The Bangladesh Securities and Exchange Commission is finalising only the acquisition rules on disclosure basis, putting on hold the merger rules. After a couple of years of assessing the rules, the regulator has now decided to amend existing rules only to settle share acquisitions. A BSEC committee would work with the merger rules later as the issue was sophisticated to address now, officials said.
A company now merges with another company and take over its shares under the Company Act 1994 with the shareholders approving the deal and the court having the final say. The commission has taken a number of steps to make clear rules for merger and acquisition seekers as the country lacks any regulation that specifically applies to public M&A except for the 2002 BSEC Substantial Acquisition of Shares and Takeovers Regulation, which has a very limited scope.
As the Securities and Exchange Commission (Substantial Share Inheritance, Acquisition and Takeover) Rules 2002 has become obsolescent, the regulator took the initiative to formulate fresh rules and formed a panel on May 04, 2016. The regulator on February 15 this year, formed another five-member committee, headed by executive director Forhad Ahmed, to evaluate the drafted merger and acquisition rules before finalising it, a senior BSEC official said. The committee expected to submit its report soon, he said. The committee was preparing the report only for substantial share acquisition rules about how the listed companies must disclose the procedures of taking over another company’s shares as price sensitive information to the public, the official said.
The court would remain the sole authority in allowing or refusing any merger or acquisition proposal made by companies and the companies ought to obey the company act for both the issues, the officials said. Another senior BSEC official said, ‘Right now, the commission has no intention to intervene in the merger and acquisition process. Under the coming amended rules, the BSEC will allow the issuer companies to issue shares based on the court approval as it is now.’ In September 2016, the country’s premier bourse, Dhaka Stock Exchange, faced an embarrassing situation in connection with Summit Purbanchol Power Company Limited’s merger and delisting fiasco. The bourse had issued a letter to the BSEC seeking guidelines on merger and the commission refrained from giving any guideline to the bourse before finalising merger and takeover rules.
The concept of merger and acquisition deals is relatively new in the Bangladesh context but such deals have been common in other parts of the world for a long time. Lack of transparency and weak financial reporting here impacted M&A the most as it makes valuation extremely tough.