BSEC asks 64 firms to comply with adequate capitalization

Summary:

BSEC has requested plans from 64 companies on how they intend to meet the compulsory minimum paid-up capital of 300mn as per the listing regulation of the Dhaka Stock Exchange and to be saved from being transferred to the SME platform.

Content:

Earlier in September 2021, the commission constituted a committee to examine the overall health of such enterprises and to pursue a way to enhance the financial performances of the low-paid-up companies.

The corporations were instructed to submit their plan reports to the commission within 30 days after receiving the letters. The panel would determine the next probable stages after analyzing their submitted proposals of the companies.

13 of these companies still have a paid-up capital of less than Tk5 crore, 17 have a paid-up capital of less than Tk10 crore, 20 have a paid-up capital of less than Tk20 crore, and the rest have a paid-up capital of less than Tk30 crore on the capital market.

In the first quarter of the current fiscal year, 20 companies lost money. And seven companies with paid-up capital of less than Tk30 crore remain on the list.

There are multiple benefits of increasing the paid-up capital of the company. Firstly, the company can experience growth. If someone wants to expand their firm, they will need to invest a significant quantity of money.

Additionally, more cash will result in more invention-related ideas being pursued. As a result, raising the paid-up capital allows the company to become more inventive.

Because technology is developing so quickly, the company may readily provide market competition by expanding capital. As a result, more capital will be necessary to compete and remain in the market.

Moreover, as the environment changes, so does the market. As a result, in order to provide greater consumer satisfaction, the low-paid-up scripts are notoriously volatile, and some investors may purposefully pursue this ill-motive. In the meantime, the price of most low-cap stocks has risen dramatically over the last week.

However, there are several ways one can increase the paid-up capital. Following are the methods through which a company can increase it’s paid-up share capital:

  • Private placement
  • Right issue
  • Preferential basis
  • Sweat equity shares
  • Conversions of loans or debentures into shares
  • Issue of bonus shares

But issuing stock dividends is not a preference for complying with the requirement. It is conceivable since it will increase the number of shares in the company. The commission wants the corporations to raise capital through new funding, according to BSEC commissioner Dr. Sheikh Shamsuddin Ahmed.

Pic & Article Source: The Business Standard

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