Strong criticism from the stakeholders over the proposed tax on stock dividend and retained earnings have prompted the authorities concerned to weigh the scope for reviewing the measure.
The Bangladesh Securities and Exchange Commission (BSEC) said on Monday it would sit with the finance minister (FM) and the National Board of Revenue (NBR) chairman to discuss the issue.
The BSEC chairman said this when the market operators submitted their opinions on the draft amendment to the public issue rules.
"The BSEC chairman said he will meet the prime minister, if necessary, as part of the move for reviewing the proposal of 15 per cent tax on stock dividend and retained earnings," said a top official of the Dhaka Stock Exchange (DSE).
He also said the BSEC has differed with the tax proposal, which would 'hinder' raising capital by the listed companies.
"Besides, tax cannot be imposed on capital raised through bonus shares. Tax cannot be imposed also on retained earnings, which are preserved after paying tax," he added, quoting to the BSEC chief.
On Monday, the representatives of the DSE, the DSE Brokers Association (DBA), the Chittagong Stock Exchange (CSE) and the Bangladesh Merchant Bankers Association (BMBA) submitted their opinions on the public issue rules to the BSEC.
Before submitting the opinions, they reached a consensus about the provisions, except the lock-in period, included in the draft amendment.
In the draft amendment, the securities regulator has included a three-year lock-in period for all the shareholders, mentioned in the IPO (initial public offering) prospectus of a company.
The lock-in period will be counted from the date of the company's debut trading instead of publication of the prospectus.
Except the BMBA, other market operators supported the provision of three-year lock-in period, set by the BSEC.
According to the BMBA, the lock-in period should be two years or the period of holding two annual general meetings (AGMs) after listing, whichever is longer.
In this regard, the securities regulator told the market operators that the lock-in period will be fixed considering different aspects.
The market operators have submitted identical opinion on the criteria of eligible investors (EIs), IPO sizes under book building and fixed price methods, and IPO quota for different types of investors.
In their uniform opinion, the stakeholders opined that provident funds, pension funds and gratuity funds should be allowed to avail the IPO quota as EIs after three years of getting their registration.
Besides, these funds must have at least 5.0 per cent investment in the secondary market.
Under the fixed price method, the minimum IPO size will be Tk 500 million or 10 per cent of the paid-up capital, whichever is higher, according to the draft amendment.
The market operators placed opinion mentioning the IPO size of Tk 300 million or 10 per cent of the paid-up capital, whichever is higher. The post-IPO size will be Tk 500 million under the fixed price method, they added.
They have also submitted opinion in favour of setting 60 per cent IPO quota for general investors, 30 per cent for EIs, 5.0 per cent for mutual funds (MFs), and 5.0 per cent for non-resident Bangladeshis (NRBs) under the fixed price method.
The BSEC's draft amendment said under the book building method, the minimum IPO size will be Tk 1.0 billion or 10 per cent of the paid-up capital, whichever is higher.
The market operators opined that the minimum IPO size should be Tk 750 million or 10 per cent of the paid-up capital, whichever is higher.
Their opinion was in favour of 50 per cent IPO quota for EIs and MFs, 5.0 per cent for NRBs, and 45 per cent for general investors.
The market operators have agreed with the securities regulator regarding other provisions of the draft amendment.
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