DOS Circular Letter No. 24: Policy Regarding Investment in Equity Shares of Private Infrastructure Companies under DOS Circular no-03/2019 by the Scheduled banks

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Bangladesh Bank
(Central Bank of Bangladesh)
Head Office
Motijheel, Dhaka-1000
Bangladesh
Department of Off-site Supervision
DOS Circular Letter No.-24 Date:
15 Sraban, 1427 Bangabda
30 July, 2020 AD
Managing Director / Chief Executive Officer
All Scheduled Banks operating in Bangladesh.
Dear Sir,
Regarding the policy on investment in equity shares of private sector infrastructure projects and project-related companies by banks.

Reference is drawn to DOS Circular No.-03 issued by Bangladesh Bank on 16 May 2019 on the above subject.

2. In order to create market liquidity, improve the quality of investment, and reduce risks regarding the equity shares taken or already taken by banks in private sector projects such as electricity and energy, tourism, and digital infrastructure, or in project-related companies, excluding projects or project-related companies under government and PPP approved by the Bangladesh Securities and Exchange Commission through mutual funds, venture capital funds, or similar funds under the aforementioned circular, the following policy has been decided to be followed:

(a) (1) An irrevocable agreement must be executed between the investing bank and all concerned parties regarding the listing of the company in the capital market within 01 (one) year from the date of the first subscription before taking such equity shares by any bank; However, if banks have already taken such equity shares, the concerned company must take steps for listing within 06 (six) months of the issuance of this directive. (2) Listing must be conducted through the book-building method, and in determining the share price, banks shall not set a price lower than the average price at which they have invested in the shares of the said company; (3) More than 5% (five percent) of the paid-up capital of the concerned project shall not be listed in the first year.

(b) If there is a convertible bond or similar instrument against such a project or project-related company, and there is no difference in the terms of the said bond, there will be an opportunity to complete the listing at the listing price. In this regard, the proportional part of the convertible loan against the said bond (i.e., the proportional part against the converted shares) can be used by the said project or project-related company for its own needs before the maturity of the remaining bond (if any).

(c) Such a project or project-related company, after listing in the capital market in accordance with clause (a), shall establish a special fund (whether called convertible loan or any other name) to ensure the safety of investment by investor banks during the unlisted period.

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With the prior approval of the concerned company, this fund can be used only for the payment of cash dividends or for paying off debts held with scheduled banks.

3. Under DOS Circular No.-03/2019, if a bank has invested in an unlisted company, the benefit provided in serial No. (2) of DOS Circular No.-03/2019 regarding the specified portion of the bank's investment against the convertible bonds held by the bank against the unlisted company under the said circular shall remain valid even after the conversion of such amount into ordinary shares upon the listing of the said company on the stock exchange.

4. This directive is issued under the powers conferred by Section 45 of the Bank Company Act, 1991 (amended up to 2018).

Yours faithfully,

(Md. Sahidul Islam)
Deputy General Manager
Phone: 9530093