The stock market regulator has revoked the mandatory listing provision for companies with paid-up capital above Tk 500 million, squeezing scopes for bringing in more large corporations in the market.
The provision was cancelled on Jun 20 in a notification signed by Bangladesh Securities and Exchange Commission (BSEC) Chairman M Khairul Hossain.
It, however, did not come up with a plausible explanation when asked about the reason for cancelling the provision in place since May 2010.
Experts and market operators have said the latest decision will further squeeze entries of local large companies in the capital market.
“I can’t find the logic why the BSEC has withdrawn the rule of mandatory listing for large companies,” said AB Mirza Azizul Islam, who served as the finance adviser in the 2007-08 caretaker administration.
A former chief of the market regulator, Islam suggests raising the mandatory listing threshold from Tk 500 million instead of scrapping the provision.
Prior to the repeal of the rule, a private limited company was legally bound to turn into a public limited entity within six months of exceeding its paid-up capital of Tk 400 million.
Once the paid-up capital of a company exceeded Tk 500 million, it was required to floating shares in the market.
The decision of the BSEC will reduce the scope of company listing at the bourses, according to market participators.
“The decision has stopped opportunities for listing good and large companies in the capital market. Only small firms with low quality may be interested now for stock market listing,” AFC Capital CEO Mahbub H Mazumder.
Mahbub, also a Bangladesh Merchant Bankers Association (BMBA) Executive Committee member, urges the government to give adequate incentives to attract companies for listing in the capital market.
Earlier, in June 2015, the BSEC also exempted foreign companies and joint venture firms from mandatory listing.
BSEC Executive Director and spokesperson Md Saifur Rahman said that from now on the commission’s approval for issuing private placement is no longer required.
He says all rules related to mandatory listing have been revoked in line with the latest decision on issuance of private placement.
“The provision has been lifted because it has not been implemented for long,” said a BSEC official, requesting anonymity.
Clarifying the rationale for the latest decision, he says since the approval for fund raising from the Commission is no longer mandatory for non-listed firms, provisions for their mandatory entries in the stock market have thus been redundant.
Another senior BSEC official says they have long been trying to bring large non-listed companies having their paid-up capital above Tk 500 million, but failed to bring them as other agencies of the government have not played their due roles.