DSE proposes easier direct listing rules for private, multinational firms

The Dhaka Stock Exchange (DSE) has drafted an amendment to its listing regulations to allow direct listing of private and multinational companies through a watered-down procedure.
The board of the premier bourse has approved the draft and sent it to the Bangladesh Securities and Exchange Commission (BSEC) for approval.
Direct listing means the listing of any non-listed securities or re-listing of any delisted securities, including those traded in the Over-the-Counter (OTC) market, on the exchanges through offloading existing shares instead of issuing new shares through a public offering.
The listing regulations effective between 2006 and 2015 allowed direct listing of both private and public entities. But a number of private companies, including Khulna Power Company Ltd, offloaded shares in the market at inflated prices, giving undue benefits to sponsor-directors. That prompted imposition of an embargo on direct listing of private firms through an order.
Hence, the withdrawal of the restriction is required prior to amending the listing regulations for the direct listing of private and multinational entities.
The BSEC can repeal its own directive to remove the restriction, said a senior official of the securities regulator.
On the listing of multinational firms, a DSE official said the incumbent commission of the securities regulator has members with experience of working with foreign companies.
"So, they are likely to give inputs to the draft amendment to facilitate the listing of multinational organisations," the DSE official said.
In the draft amendment, the DSE has also proposed removing unnecessary compliance burdens from the listing procedure.
At present, a company willing to enter the secondary market through the direct listing method must have a minimum paid-up capital of Tk 300 million. The DSE wants this rule to be relaxed.
The existing regulations also require a company to show profits in three years out of the immediate past five accounting or financial years with a steady growth pattern. In the draft amendment, the DSE has eased this provision, proposing a requirement of profits for at least two out of five years ahead of the listing. It also suggested flexible rules for share offloading. Presently, a company is required to offload at least 10 per cent of its shares within 30 days of listing. The DSE is in favour of relaxing this provision so that companies can offload shares without feeling undue pressure.
The DSE expects that the simplified listing procedure, if approved, will attract non-listed companies.
On simplifying the listing procedure, DSE Managing Director Nuzhat Anwar said a company under the existing rules needs to submit "a pile of documents" along with the IPO proposal to the securities regulator and stock exchanges.
If the proposed amendment is passed, online submission of documents through any of the bourses' platforms will suffice. The relevant bourse will scrutinise the documents and submit them to the securities regulator.
The existing requirement of dual listing will also be waived. Issuers will have the freedom of choosing one exchange for listing, which will cut down the cost of listing.
"The BSEC chairman has told us that the regulator will facilitate the job of simplifying the listing procedure through more discussions with the Dhaka exchange and issue managers," said Ms Nuzhat.
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