka Stock Exchange (DSE). They have failed to pay dividends for more than two consecutive years.

The securities regulator said, in the directive, that if a company is involved in money laundering and terror financing, the illegal drug business, or subversive activities, the commission may direct it to apply the exit plan and delist its securities from the exchanges.

The commission has set the criteria for companies eligible for following the exit plan. The criteria are that the company: not be in operation for more than two years, has incurred net losses for more than three years, has accumulated losses exceeding the paid-up capital, has failed to pay cash dividends for three consecutive years, and has failed to hold an annual general meeting for two consecutive years.

For the exit plan, the company must appoint an offeror or a concert party who makes the offer to buy the shares from the shareholders under the exit plan.

The company must then appoint an existing shareholder, proposed shareholder, securities holder, any unlisted company having majority shareholding by the sponsors and directors, or any person as the offeror or the concert party.

The offer price for buying securities under the exit plan will be whichever is highest among these: face value, issue price at the time of the initial public offering (IPO), last trading price on the date of suspension of trade, net asset value per share as per the last audited financial statement, or the volume weighted average price for one year immediately preceding the date of suspension of trade or the date of delisting.

The BSEC directive said the offer price for buying securities under the exit plan will be the issue price at the time of IPO in case of such securities traded below the face value, subject to the approval of the commission.

The exit plan decision can be made by the managing director or the chief financial officer and the chairman in the absence of a board of the eligible company. The company must submit an application to the BSEC and stock exchanges in the format specified by the regulator.

The stock exchanges will take necessary actions to suspend the trade of securities of the company if traded in the OTC platform or ATB immediately after receiving the application. It will also set the cut-off date or record date after receiving the application.

The eligible company must then conduct a general meeting, extraordinary general meeting or special meeting of its shareholders with an agenda for approval of the exit plan within 45 days from the cut-off date or record date.

The stock exchanges concerned must open and maintain an escrow bank account jointly by the managing directors of the Dhaka Stock Exchange and Chattogram Stock Exchange with a designated scheduled bank – only for making payments of securities bought or acquired under the exit plan.

The stock exchanges must maintain and operate a BO account for the consolidation of securities bought or acquired under the exit plan as well as clearing and settlement of such securities.

If the commission rejects the application, the stock exchanges will resume trading within seven working days.