Bangladesh Securities and Exchange Commission (BSEC) has decided to remove the directors who still do not hold at least 2 per cent shares of their listed companies although the regulator made it mandatory nine years ago.
As a result, 17 directors from 10 listed companies, namely Bangladesh General Insurance, Eastern Insurance, Fuwang Ceramic, Imam Button, Intech, Meghna Life, Mercantile Insurance, Provati Insurance, Purabi General Insurance and United Airways may be removed for noncompliance.
On November 22, 2011, the BSEC issued a circular making it mandatory for directors of listed companies to own at least 2 per cent shares individually and 30 per cent jointly.
Many directors did not follow the directive, prompting the regulator to come up with another circular in August last year, reminding them of their obligation.
As some directors continued to disregard the laws, the commission issued an order on July 2 this year, giving the nonconforming directors 45 days to hold the minimum shares or face the music.
It ordered 61 directors of 22 listed companies to comply. Some of them have already obeyed the order but many did not. So, the regulator is going to issue a notice by announcing the posts vacant very soon, according to a BSEC source.
Twenty-five of the directors have already purchased shares or were gifted the required number of shares to keep their post intact.
Eighteen directors left the board as they did not meet the requirement on the minimum shareholding. The rest 17 directors neither bought the shares to meet the quota nor left the board.
"We have seen a huge zeal among many directors to follow the order. But those who are not following the order would face the consequences as per laws," said Prof Shibli Rubayat Ul Islam, chairman of the BSEC, said recently.
"We will be tough about the noncompliant directors."
Some companies are trying to fulfil the requirement of holding 30 per cent shares jointly.
"We will consider if directors who have already started buying shares seek some time to meet the requirement."
If the directors have not begun the process to keep at least 30 per cent shares of jointly, the regulator will take a tough measure, the chairman added.
"This is a good initiative," said Prof Abu Ahmed, a stock market analyst.
"When sponsors hold most shares, they work for the company with much interest. Otherwise, they don't care about the performance of the company."
The order on the minimum share-holding should have been implemented much earlier, according to Ahmed. The strict policy of the commission has lifted the confidence of the investors, he said.
"The initiative must continue. Then it would ensure discipline in the market."
Investors also appreciated the BSEC move, saying it will help the commission gain acceptance among market intermediaries.
In 2011, some 14 directors from four listed companies went to the High Court challenging the BSEC order on minimum shareholding. The court rejected the appeal.