Rights Issue and Preferential Allotment in Bangladesh: BSEC Rules

Legal Framework for Capital Raising

The issuance of further capital in Bangladesh is primarily governed by Section 155 of the Companies Act, 1994, which mandates the right of pre-emption for existing shareholders. For listed entities, the Bangladesh Securities and Exchange Commission (Rights Issue) Rules, 2006 and the Securities and Exchange Commission (Issue of Capital) Rules, 2001 dictate the procedural strictures.

Comparative Statutory Requirements

Feature	Rights Issue	Preferential Allotment
Primary Statute	BSEC (Rights Issue) Rules, 2006	SEC (Issue of Capital) Rules, 2001
Applicability	Existing Shareholders (Pro-rata)	Selected Investors/Strategic Partners
Pricing Mechanism	Fixed Price or Book Building	Net Asset Value or Market Price
Lock-in Period	Generally None (unless specified)	1 to 3 years as per BSEC Notification
Approval Authority	BSEC & Shareholders (EGM)	BSEC & Shareholders (Special Resolution)

The Regulatory Roadmap

Procedural Mandates for Rights Issue

Board Resolution: The Board of Directors must approve the proposal, specifying the ratio and price, subject to shareholder and BSEC approval.
Shareholder Consent: Under Section 155(1) of the Companies Act 1994, a special resolution must be passed in an Extraordinary General Meeting (EGM).
BSEC Application: Submission of the Rights Share Offer Document (ROD) as per Rule 8 of the BSEC (Rights Issue) Rules, 2006.
Credit Rating: Mandatory credit rating for the issue if the offer is at a premium, pursuant to the Credit Rating Companies Rules, 1996.
Record Date: Announcement of a record date to determine eligibility after BSEC approval.

Preferential Allotment (Private Placement)

Preferential allotment to non-shareholders or specific groups requires strict adherence to the Securities and Exchange Commission (Issue of Capital) Rules, 2001. Key requirements include a Valuation Report prepared by a registered Chartered Accountant and ensuring the issue price is not below the face value or the Net Asset Value (NAV) per share.

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Schedule Scoping

Frequently Asked Questions

What is the statutory pre-emption right in Bangladesh?

Under Section 155 of the Companies Act 1994, existing shareholders have the first right to subscribe to new shares in proportion to their existing holding, unless otherwise decided by a special resolution in a general meeting.

Can a company issue rights shares at a premium?

Yes, but as per Rule 3(e) of the BSEC (Rights Issue) Rules 2006, the company must justify the premium through an audited financial statement and a credit rating report if the premium exceeds a certain threshold.

What is the lock-in period for preferential allotment?

According to BSEC Notifications issued under the Securities and Exchange Ordinance 1969, shares issued through preferential allotment/private placement are typically subject to a lock-in period of 1 to 3 years from the date of issuance.

◆ Related Statutory Guides & Practice Insights

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Official Regulatory Authorities, Gazettes & Forms

Governing Primary Statutes: Companies Act 1994, Partnership Act 1932, Local Government (City Corporation) Act 2009

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  <a href="https://www.roc.gov.bd/" target="_blank" rel="noopener noreferrer" style="color:#C5A059; font-weight:600; font-size:14px; text-decoration:underline;">Registrar of Joint Stock Companies & Firms (RJSC) &nearr;</a>
  <p style="color:#94A3B8; font-size:12px; margin:4px 0 0 0; line-height:1.4;">Online Name Clearance, MoA/AoA Registration & Returns Filing</p>
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  <a href="https://bida.gov.bd/" target="_blank" rel="noopener noreferrer" style="color:#C5A059; font-weight:600; font-size:14px; text-decoration:underline;">Bangladesh Investment Development Authority (BIDA) &nearr;</a>
  <p style="color:#94A3B8; font-size:12px; margin:4px 0 0 0; line-height:1.4;">One-Stop Service (OSS), 100% Foreign Equity Approvals & Branch/Liaison Office Permission</p>
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  <a href="https://bdlaws.minlaw.gov.bd/" target="_blank" rel="noopener noreferrer" style="color:#C5A059; font-weight:600; font-size:14px; text-decoration:underline;">Ministry of Law, Justice & Parliamentary Affairs &nearr;</a>
  <p style="color:#94A3B8; font-size:12px; margin:4px 0 0 0; line-height:1.4;">Codified Statutory Laws of Bangladesh</p>
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