The High Court (HC) in a judgment Wednesday declared 'illegal' the much-talked-about securities regulator's notification on mandatory holding of 2.0 per cent shares by each of the sponsor-director of the listed companies.
The HC bench comprising Justice Dr Quazi Reza-Ul Hoque and Justice ABM Altaf Hossain passed the judgment in response to a writ petition filed by a listed bank's sponsor shareholder.
"The HC made its rule absolute, meaning that the verdict came into effect immediately in the case of all the sponsor-shareholder-directors of all the companies listed on both the stock exchanges," petitioner's lawyer Advocate Shah Mohammad Ahsanur Rahman told the FE.
"Following the judgment, the sponsor-directors no longer need to hold minimum 2.0 per cent and/or 5.0 per cent shares of the listed companies paid up capital to continue their directorship as per clauses "d" and "f" of the notification issued earlier by the Bangladesh Securities and Exchange Commission (BSEC)," he said.
"And there is no legal bar in this respect for the sponsor-shareholders, who had lost their posts in accordance with the notification, to regain their directorship subject to holding of the qualifying shares as mentioned in the Article of Association of their respective companies," Mr Rahman added.
In the judgment, the HC declared two particular classes -- d and e -- of the notification illegal by making its earlier rule 'absolute'. "Details about the judgment will be available after release of its full text," the lawyer said.
It is the first HC judgment that declared the provision of mandatory holding 2.0 per cent shares by the sponsor-directors illegal, sources in the apex court said.
When contacted for securities regulator's view on appeal against the judgment, executive director and spokesperson of the securities regulator Mohammad Saifur Rahman told the FE, "We are yet to get certified copy of the judgment. After getting the copy, we well decide on it."
Asked about the number of sponsor-directors, who already lost their directorship until now under the notifications, he said, "I do not have the relevant statistics now." However, sources in the sector said the number could be several hundred.
The BSEC issued the notification on November 22 in 2011.
Clause "d" of the notification made it mandatory for each the sponsor-directors, other than the independent ones, to hold individually shares worth, at least, two per cent of his/her company's paid-up capital. "Otherwise there shall be a casual vacancy of director," it said.
"In case of aforesaid casual vacancy of director, any individual holding five per cent or more shares of the paid up capital shall be entitled to be a director in the next Annual General Meeting (AGM)," as per its clause "e".
Mostafizur Rahman, NCC Bank's sponsor-shareholder filed the writ petition in December, 2012 challenging the two clauses -- d and f -- of the notifications. Earlier, he served a legal notice on the authorities concerned over the issue.
Upon his writ petition, the HC on December 12, 2012 issued a rule on the matter asking the government to explain as to why the two clauses shall not be declared illegal.
The HC also gave 'status quo' on the BSEC's notifications for the plaintiff; the 'status quo' order was later modified as 'stay order', which was later extended on several occasions, the lawyer said.
On April 18, 2013, the petitioner sent another legal notice calling upon the bank's management to invite him to the board meeting saying that the BSEC's notification had no effect on him because of the 'stay' order. Later, he also filed a contempt of court petition with the HC over the issue.
On April 30, 2013, the HC directed the bank management to publish its annual report and audit report before that year's AGM showing the names of the petitioner and others concerned as directors, names of whom were submitted through return filing by the bank to the RJSC.
Then the bank management went to the Appellate Division of the Supreme Court (SC) that stayed the April 30 HC order on publication of the annual report and audit report on May 20, 2013.
After hearing both parties on the matter, the Appellate Division on October 10, 2013, set a timeframe for the HC to dispose of the 2012 December rule, the lawyer said.
"The ends of justice would be best served, if the rule itself is disposed of on merit by the High Court Division," the Appellate Division said.
Then, the HC bench comprising Justice Dr Quazi Reza-Ul Hoque and Justice ABM Altaf Hossain thoroughly heard the matter.
Concluding the hearing on February 12, 2014, the bench kept the matter as CAV (Curie Advisori Vult) meaning that "judgment would be delivered anytime."
Finally Wednesday, the HC bench delivered the judgment making the rule "absolute", Mr Ahsanur Rahman said.
Mentioning the delegation of power in the Section 2CC of the Securities and Exchange Ordinance-1969, under which the BSEC issued this notification, the HC in the judgment posed a question as to whether the Parliament can delegate its own enactment power to any other body to enact legislation citing an example of the Irish Parliament, which adopted resolution that Parliament cannot delegate its own legislative power to any other authority, Mr Ahsanur Rahman said.
Senior Advocate AJ Mohammad Ali with Mr Ahsanur Rahman argued for the petitioner in the court while Attorney General Mahbubey Alam stood up for the BSEC on his personal capacity and Advocate Rokanuddin Mahmud with Advocate Sheikh Fazle Noor Taposh and Md Ramzan Ali Sikder appeared for the NCC Bank's chairman and its managing director, added respondents in the writ petition.
Earlier in May, 2012, a number of writ petitions, filed by a section of the sponsor-shareholders challenging the BSEC's notifications, were rejected by a HC bench. In December of 2012, another writ on the same issue was also rejected.
However, another part of the notification on jointly holding 30 per cent company share by the sponsor-directors has gone unchallenged until now.