Written by The Banking Post
The securities regulator has called for a compensation package for general shareholders before the liquidation and delisting of several troubled non-bank financial institutions (NBFIs).
A committee of the Bangladesh Securities and Exchange Commission (BSEC) recently met officials of the central bank and handed over a letter outlining recommendations to safeguard investors’ interests.
The move comes as the central bank advances what is being described as the largest clean-up drive in the financial sector. In November last year, Bangladesh Bank decided to liquidate nine NBFIs plagued by irregularities, mismanagement and failure to repay depositors. In January, six were shortlisted for immediate liquidation.
Initially, nine firms were set for closure. But after hearings, Prime Finance, GSP Finance and Bangladesh Industrial Finance Company (BIFC) were granted three to six months to improve their financial positions.
The six NBFIs now facing liquidation are FAS Finance, Premier Leasing, Fareast Finance, Aviva Finance, People’s Leasing and International Leasing. All but Aviva Finance are listed on the stock exchange.
‘Investors Should Not Be Deprived’
BSEC spokesperson Md Abul Kalam confirmed the letter and its contents.
In the letter, the regulator argued that standard liquidation norms may not apply in this case. Typically, if a company’s net asset value turns negative, shareholders receive nothing after liquidation. However, depositors of these NBFIs have reportedly been promised refunds, requiring around Tk 50 billion.
“Therefore, investors should not be deprived,” the BSEC said, urging that general shareholders be compensated before the institutions are delisted or liquidated.
The regulator proposed 10 recommendations, including determining the value of general shareholders’ stakes — or a per-share compensation price — in advance. It suggested that shareholders be paid either the face value or the prevailing market price, whichever is higher.
However, it made clear that compensation should apply only to general shareholders, not sponsor-directors implicated in fund embezzlement.
The BSEC also stressed the need for transparency in the liquidation process, proper disclosure to the Dhaka Stock Exchange regarding trade cancellations, and timely dissemination of price-sensitive information.
The regulator warned that failure to compensate investors could undermine confidence in the capital market in the future, adding a new layer of risk to an already fragile sector.
