The Bangladesh Securities and Exchange Commission (BSEC) has asked 61 directors of 22 listed companies to ensure a minimum 2% shares in their own companies within 45 days to continue their directorship.

The commission sent separate letters to all the non-compliant directors on Thursday, asking them to comply with the rules of holding a minimum 2% stake.

Independent directors are not law bound to hold the minimum share.

The BSEC came up with the regulation of 2% share after the stock market crash in 2010. The move was aimed at making the directors responsible and loyal to small investors, as it was seen that many directors had sold off their shares right before the debacle.

The BSEC made it mandatory for all sponsor-directors to hold the 2% minimum shares of company’s paid up capital by issuing a directive on November 22, 2011.

Recently, a meeting of the BSEC with different stakeholders, including merchant banks and Dhaka Stock Exchange, took a number of critical decisions to revive the ailing stock market.

It has also decided to direct its enforcement department to take legal actions against directors of listed companies who are not holding at least 2% share of the company’s paid-up capital they now represent.

Investors of the stock market have long been alleging that many sponsors and directors have sold off their shares, but still are holding the controlling authority on the companies.

According to the rules, if any director fails to comply with the 2% shareholding rules, his/her position would be automatically vacated.

Five directors with no shares in Bangladesh National Insurance Company were served notices for holding the minimum shares by the time, according to the securities regulator.

Six directors each of Continental Insurance and Purabi General Insurance, and five each of Prime Islami Life Insurance and Mercantile Insurance Company were also been given notices to comply with the directive.

Other directors belonging to insurance companies are: Asia Insurance, Bangladesh General Insurance, Eastern Insurance, Karnaphuli Insurance, Meghna Life Insurance, Progresive Life Insurance, Purabi General Insurance, Standard Insurance and Paramount Insurance Limited.

Besides, directors of Wata Chemical, Fu-Wang Ceramic , United Airway, Kay & Que (Bangladesh), Intech Limited, Imam Button and Dulamia Cotton and Exim Bank Limited were also asked to comply with the shareholding rules.

Despite repeated warnings from the regulator, many directors continue their position without complying with the rule, raising questions about the legitimacy of their positions.

Former BSEC Chairman and economist AB Mirza Azizul Islam has said: “Companies violating rules are not practicing corporate governance. So, the BSEC should take measures to ensure that directors of all listed companies individually hold a minimum 2% share.”

“If listed companies do not follow the rule, small investors may lose their interest in the companies,” he warns.Report:Dhakatribune