The High Court on Thursday rejected five writ petitions that challenged the constitutionality of a securities and exchange law which empowers the market regulators to impose conditions on directors of listed companies.
The bench of Justice Hasan Foez Siddique and Md Jahangir Hossain pronounced the verdict after discharging the rule it had issued on April 4 in response to the petitions, asking the Securities and Exchange Commission to explain why the Section 2CC of the Securities and Exchange Ordinance 1969 should not be declared unconstitutional.
‘All the rules are discharged,’ said Justice Hasan Foez. He said that the court had delivered the operative portion of the verdict for lack of time.
Section 2CC of the SEC Ordinance says, ‘Notwithstanding anything contained in Company Act 1994, or in any other law for the time being in force, or in any contract or any Memorandum and Articles of Association of the any company, any consent or recognition accorded under Section 2A, Section 2C, whether before or after the commencement of this section, shall be subject to such conditions, if any, as the Commission may, from time to time, think fit to impose.’
The directors concerned of National Credit and Commercial Bank Ltd, Southeast Bank Ltd, National Life Insurance Ltd, Mercantile Bank Ltd and Abeeco Industries Ltd filed the five writ petitions challenging the provision contained in Section 2CC after another High Court bench on May 5 had rejected the three writ petitions filed by the directors of National Credit and Commercial Bank Ltd, Popular Life Insurance and Delta Life Insurance, challenging the commission’s authority to issue notifications on the mandatory share holding provision.
On November 22, 2011, the commission exercising its power vested under Section 2CC of the ordinance issued a notification making it compulsory for sponsors
and promoters of listed firms to individually hold at least 2 per cent of the stakes of their own companies.
The commission also made it mandatory for sponsors, directors and promoters of listed firms to jointly hold a 30 per cent of the stakes of their firm.
It also set a six-month deadline for the sponsors or promoters to acquire the minimum amount of shares of their companies. Otherwise, they would be disqualified from holding the office of directors with the expiry of the deadline on May 21, 2012.
Although the capital market gained for a few days after the rejection of the three earlier writ petitions, it again went through volatility after the issuance of the HC rule on April 4 in response to the latest writ petitions as the investors were waiting for the High Court’s verdict.
Senior lawyers Kamal Hossain, Mahmudur Rahman, Rokanuddin Mahmud and Akhter Imman acted for the directors concerned of the five companies while the attorney general, Mahbubey Alam, acted for the commission, Amirul Islam for the Dhaka Stock Exchange, Hassan Ariff for the Chittagong Stock Exchange and Sheikh Fazle Nur Taposh for the investors’ association.