DSE embarks on mission to identify errant firms

The Dhaka Stock Exchange has embarked on a mission to identify companies that are not holding annual general meetings and paying dividends without acceptable reasons, a move market experts believe will increase confidence of small investors.
A three-member DSE team will submit reports to the Securities and Exchange Commission (SEC) after identifying the errant companies listed with the bourse that belong to the Z group.
The SEC meanwhile recently got a power back to dissolve boards of directors of the errant companies following a new court ruling. The High Court vacated a previous stay order on effectiveness of an SEC notification through which the regulator can dissolve and constitute a new board.
As per the notification, the stock market regulator will also be able to constitute a new board of directors of a company belonging to Z category for a continuous period of one year or more on the stock exchanges.
Market experts believe enforcement of the SEC notification on Z group companies will cast positive impact on the stock market as poorly performing companies will be forced to improve their condition.
“We welcomed the SEC notification for Z category companies when it was enforced in 2002. And now we again hope the restoration of the power of the SEC will bring about positive changes in the market,” said Yawer Sayeed, managing director and chief executive officer of Asset and Investment Management Services (AIMS) of Bangladesh Limited.
According to DSE sources, the identification process will take some time, as the inspection team will have to visit all the errant companies.
Out of total 350 securities, 93 securities belong to the Z category on the DSE.
In 2002, the SEC issued the notification for the companies belonging to Z category.
According to the notification, the companies of Z group will be given six months time to overcome their problems. In default, the SEC will dissolve the boards of directors and constitute new boards by involving the general and institutional shareholders. The new boards will be provided 24 months time with all necessary supports to run and improve the situation of the companies. If the new boards fail to do so, the companies will be given six months time for liquidation.

Following the notification, the stock market had seen positive changes with a good number of Z group companies holding AGMs and announcing dividends for the shareholders regularly.
But, the effectiveness of the notification was suspended upon a writ petition filed by a company.

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