BSEC to amend rules to deal with M&A

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The Bangladesh Securities and Exchange Commission has moved to amend the Securities and Exchange Commission (Substantial Share Inheritance, Acquisition and take-over) Rules 2002 by renaming it as merger and acquisition rules.
The amendment process will be finalised by this year, a BSEC senior official told New Age recently.
The capital market regulator took the move as it found that the existing rules are not appropriate for merger-seekers to comply with on different grounds and these need to be upgraded.
Not having any rules specifically for the merger and acquisition is another reason for the amendment move.
A committee has been formed for drafting rules in this regard, the BSEC official said adding that the committee would study merger and acquisition rules being practiced in the developed markets and make suggestions to the commission.
The committee will also suggest amendments, if required, in the related act.
Then the commission will suggest the government what amendments should be made in the existing rules or act, the official said.
Currently, companies follow Companies Act, 1994 for the purpose of merger and acquisition.
The Securities and Exchange Board of India has recently enacted separate rules for this purpose.
The BSEC official said, ‘In essence, there is no scope for the commission to intervene in the merger and acquisition process under the existing rules. Court is the sole authority in allowing or regretting any merger or acquisition proposal made by companies.’
The BSEC only allows the issuer companies to issue shares based on the court approval, he said.
Although Securities and Exchange Commission (Substantial Share Inheritance, Acquisition and take-over) Rules 2002 mentions some procedural requirement regarding merger and acquisition, most of them are not fit for compliance.
‘That’s why commission gives waver to the issuer companies,’ the official said.
In 2005, the scope for merger and acquisition was first introduced when Beximco Infusions merged with Beximco Pharma.
In 2006, Beximco Textiles, Beximco Denims and Beximco Knitting merged with Padma Textile Mills.
Later, Padma Textile Mills was renamed as Bextex which was later merged with Bangladesh Export Import Company Limited.
In 2009, Bangladesh Online Limited merged with BEXIMCO.
Besides the entities, Dhaka-Shanghai Ceramics, Shinepukur Ceramics, Shinepukur Holdings and Beximco Fisheries in different times merged with BEXIMCO.
In 2014, Keya Cosmetics, another listed company, initiated the process of merger with three of its associate companies — Keya Knit Composite Limited, Keya Cotton Mills Limited and Keya Spinning Mills Limited.
In all the cases, the companies declared that the merger would enhance their profitability.
In most of the cases, the profit of the entities declined or failed to satisfy investors.
In most of the cases, court gave its order based on the proposed merger scheme submitted by the companies.
Source: New Age

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