1. Webinar on
Regulatory Framework of IPO, Right Issue, Private
Placement and Alternative Investment.
Date: October 15, 2015

2. Presented By:
Suman Kundu
Senior Manager
Alliance Financial Services Limited
(Merchant Bank & Corporate Advisor)

3. Capital Market

4. Types of Company
Company means a legal entity, allowed by legislation, which permits a group of
people, as shareholders, to apply to the government for an independent
organization to be created, which can then focus on pursuing set objectives, and
empowered with legal rights which are usually only reserved for individuals, such
as to sue and be sued, own property, hire employees or loan and borrow money.
A company limited by shares may be
1.A Private Limited Company or
2.A Public Limited Company
- Non-Listed Company
- Listed Company

5. Capital Market Laws (1)
Bangladesh Securities and Exchange Commission (BSEC) was established on
8th June, 1993 as the regulator of the country’s capital market. BSEC enforced
different law for development of capital market. All the private limited and public
limited companies required to comply with these laws.
A. For Private Limited and Public Limited (Non-listed) Companies:
 Issue of Capital Rules, 2001
 Notifications issued under the Ordinance
 Private Placement of Debt Securities Rules, 2012
 Alternative Investment Rules, 2015
 Notification, Revaluation of Assets to Issue of Capital

6. Capital Market Laws (2)
B. For Public Limited (listed) Companies:
 Credit Rating Companies Rules, 1996
 Issue of Capital Rules, 2001
 Public Issue Rules, 2006
 Rights Issue Rules, 2006
 Notifications issued under the Ordinance
 Private Placement of Debt Securities Rules, 2012
 Alternative Investment Rules, 2015
 Notification, Revaluation of Assets to Issue of Capital
 Revised Corporate Governance Guidelines

7. Issue of Capital

8. When need permission from BSEC for capital Raising?
For Non-Listed Co.
I.A Public limited company whose paid up capital exceeds
Tk. 1 crore
II.A Private Limited Company whose paid up capital
exceeds Tk. 10 crore
(Reference:
1.BSEC Oder dated 28 March 2001
2.BSEC Oder dated 19 August 2004)

9. When need permission from BSEC for capital Raising?
For Listed Co.
I. Right Issue under Securities and Exchange Commission
(Rights Issue) Rules, 2006
II. Repeat Public Offering (RPO) under Securities and
Exchange Commission (Public Issue) Rules, 2006
III. Merger & Acquisition under Securities and Exchange
Commission (Issue of Capital) Rules, 2001
Note:
I. Capital raising against Convertible Securities: generally do
not require to take further permission
II. For Bonus Issue does not require to take permission from
BSEC
(Reference:
1. BSEC Oder dated 17 February, 2002)

10. When Require to Appoint Merchant Bank for capital Raising?
For Non-Listed Co.
In case of Capital Raising from other than existing
shareholders along with following conditions:
I.A Public limited company whose paid up capital exceeds
Tk. 1 crore
II.A Private Limited Company whose paid up capital exceeds
Tk. 10 crore
(Reference:
1.BSEC Notification dated 02 October 2011)

11. Requirement for Capital Raising
Company should convert itself into public limited when
paid up capital exceeds Tk. 40 crore
No company shall approach to or take share money
deposit from any person other than existing shareholder for
subscribing shares of the company before obtaining consent
from BSEC
Fund raised against allotment of shares or in the form of
share money deposit shall be deposited in a separate bank
account. All amount more than Tk. 5 lac shall be deposited
through Account Payee cheque or payment order.

12. Distribution Restriction
In case of Capital Raising from other than existing
shareholders:
Additional capital may be raised from not more than one
hundred (100) investors including institutions.
(Reference:
1.BSEC Notification dated 02 October 2011)

13. Public Issue

14. Initial Public Offering (IPO)
1. It is a type of public offering where shares of a company
are sold to the general public, on a securities exchange,
for the first time.
2. As per BSEC rules, It means first offering of security by
an issuer to the general public.

15. Why Choose IPO?
1. The Company which is considerable growth potential.
2. Required fund for expansion or introduce new unit or
new product line.
3. Trading in the open markets means liquidity. So
Entrepreneurs get opportunity to liquid their investment
at any time.
4. Alternative source for traditional Bank Borrowing

16. Advantages of IPO
A. Branding of the Organization
B. Tax Advantages
C. Exit Option Open for Sponsor
D. Easy Excess to cheap fund from Foreign Institution
E. Increase Capital Base
F. Business Promotion
G. Transparent in Financials & Corporate Governance
H. Debt option is comparatively wider than non listed
company
I. Option to raise additional fund after listing through right
issue or RPO

