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Review compulsory listing decision

Businesses urge SEC

Star Business Report
Business leaders yesterday urged the stock market regulator to review the notification on compulsory listing of companies with paid up capital ofTk 50 crore or more and in commercial operations for three years.
The mandatory listing is 'somewhat retrogressive', they said at a meeting between Metropolitan Chamber of Commerce and Industry (MCCI) and Securities and Exchange Commission (SEC) at the chamber's conference hall in Dhaka.
“There should not by any such compulsion. Well performing private limited com-panies will go public when there is incentive to do so. Similarly, public limited companies will go for public offering, if there is adequate financial incentive," said Latifur Rahman, MCCI president.
"Public listing involves corporate governance and disclosures. These can be better ensured through voluntary compliance than compulsion,” he observed.
On February 12 the SEC decided that public limited companies, which are in business for three years with a paid up capital of Tk 50 crore or more, must go for initial public offering (IPO) within a year.
The SEC also decided that if the paid up capital of any private company reaches or exceeds Tk 40 crore, the company must transform itself into a public limited company within six months of such happening.
Existing private limited companies with paid up capital ofTk 40 crore or more will have to become public limited companies within a year.
The MCCI chief also said the existing IPO pricing method needs to be changed, as the method does not ensure fair prices to the well-performing companies.
With the existing IPO pricing, a Tk 100 or Tk 150 share increases to Tk 500 or more on the very first day of trading and the total benefit of this rise goes to IPO lottery winners, and not to the entrepreneurs, he explained.
He said the provision for changing auditors in every three years should be reviewed. “We feel that decisions on such changes should be left to the shareholders in the interest of corporate democracy," he added.
SEC Chairman Faruque Ahmed Siddiqi said although funds with no liability, interest and capital payments could be raised through the capital market, no private company has approached with any proposal for raising fund in the capital market during the last two years.
He said there is also a corporate benefit for getting enlisted in the capital market, such as the reduction on corporate tax by 10 percentage points, adding, “I wonder why no one comes to take the benefit.”
IPO pricing may not be the only issue for not coming into the capital market, he said, adding that there may be some reasons for not coming into the stock market. “Maybe, the private companies’ owners do not want to go beyond their family ownership," he said.
Regarding the compulsory listing notification, Siddiqi said they have already received some recommendations from businessmen and they will review the issue.
International Chamber ^ u Commerce-Bangladesh (ICC-. B) President Mahabub6^fa Rahman said if private compa^,^^ nies were forced to go for IPOs and fail to perform successfully, this would have a negative impact on the overall market
Of the 300 listed companies, 200 companies are now performing badly and many are_ not paying dividends or holding annual general meetings, he said.
He said instead of forcing the private companies to get listed, the government should encourage the foreign or multinational companies such as telecom operators, to get involved in the country 's stock market.
Other speakers at the meeting said more mutual funds and Internet based trading should be introduced on the stockmarket.