The securities regulator has caught Tamijuddin Textile Mills having misappropriated undistributed stock dividends worth more than Tk 330.77 million by disbursing them to shareholders who were not entitled.
The company has so far deposited about 1.06 million undistributed bonus shares to the account of the Capital Market Stabilisation Fund (CMSF). It claimed to have given another 1.21 million bonus shares, which had remained as undistributed for long, to the rightful owners and that there were no undistributed stock dividends in the suspense account.
But a verification attempt by the auditor, appointed by the CMSF, found that documents were missing to prove the settlement of the bonus shares with actual beneficiaries.
Documents show that Tamijuddin Textile disbursed the 1.21 million bonus shares to 48 shareholders between January 2022 and March 2023, the value of which has been determined by the securities regulator on the basis of the stock price on the record date, November 14 of 2022.
But the auditor reported to the Bangladesh Securities and Exchange Commission (BSEC) that the company's information about the beneficiaries was not convincing after it checked the share register and shareholding data of different record dates.
As per the rules, a shareholder must have shares of a listed company in his BO (beneficiary owner's) accounts within the record date to get dividends.
Officials concerned of Tamijuddin Textile failed to explain the queries made by the auditor.
Moreover, the company did not preserve dividend compliance reports, financial statements, and board meeting minutes for the period of FY11-FY15.
It even failed to produce dividend entitlement reports and year-wise lists of undistributed cash and stock dividends.
The BSEC said the company's failure to provide relevant and appropriate documents pointed to misappropriation of the stocks by its board of directors.
In its reply to the BSEC query, the company said it could not preserve hard documents of the time before digital record keeping started. It said it was not so aware of the need to protect hard copies of share-related documents. The FE has seen the response letter.
The regulator is set to place the matter at its next meeting to decide the next course of action.
A senior official of the BSEC, wishing not to be named, said the company must pay back cash equivalent of shares, which had been misappropriated.
Apart from the data mismatch regarding settlement of the undistributed shares, the company failed to provide information about electronic conversion of paper shares.
Referring to the Central Depository Bangladesh Ltd. (CDBL), the BSEC said the company had converted 703,700 paper shares into electronic form between December 2018 and November 2022. Again, it did not find documents confirming whether the shares were deposited into the accounts of actual shareholders.
Meanwhile, the company's auditor gave a qualified opinion in its report for the year ended in June 2023. It said it could not verify the value of inventories due to a lack of sufficient and appropriate evidence.
In addition, the auditor was unable to conduct a net realizable value test as well as assess the impact on the cost of goods sold, gross profit and income tax. Hence, determining the condition and position of the property, plant & equipment was not possible, said the auditor.
Tamijuddin Textile Mills was shifted to the OTC (over-the-counter) market from the main market in 2009 for the business remaining closed for a long time. Later, it returned to the main board in 2021 after the operation resumed.
Presently an 'A' category company, it showed in its financial statements a continuous growth in profit over the three fiscal years to FY23.
It gained a 74 per cent year-on-year growth in earnings to Tk 61.78 million in FY21, 221 per cent to 198.74 million in FY22 and 0.51 per cent to Tk 199.76 million in FY23, according to published financial results.
The BSEC in June 2021 issued rules for the Stabilisation Fund to help revitalise the market alongside settling investors' claims of undistributed/unsettled dividends. Listed companies then started to deposit undistributed and unclaimed dividends into the account of the Fund.
A large number of companies are yet to complete the handover of dividends.
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