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Securities Laws Violation: KPCL directors barred from selling shares

  • Published at 10:24 pm November 27th, 2018
File photo of Bangladesh Securities and Exchange Commission Office in Dhaka Syed Zakir Hossain/Dhaka Tribune

The regulator also penalized Central Pharma directors

The Bangladesh Securities and Exchange Commission (BSEC) banned the sale and transfer of shares of Khulna Power Company Limited (KPCL) on Tuesday.

The BSEC blamed the sponsors and directors of the company for selling their shares by hiding company’s price sensitive information. The commission also formed an investigation committee to inquire into the matter.

The stock market regulator BSEC made the call at a meeting held in Dhaka. BSEC Chairman M Khairul Hossain presided over the meeting, a BSEC official statement said.

BSEC also fined the managing director and directors of KPCL except independent directors Tk4 lakh each for violating stock exchange securities rules.

Contract titled “Independent Power Plant (IPP) of KPCL 110MW Barge Mounted Power Plant” between KPCL and Bangladesh Power Development Board (BPDB) had expired on October 11, 2018, and BPDB, on the same day, through a letter requested KPCL to shut the power plant. 

But, the sponsors and directors of the company continued selling the shares hiding the information of closure.

Therefore, all the sponsor-directors including 10% shareholders were barred from selling and transfering the shares of KPCL until further announcement. 

According to the Dhaka Stock Exchange (DSE) disseminated news, the KPCL said that the contract of the power plant will expire on 12th October 2018 and the plant will resume its activities in due course; accordingly we will be discussing the issue with BPDB. 

It also said that the tenure of 1st amended IPP of KPCL would expire on 12th October 2018 which was clearly mentioned in the audited financial statements, 2016-2017 in the company’s profile.

On 11 September, the Dhaka Stock Exchange (DSE) withdrew the suspension order of trading of shares of KPCL. On November 7, DSE suspended the trading of the shares again.

While Khulna Power’s corporate entrepreneur Summit Corporation announced the sale of 18,064,235 of its shares, given that November 22 is slated as the date of distribution of its dividends, selling of shares before the date would mean that the dividends would not be distributed. 

Following the mass sale the price of Khulna Power Company Limited shares fell drastically. 

The power generation company KPCL, which was listed on the Dhaka bourse in 2010, recommended 30% cash and 10% stock dividend for the year ended on June 30, 2018. The company disbursed 55% cash dividend in 2017.

Dhaka Stock Exchange investigation found that the auditor of KPCL though provided positive information for the financial year ending June 30, 2017,KPCL authorities gave information in the negative to the BSEC, DSE and investors, breaching securities rules.

Auditor finds fault on Central Pharma

The auditor mentioned that the KPCL did not keep provision against bad loans and interests for short term loans, and did not separate long term loans’ current portion and long term portion. It also did not adjust advanced tax and due tax according to the financial statements.

Central Pharma Directors barred from

The commission also announced that the shareholder directors of Central Pharma will not avail any dividends, gratuity and other benefits until the violations are fixed.

The regulator also decided to punish Indicate Securities and Consultant Limited as the brokerage house failed to provide annual financial reports in due time ending on June 30, 2017.

The directors of the company have alsobeen barred from availing dividends, gratuity and money earned from the sales proceeds of the shares to a Chinese consortium.

The company cannot withdraw or distribute funds from reserve funds and retain earnings other than administrative expenses.

The company is the first independent power producer in the country. It was incorporated in October 1997 as a private limited company and converted into a public limited one in July 2009, according to the company's website.

BSEC at the meeting also fined the managing director and all directors except independent directors of Central Pharmaceuticals Limited by Tk4 lakh each for violating securities rules.

Dhaka Stock Exchange investigation found that the auditor of KPCL had provided positive opinion for the company’s financial year ending June 30, 2017, but the company gave negative audit opinion to the BSEC, DSE and investors, breaching securities rules.

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