FE Report (October 21, 2010)
Securities and Exchange Commission (SEC) has brought changes in the capital issue rules allowing a company with a minimum paid-up capital of Tk 300 million to go public.
The SEC Thursday approved the decision taken Tuesday after the commission meeting with its chairman Ziaul Haque Khondker in the chair.
"The commission will issue a notification soon regarding the changed capital issue rules," an SEC official said.
The capital issue rules were relaxed in the wake of experts' strong criticism over the SEC's setting of IPO rules which said a company having a minimum paid-up capital of Tk 400 million would be allowed to hit the market.
Under the new capital issue rules, a company with an existing paid-up capital of Tk 180 million will be able to go public.
In that case the company will have to offload shares of at least Tk 120 million in the initial public offering (IPO).
But the company with a paid-up capital of more than Tk 300 million will have to float shares worth at least 10 per cent of its paid-up capital.
On March 11 last, the SEC issued a notification saying that minimum paid-up capital requirement for a company must be Tk 400 million to go public. A company with a paid-up capital of Tk 750 million will have to offload shares worth 40 per cent of its total paid-up capital.
The minimum public offer for a company with a paid-up capital of more than Tk 750 million and up to Tk 1.5 billion must be 25 per cent of the total paid-up capital or Tk 300 million, whichever is higher. The minimum public offer for a company with a paid-up capital of above Tk 1.5 billion will be 15 per cent of its capital or Tk 400 million, whichever is higher.
"I do not think it will help increase share supply to the market as most of the companies are owned by families and they are afraid of accountability and transparency," former SEC chairman and advisor of the caretaker government AB Mirza Azizul Islam told the FE.
"However, I am not against the move taken by the SEC," he added.
An issue manager asking not to be named said, "The previous rules were a bar for many companies to go public because a company with good fundamentals always tries to keep at least 75 per cent stakes in its grip."
"That's why we were not able to bring new issues in the market," he said.
"But the SEC must be careful about the window-dressing balance sheets of the companies before approval. Otherwise, opportunist companies will take away money from the market capitalising on this scope," he added.
Securities and Exchange Commission (SEC) has brought changes in the capital issue rules allowing a company with a minimum paid-up capital of Tk 300 million to go public.
The SEC Thursday approved the decision taken Tuesday after the commission meeting with its chairman Ziaul Haque Khondker in the chair.
"The commission will issue a notification soon regarding the changed capital issue rules," an SEC official said.
The capital issue rules were relaxed in the wake of experts' strong criticism over the SEC's setting of IPO rules which said a company having a minimum paid-up capital of Tk 400 million would be allowed to hit the market.
Under the new capital issue rules, a company with an existing paid-up capital of Tk 180 million will be able to go public.
In that case the company will have to offload shares of at least Tk 120 million in the initial public offering (IPO).
But the company with a paid-up capital of more than Tk 300 million will have to float shares worth at least 10 per cent of its paid-up capital.
On March 11 last, the SEC issued a notification saying that minimum paid-up capital requirement for a company must be Tk 400 million to go public. A company with a paid-up capital of Tk 750 million will have to offload shares worth 40 per cent of its total paid-up capital.
The minimum public offer for a company with a paid-up capital of more than Tk 750 million and up to Tk 1.5 billion must be 25 per cent of the total paid-up capital or Tk 300 million, whichever is higher. The minimum public offer for a company with a paid-up capital of above Tk 1.5 billion will be 15 per cent of its capital or Tk 400 million, whichever is higher.
"I do not think it will help increase share supply to the market as most of the companies are owned by families and they are afraid of accountability and transparency," former SEC chairman and advisor of the caretaker government AB Mirza Azizul Islam told the FE.
"However, I am not against the move taken by the SEC," he added.
An issue manager asking not to be named said, "The previous rules were a bar for many companies to go public because a company with good fundamentals always tries to keep at least 75 per cent stakes in its grip."
"That's why we were not able to bring new issues in the market," he said.
"But the SEC must be careful about the window-dressing balance sheets of the companies before approval. Otherwise, opportunist companies will take away money from the market capitalising on this scope," he added.
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