DBA proposes share buyback, M&A provisions in Companies Act

The DSE Brokers Association of Bangladesh (DBA) has called for legal provisions allowing listed companies to buy back their own shares and complete mergers and acquisitions (M&A) through a faster regulatory process.

The proposals are aimed at making corporate restructuring and capital management easier while giving the stock market greater flexibility to respond to changing business and market conditions.

The DBA sent a written recommendation, signed by its President Saiful Islam, to Commerce Secretary Md Ataur Rahman Khan, NDC, on Wednesday, seeking inclusion of the provisions in the proposed third amendment to the Companies Act, 1994. A copy was also sent to Bangladesh Securities and Exchange Commission (BSEC) Chairman Masud Khan.

Speaking to Daily Waadaa, Mr Saiful Islam said the absence of a share buyback mechanism was a significant gap in the country's corporate and capital-market framework.

“Listed companies should have a legal option to buy back their own shares, subject to clear conditions and regulatory oversight. This is a widely used capital-management tool in developed markets,” he said.

He said companies with substantial surplus cash could use buybacks to return capital to shareholders or support their share prices during periods of market weakness.

“Suppose a fundamentally strong company's share price falls sharply while the company has sufficient surplus cash. Under a regulated buyback mechanism, the company could purchase its own shares from the market,” he said.

A buyback could also reduce paid-up capital and, in turn, increase earnings per share, potentially benefiting remaining shareholders, he added.

However, Mr Saiful said the proposed reform should not give companies unrestricted authority to conduct buybacks.

“First, the Companies Act needs to recognise share buyback. Then the BSEC should have the authority to formulate detailed rules, monitor implementation and ensure proper governance,” he said.

The DBA has also proposed a major overhaul of the regulatory process for mergers and acquisitions involving listed companies.

According to Mr Saiful, the existing process is too lengthy, with multiple extraordinary general meetings and legal procedures often making corporate combinations take two to three years.

“In today's business environment, a merger should not take two or three years simply because of procedural complications. The process needs to be made much faster,” he said.

The lengthy procedure can also create difficulties for banks and other institutions that need to restructure or consolidate within a reasonable timeframe, he added.

The DBA has therefore recommended giving the BSEC the authority to frame and implement rules for M&A involving listed securities.

“We have proposed a framework under which the process could be completed within around two months, subject to proper scrutiny and safeguards,” Mr Saiful said.

He argued that placing the regulatory authority with the BSEC would allow rules to be updated more quickly in response to developments in the capital market.

“BSEC is the statutory regulator of the capital market and listed companies. It should have the necessary authority to regulate these transactions efficiently while ensuring transparency and protecting investors,” he said.

The DBA believes the proposed reforms would facilitate corporate restructuring, improve capital allocation and increase market activity.

The association has urged the government to incorporate the recommendations into the third amendment to the Companies Act, 1994, as part of its broader initiative to modernise the country's capital market.