situation of the shareholders in bangladesh

7/26/2019 Situation of the Shareholders in Bangladesh

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The Protection of Shareholders in

Bangladesh:

The role of Bangladesh Security

Exchange Commission & the Supreme

Court

Submitted By

SHA!"# SHA$"#A E!A

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Section: '+

Submitted To

,%- A.ABA/"

C01SE "#ST1CT0

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%ate of Submission: *(3(*3+('4


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Table of Contents

Introduction...............................................................................................................2

Rights of Shareholders in Bangladesh.......................................................................3

Problems of Shareholders in Bangladesh..................................................................4

Protection of Shareholders: Role of SEC and Supreme Court..................................

Conclusion.................................................................................................................!


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Introduction

"he Bangladesh Securities and Exchange Commission 5SEC6 is the regulator of the

capital mar#et ofBangladesh$ comprising %ha#a Stoc# E&changeand Chittagong Stoc#

E&change."he Commission is a statutor' bod' and attached to the (inistr' of )inance. "he

missions of SEC are to protect the interests of securities in*estors$ in*ent and maintain fair$

transparent and efficient securities mar#ets and ensure proper issuance of securities and

according to the la+s.

"he Supreme Court of Bangladesh is the highest court of la+ in Bangladesh. It is

composed of the ,igh Court %i*ision and the -ppellate di*ision$ and +as created b' Part I

Chapter I of theConstitution of Bangladeshadopted in /012. "his is also the office of the Chief

ustice$ -ppellate %i*isionustices$ and,igh Court %i*isionusticesof Bangladesh. Some

maor functions of Supreme court of Bangladesh are to ,ear and adudicate original cases$

appeals$ re*ision cases and cases under other urisdictions$ pro*ide proper directions to an'

person or authorit' for the enforcement of the fundamental rights of the people of the republic$

super*ise and control subordinate courts and tribunals as a Constitutional dut' and so on.

Both the SEC and Supreme Court pla' a *er' important role in protecting the

shareholders of Bangladesh. "he shareholders of Bangladesh often face difficulties +hile

opening up business or in*esting in different stoc#s. So$ there are SEC and Supreme Court to

protect them +hile opening up ne+ businesses$ going through legal procedures and in*esting in

stoc#s in %SE or CSE. In the later part of this report this +ill be discussed that ho+ SEC and

Bangladesh Supreme Court ha*e been protecting shareholdersin*estors since the' +ere

established.
http://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Dhaka_Stock_Exchangehttp://en.wikipedia.org/wiki/Chittagong_Stock_Exchangehttp://en.wikipedia.org/wiki/Chittagong_Stock_Exchangehttp://en.wikipedia.org/wiki/Chittagong_Stock_Exchangehttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Constitution_of_Bangladeshhttp://en.wikipedia.org/wiki/Constitution_of_Bangladeshhttp://en.wikipedia.org/wiki/Chief_Justice_of_Bangladeshhttp://en.wikipedia.org/wiki/Chief_Justice_of_Bangladeshhttp://en.wikipedia.org/wiki/Appellate_courthttp://en.wikipedia.org/wiki/Appellate_courthttp://en.wikipedia.org/wiki/High_Courthttp://en.wikipedia.org/wiki/High_Courthttp://en.wikipedia.org/wiki/High_Courthttp://en.wikipedia.org/wiki/Justicehttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Dhaka_Stock_Exchangehttp://en.wikipedia.org/wiki/Chittagong_Stock_Exchangehttp://en.wikipedia.org/wiki/Chittagong_Stock_Exchangehttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Constitution_of_Bangladeshhttp://en.wikipedia.org/wiki/Chief_Justice_of_Bangladeshhttp://en.wikipedia.org/wiki/Chief_Justice_of_Bangladeshhttp://en.wikipedia.org/wiki/Appellate_courthttp://en.wikipedia.org/wiki/High_Courthttp://en.wikipedia.org/wiki/Justice


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Rights of Shareholders inBangladesh

Before getting into the discussion about the +a's ho+ SEC and Supreme Court protect the

shareholders$ +e need to #no+ the rights of them. -ccording to Companies -ct /004$ the

shareholders ha*e rights gi*en belo+:

Right to re5uest a cop' of the (- and a cop' of -- b' pa'ing fees as ma' be fi&ed b'

the compan' and compan' shall +ithin fourteen da's from the date of re5uest send the

cop' to the member.Right to get share certificates.

Rights to get the shareholders name recorded in the register.Right to inspect share register.Right to inspect instrument creating mortgages and compan'6s register of mortgages.

Rights to ha*e financial statements and rights to inspect audit report.

Right to get notice of -7( and to participate in the -7(s.Right to select the board of directors and remo*al of the board of directors.

Right to select auditor.

Right to re5uisition E7( b' holders of not less than1

10 th of the issued share

capital.

