The High Court on Monday declared legal the Securities and Exchange Commission’s notification issued in November 2011 asking sponsors-directors of listed companies to individually hold minimum two per cent shares of the paid-up capital of their respective companies.
As per the verdict, all sponsor-directors jointly holding less than 30 per cent and individually 2 per cent shares were supposed to acquire the rest of the shares within a six-month deadline which expired on Monday.
The bench of Justice Farid Ahmed and Justice Sheikh Hassan Arif pronounced the verdict after rejecting all the three writ petitions filed earlier by directors concerned of the National Credit and Commercial Bank Limited, Popular Life Insurance and the Delta Life Insurance challenging the legality of the notification.
‘We do not see any illegality of the notification issued on November 22 by the SEC in exercising its power under Section 2CC of the Securities and Exchange Ordinance 1969,’ the court observed in its verdict.
It also said, ‘There is no such apparent clash between the SEC rule [on the mandatory shareholding] and the Securities and Exchange Ordinance.’
The court said that it appeared the SEC had imposed some control on the sponsors-directors compelling them to hold minimum shares individually.
‘We are of the view that the SEC is empowered from time to time to issue conditions on the company directors for the sake of securities and the capital market,’ it said.
The court, however, termed some words of the notification improper.
For that reason, however, the entire notification would not be vitiated, said the court.
‘It is a serious matter that the authorities should issue the notification properly,’ the court advised.
The court completely disagreed with the argument of the defence counsels that there was no provision in the world that company directors needed to hold minimum shares to become directors.
‘It appears that the concept of promoters or sponsors-directors is not new in the subcontinent where it has already been introduced,’ said the court.
It said, ‘The regulators always keep some control on the promoters-directors so that they cannot cheat the innocent public.’
In 2006, the government of India made it mandatory for holding minimum shares by the promoters-directors to keep them in control, the court observed.
It said, ‘Bangladesh has just introduced the concept in a different manner.’
The relevant law of the companies also imposed restrictions on the promoters-directors.
It is true that there is no minimum control of the promoters-directors of the concerned companies in Bangladesh, the court pointed out.
‘It is clear that the Memorandum and Articles of Association of the companies concerned always gave the upper hand to the promoters-directors.’
The court observed, ‘Most of the directors were involved in stock business without concentrating on the affairs of their companies.’
On November 22, 2011, the Securities and Exchange Commission made it compulsory for sponsors and promoters of listed firms to hold at least 2 percent stakes individually in their own companies.
The SEC also made it mandatory for sponsors, directors and promoters of a listed firm to jointly hold a 30 percent stake in their firm.
It also set a six-month deadline for the sponsors or promoters to acquire the minimum amount of shares of their companies. Otherwise, they would be disqualified to hold the office of directors with the expiry of the deadline on May 21, 2012.
In April, some directors of National Credit and Commercial Bank filed a writ petition challenging the legality of the notification, and the same bench after the hearing on April 8 asked the SEC to explain why its directive on minimum shareholding should not be declared illegal.
In May, sponsors-directors concerned of the Popular Life Insurance Company, Delta Life Insurance Company and Phoenix Finance and Investments filed separate writ petitions. Later, the Phoenix petition was withdrawn.
During the hearing the rules on the writ petitions, three fresh writ petitions were filed on Sunday by three directors pf Mercantile Bank Limited, including Abdul Jalil—also a leader of the ruling Awami League, nine directors of the NCC and four directors of Labeeco Industries Limited.
The court said it would hear the latest petitions after delivering verdicts on the previous three petitions.
The lawyers of latest three petitions said that their petitions were different from the previous three which had not challenged constitutionality of Section 2CC of the Securities and Exchange Commission Ordinance 1969.
Legal experts opined that the last three petitions would have the same fate like that of the previous ones.
-With New Age input
