The Securities and Exchange Commission (SEC) made recommendations on buy back of shares prohibiting the companies raise capital for two years.
Buy back refers to a process that allows a joint stock company to buy its shares and thus let capital flow to the shareholders. No rights are conceded to the company from these shares.
The SEC made the recommendation during a meeting presided over by SEC chairman Ziaul Haque Khondker with the stakeholders on Tuesday.
Shakil Rizvi and Fakor Uddin Ali Ahmed presidents of Dhaka and Chittagong stock exchanges and Salman F Rahman president of Bangladesh Association of Publicly Listed Companies were present at the meeting.
According to the recommendation, a company will be able to buy back stocks equivalent to 10 per cent of its paid up capital. But the company will not be able to buy back shares if its debt is double of paid up capital or its free reserve.
Any company will be able to buy back shares with reserve capital or through securities premium account and no company can float shares without bonus share.
As per the new draft policy on buy back, a company could not sell stocks after buy back from the market. The regulator was able to destroy or cancel stocks within seven days of buying within 24 months after buy back.
The SEC has recommended one year imprisonment or at least Tk 100,000 fine for violating the new buy back rules.
As per the recommendation, any company will not be able to increase its capital for the next two years after completion of buy back process. The law will be enacted after getting nod from the finance ministry.
The SEC will send the recommendation to the finance ministry very soon and after reviewing the draft, the ministry will place it to the parliament for bringing necessary amendments in the company laws.
News Source: The Daily Sun