Only a few Z-category cos recast board of directors

Kayes M Sohel | Published: June 01, 2008 00:00:00 | Updated: February 01, 2018 00:00:00

Only a few of the 98 Z-category listed companies complied with a Securities and Exchange Commission's (SEC) directive on recasting their board of directors until Thursday last, the deadline of which expires Tuesday.

Mona Food has already reconstituted its board of directors while Niloy Cement is expected to reconstitute today (Sunday). Tripti and Olympic Industries are likely to merge this month.

The SEC earlier won a legal battle over the directive challenged by Mark Bangladesh, a Z-category issue against the commission's gazette notification issued on August 1, 2002.

However, three more Z-category companies-- Bengal Biscuits Limited, Eagle Star Textile Mills Limited and Modern Industries - filed another writ petition challenging the order in the High Court (HC).

A HC division bench of the Supreme Court will hear the petition on June 30 next.

Commenting on the development, a 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," said a senior SEC official requesting anonymity.

Dhaka Stock Exchange (DSE) chief executive officer Salahuddin Ahmed Khan said: "We are ready to help the worst performing companies, but they are reluctant to come. I don't know why."

"A business institution might experience profit or loss. But a company that intentionally want to remain in Z-category is not desirable," he added.

MA Kalam, an entrepreneur of a Z-category company, said: "The SEC has failed to know how a sick company survives. Before issuing such notification, the commission should have discussed with us to find a proper solution to overcome the problems facing by the worst performing industries."

"Even after recasting the boards of directors, nobody can ensure that a company will become commercially viable and operationally sound. There is no Aladdin's lamp," he added.

The SEC directive has a provision to include a representative from the general shareholders in the board of directors of a Z-category company.

The commission suspended trade and transfer of the sponsors or directors' shares of 'Z' category companies to prevent them making any move prior to implementation of 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 failure.