BSEC relaxes Z-category norms

The Bangladesh Securities and Exchange Commission (BSEC) has changed the rules required for categorising junk or Z-category companies listed on the stock exchanges.

“No securities listed with the stock exchanges will be placed or adjusted to ‘Z-category’ in the event of a failure to declare a cash dividend for two consecutive years for any regulatory restrictions or compliance purposes,” said the BSEC in an order on Thursday. The securities regulator wrote to the Dhaka Stock Exchange, the Chittagong Stock Exchange and IFIC Bank Limited about the order.

The move comes following a recent application made by IFIC Bank, which declared 5 per cent stock dividend for 2021.

At present, twenty-six Z-category companies are listed on the Dhaka Stock Exchange.

The directive said that the shares of a company will be traded under the Z-category if it fails to distribute a cash dividend or hold an AGM for two years.

A company that has a net operating loss or negative cash flow from operations for two consecutive years will also be transferred into the Z- category.

A listed company will also be transferred into the said category if its negative retained earnings exceed its paid-up capital.

The BSEC would issue a new notification soon instructing the stock exchanges to amend their listing regulations.

According to the existing DSE settlement and transactions rules, a listed company needs to declare at least a 10 per cent dividend for its shareholders to be traded under the ‘A’ category. If the company declares less than a 10 per cent dividend, it is placed in the ‘B’ category.

A company is downgraded to the ‘Z’ category if it fails to declare any dividend or does not hold an annual general meeting regularly or is not in continuous operation for more than six months.