The Securities and Exchange Commission (SEC) is yet to take any decision on the low-rated Z-category companies despite expiry of the time given for recasting their respective board of directors on June 3.
Only four of the 98 Z-category companies complied with the directive of the securities regulator within the timeframe.
Currently, there are 271 companies listed with the Dhaka Stock Exchange, of which 98 are in the Z-category.
'The commission is yet to take any decision against the remaining worst performing companies failing to comply with the directive,' a high official of the SEC told the FE Wednesday.
But a decision for taking action against those companies is under consideration as proposals regarding the issue will be placed in the commission meeting for approval very soon, he added.
Earlier, the SEC directed the errant companies to reconstitute their respective board of directors in order to make them commercially viable and operationally sound.
On the other hand, an entrepreneur of a Z-category company, requesting not to be named, said: 'The commission has failed to know how a sick company survives. Before issuing such a notification, the commission should have discussed with us to find out a proper solution to the problems faced by the worst performing companies.'
After winning the long legal battle over the challenge thrown by the Mark Bangladesh against the SEC's gazette notification issued on August 1, 2002 on reconstitution of Z-category companies' boards of directors, the securities regulator had directed the errant companies to recast their boards within six months by holding extra ordinary meetings (EGMs).
The directive had been made effective from December 3, 2007.
But last month, three Z-category companies-- Bengal Biscuits Limited, Eagle Star Textile Mills Limited, and Modern Industries - filed a writ petition challenging the order with the High Court (HC). An HC bench will hear the petition Monday next.
Commenting on it, an SEC official said: 'As there is no stay order in force, the commission will be able to go ahead with its directive.'
'Response from the low-rated companies is really disappointing. A business institution might gain profit or suffer loss. But a company that intentionally wants to remain in Z-category is not desirable,' he added.
The SEC directive said a Z-category company must include a representative from general shareholders in the board of directors.
The commission suspended trade and transfer of sponsors or directors' shares of the 'Z' category companies to prevent them from making any move prior to compliance with the notification.
'The reconstituted board will prepare specific/detailed proposals for devising appropriate action plans for improving the operational and financial performance to run a Z-category company profitably,' said the directive.
As per the SEC notification, the reconstituted board will identify the specific reasons for the company's failure to operate profitably and also identify the persons, if any, of the company concerned, including its directors, auditors, responsible for such a failure.
The reconstituted board will also be empowered to take appropriate measures, including legal actions, if applicable, against the persons responsible for the company's failure.
'In case the issuer fails to show improved operational and financial performance of the Z-category company within 24 months from the date of reconstitution of the board, the company will take appropriate measures for liquidation of the entity, including merger or winding up, as per law, after taking shareholders' approval by holding an EGM,' the SEC directive stated.
The EGM will take place within three months of expiry of the given 24 months, the SEC said.
SEC yet to take action against cos for failing to reconstitute boards
Kayes M Sohel | Published: June 26, 2008 00:00:00 | Updated: February 01, 2018 00:00:00
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