Right to get the cop' of minutes of -7( and board meetings upon pa'ment.Rights to ha*e the gist of the contract or terms and conditions of the contract entered into

b' the compan'.

Rights to ha*e further shares if the compan' decides to raise capital.Rights to participate in maor decisions i.e. change of obect clause$ increase of

authori8ed capital$ reduction of capital$ internal or e&ternal construction etc.

Right to appl' to the 7o*t. to appoint inspectors.Right to appoint inspectors.

Rights of minorit' shareholders to bring to the notice of the court if affairs of the

compan' are being conducted in inappropriate manners.

Rights to ha*e residual assets in the e*ent of li5uidation of the compan'.Right to lodge case against the auditors$ directors or officers of the compan' in the e*ent

of their breach of the fiduciar' responsibilit'.Right to +ind up compan' *oluntaril' meeting certain conditions.

Right to attend in the final meeting as soon as the affairs of the compan' are full' +ound

up.


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Right of the shareholders of the limited companies not to contribute an' amount in the

e*ent of +inding up e&ceeding the amount.

Problems of Shareholders inBangladesh

Bangladesh is one of the +orld6s least de*eloped economies. - lo+ le*el of corporate

go*ernance is an obstacle to the economic de*elopment of the countr'. Corporate go*ernance is

the s'stem of rules$ practices and processes b' +hich a compan' is directed and

controlled. ,o+e*er there is an enormous possibilit' of impro*ement +hich is an important

reason to implement corporate go*ernance in business practice as this +ill encourage in*estors9

confidence b' impro*ing a+areness and consistenc' of business rules and regulations.

Shareholders often face problems regarding the corporate go*ernance of their compan'.

Problems faced b' the maorit' shareholders:

(odels of corporate go*ernance differ sometimes on the basis of the geographical$

cultural$ demographic$ political and legal code and practices of nations.

"he problems arising from the separation of o+nership from control also need to be

sol*ed. ne important mechanism is *ia the board of directors.

If the promoterssponsors$ directors and top managers ha*e little sta#e in the companies$

the' are more prone to ta#ing e&cessi*e unustified ris#. If this e&cessi*e ris# or gamble

does not pa' off$ it lea*es the compan' *ulnerable to financial difficult' and ban#ruptc'

and in such e*ent the ultimate losses are borne b' in*estorsshareholders.

;ea*ing the institutional in*estors aside$ the in*estors that +e see on " and ne+spapers$

rioting on the streets in front of the %SE as a result of a price fall$ ha*e little #no+ledge

about the corporations that the' are in*esting their precious sa*ings into.

Problems faced b' the minorit' shareholders:

(o*ing assets of the business a+a' from the business$


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Starting another business and ta#ing a+a' the customers of the business$

"he rein*estment of profits for depri*ing the minorit' shareholders$

Pa'ing high salaries and allo+ance to the maorit' shareholders$"erminating the emplo'ment of the minorit' shareholders and

Issuing more stoc# to dilute the minorit' shareholder6s interest.

Protection of Shareholders: Role ofSEC and Supreme Court

"he concept of in*estor protection encompasses the notion that a compan' must ha*e its

accounts audited and place them at least once before the annual general meeting of

shareholders .

"he -ct further pro*ides that the compan' shall furnish the information that the balance

sheet and the audited accounts of the compan' contain."he la+ re5uires that a public compan' must publish a prospectus at the time of in*iting

subscriptions for shares or debentures in the compan'$ and this document contains

particulars of those in management$ the proect for +hich the mone' is re5uired$ and the

general financial bac#ground of the compan'

If the compan' is listed in the stoc# e&change$ the Securit' E&change Commission must

appro*e the prospectus."he act pro*ides for in*estigation b' the registrar of oint stoc# companies on its o+n or

on complaint b' shareholders holding one?tenth of the issued shares.- shareholder ma' also petition the Court if she can sho+ that it is ust and e5uitable to

+ind up a compan'.- shareholder o+ning /@A or less of bu'er6s shares can inspect transaction documents

before filing suit.

- shareholder o+ning /@A or less of bu'er6s shares can re5uest an inspector to

in*estigate the transaction.

Shareholders can sue directl' or deri*ati*el' for the damage that the Bu'er?Seller

transaction causes to the compan'.- court can *oid the transaction upon a successful claim b' a shareholder plaintiff

possibl' +hen the transaction is oppressi*e or preudicial to minorit' shareholders.


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Conclusion

)rom the discussion abo*e +e can clearl' see the roles of SEC and Supreme Court$ the problems

of shareholders in Bangladesh$ the rights the' deser*e and the +a' the' are protected b' the SEC

and Supreme Court. Still there are problems and difficulties that shareholders go through and +e

loo# for+ard to get solutions from SEC and Supreme Court in near future. "he minorit' and

maorit' shareholders +ill be ha*ing benefits according to +hat the' deser*e.

situation of the shareholders in bangladesh

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