BSEC, IDRA lock horns over number

The Bangladesh Securities and Exchange Commission (BSEC) and the Insurance Development and Regulatory Authority (IDRA) are at odds over the number of independent directors on the boards of listed companies.
The disagreement between the capital-market regulator and the insurance sector regulator surfaced following a BSEC notification, issued last November, on corporate governance code amendment for listed companies.
The IDRA has urged the BSEC to adhere to section 76(1) of the Insurance Act 2010 that pertains to the appointment of independent directors on the boards of life and non-life insurers with stock-market listings.
In reply to the notification this week, the IDRA has highlighted that at least two directors, or one-fifth of the total director count, on a company's board must be independent directors.

This BSEC notification specifies that any fractional count of neutral directors should be rounded up to the next whole number.
"At least one-fifth of the total number of directors on a company's board shall be independent directors; any fraction shall be considered to the next integer or whole number for calculating number of independent director(s)," reads the BSEC corporate governance code.
The Corporate Governance Code notification, issued on 20 November 2023, mandated listed companies to formulate and comply with the code by 31 December 2018 as per a directive from 03 June 2018.
The IDRA contends that the clause pertaining to neutral directors in the Corporate Governance Code conflicts with the Insurance Act 2010.
The regulatory authority asserts that since the Act's provisions take precedence over the code, relevant sections be applied to companies in this context.
If an insurance company is registered under the Act, according to section 76(1), the number of directors, regardless of its memorandum or articles of association, shall not exceed 20 persons.
In such cases, there should be 12 entrepreneurial directors, six public shareholder directors and two independent directors.
"Where the insurer is a company incorporated under the Company Act, the maximum number of directors of that company shall, notwithstanding anything contained in the memorandum of association or articles of association of the company, not exceed 20," reads section 76(1).
"In that case, 12 shall be sponsor directors, six shall be directors holding public share and two shall be independent directors."
The BSEC code is not just a code, it implies additional requirements for all kinds of listed companies in the capital market, according to company law expert barrister Kazi Ershadul Alam. "So, it's not about precedence of act over code. This is a mandatory requirement for all companies in the capital market," he said.
Mr Alam maintains that the Insurance Act 2010 clause will not be applicable in this case, it will be applicable to the insurance companies that are not listed with the capital market.
Bangladesh Insurance Association (BIA) vice-president AKM Monirul Hoque said they recently sat with the regulator and discussed the issue.
He told the FE that the IDRA assured the BIA that the provision in question would apply to listed insurance companies only.
"For us, both BSEC and IDRA are regulators, so they must sit and resolve this issue," he said.
There are 78 companies in the insurance sector of Bangladesh. Of them, 32 are life insurance and 46 are non-life insurance companies.
Fifty-seven life and non-life insurance companies are listed with the Dhaka Stock Exchange.
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