The Bangladesh Securities and Exchange Commission is yet to make any decision on streamlining the companies in the ‘Z’ category, which groups non-performing securities, despite taking several steps in this regard a year ago. Market experts said that the companies in the junk category were reluctant to revive their business and provide dividend to their shareholders but the regulator was shy to take any firm action against the companies. The regulator’s silence is worsening the situation as it encourages the companies to continue the wrongdoings, they said. On April 11 last year, the BSEC formed a committee to prepare necessary proposals on a notification regarding reconstitution of boards of companies remaining in the ‘Z’ category. According to the notification issued in 2002, the existing board of directors of the issuer company of a listed security which has remained in the ‘Z’ category for one year or more must be reconstituted by holding extra-ordinary general meeting within six months. But the companies in the category are yet to implement the BSEC order. The notification has remained on paper as no action has been taken in accordance with the rule. The body assessed the BSEC notification issued in 2002 on the ‘Z’ category companies and submitted its report to the commission in September last year with a number of suggestions that included freezing of shares of sponsor-directors of the companies. Dissolving board of a company and appointing administrator to the board are not within the jurisdiction of the BSEC. So, the commission must put restrictions on the company to force the company to restructure its board. But, the BSEC is yet to approve the proposals of the committee. Market operators said that sponsor-directors of those companies left the market after selling their shares at high prices by manipulating the companies’ financial documents and inflating the firms’ profits. Strong supervision from the regulator is needed to stop manipulation, fudging accounts and ill-intention of the directors, they said. The BSEC took the initiative after the country’s premier bourse Dhaka Stock Exchange sent a list of 14 companies seeking approval regarding the bourse’s intention to delist them. Meanwhile, on October 15, 2019, the commission sent a letter to the DSE saying that there was lack of legal basis as per existing securities laws as well as laws of the land, for which no legal action might be initiated by the exchanges against the defaulting companies/directors for breach of condition of agreement. Therefore, the regulator asked the bourse to frame a guideline on non-voluntary delisting, defining the responsibility of exchange and to comply with the necessary regulatory provisions before delisting listed securities from trading board. DSE officials said that it prepared a guideline on delisting the ‘Z’ category companies, which would be submitted to the BSEC soon. Most of the ‘Z’ category companies do not maintain basic regulatory requirements and do not provide dividends to their shareholders. Despite having no business operations, the share prices of most of the ‘Z’ category companies often rise abnormally due to manipulation. There are 50 companies in the ‘Z’ category and the operations of most of the companies have remained closed or partially closed for years. Many of them do not bother to declare financial accounts regularly and do not hold annual general meetings.