17. Methods of IPO Offering

18. Eligibility for IPO- Fixed price Method
1. Should be Public limited company.
2. Minimum paid-up capital (existing + proposed) requirement for public
issue (i.e. IPO) shall be Tk. 30 (thirty) crore.
3. Minimum size of IPO shall be Tk. 12 (twenty) Crore or 10% of total
capital (Proposed + IPO), whichever is higher.
4. Sponsor/promoter group should maintain a minimum post-issue
shareholding of Thirty percent (30%)
5. Each Director should hold at least 2% of Share Capital except
Independent Director

19. Eligibility for IPO- Direct Listing Method
 Applicable only for fully owned by government organization (Notification
14 January, 2010) and company interested to listed in Normal Market
from OTC market
 Shall have minimum paid up capital of Tk. 100 (one hundred) million;
 Shall have no accumulated loss;
 Shall be in commercial operation for at least immediate last five years;
 Shall have profit in three years out of the immediate last five completed
accounting/financial years with steady growth pattern;
 Is regular in holding annual general meeting (AGM).
 Sponsor/promoter group should maintain a minimum post-issue shareholding
of Thirty percent (30%)
 Each Director should hold at least 2% of Share Capital except Independent
Director.

20. Eligibility for IPO- Book Building Method
1. Must have at least Tk. 30 crore net-worth.
2. Shall offer at least 10% shares of paid up capital (including intended offer) or
Tk. 30 crore at face value, whichever is higher;
3. Shall be in commercial operation for at least immediate last three years (One
year for Thrust sector .i.e. power and Gas Infrastructure companies);
4. Shall have profit in two years out of the immediate last 3 completed financial
year;
5. Shall have no accumulated loss at the time of application;
6. Shall be regular in holding annual general meeting;
7. Financial Statements shall be audited by the Foreign Affiliated Audit Firm
8. Sponsor/promoter group should maintain a minimum post-issue shareholding
of Thirty percent (30%)
9. Each Director should hold at least 2% of Share Capital except Independent
Director.

21. Pre IPO Works
 Structuring Financial Statements as per BAS, BFRS & Company Act,
1994
 Audited Financial Statement not older than 120 days
 Engage Lead Banker, Underwriter, Stock Brokers & Merchant Banker
 Prepare Draft Prospectus as per BSEC (Public Issue) Rules, 2006 and
relevant amendments
 Prepare IPO Application and submit to BSEC, DSE & CSE
Additional work Under Book Building Method:
 Prepare Information Memorandum and arrange road show for EII to
received quotation (received at least from 20 EIIs, minimum 3 from
each category out of six category of EII)
 Complete Draft prospectus mentioning Indicative price

22. Pre IPO Works
 If the issue price of the ordinary share is higher than the par value
thereof, justification of the premium should be disclosed.
Recently Used:
A. Valuation based on Net Asset Value
B. Valuation based on Historical Earning Based Value Per Share
Note:
1. Under Fixed Price Method-no public offering shall not exceed
the amount of premium charged on shares (except bonus share)
within immediately preceding one year
2. Offering price under book building method determined based on
Indicative price received from Eligible Institutional Investors (EII)

23. Post IPO
 Comply BSEC procedure as advised in the consent letter
 Appoint Post Issue Manger to carry out post IPO activities .i.e. NRB
application received, data processing, arrange for lottery and arrange
for refund warrant and allotment letter.
 Apply to DSE and CSE for Listing
 Received Consent letter for Trading from DSE & CSE
Book Building Method
 Arrange for online bidding
 Apply again for final consent to BSEC after incorporating Cut Off price
 Getting Consent Letter

24. Lock-in Period
 Three years Lock in applicable- for all Directors, Sponsors and
those who hold 5% or more
 Three years Lock in applicable- for shareholder, who received
shares through transfer of shares from Directors, Sponsors within
preceding 12 months of submitting application for IPO
 One year Lock in applicable- other than above, who have subscribed
the shares of the company within immediately preceding two years of
according consent.
Lock in applicable from the date of issuance of prospectus or commercial
operation, whichever comes later.
Under book building method 4 (four) months lock-in applicable for the EII,
starting from the first trading day.

25. Post IPO Activities
 A compliance report on Corporate Governance shall be submitted to
the commission before 7 (seven) working days of the IPO subscription
opening
 The company shall furnish status repot on utilization of IPO fund
audited by foreign affiliated auditors and authenticated by the Board of
Directors to the Commission and stock exchanges within 15 days of
the closing of each month until such fund is fully utilized

26. IPO Process – at a Glance

27. Quick Poll

28. Right Issue

29. Why Choose Rights Offer?
1. Company which has considerable growth potential
2. Required fund for expansion or introduce new unit or new product
line
3. Alternative source for traditional Bank Borrowing
4. Sponsor & Director shareholders get opportunity to maintain their
existing control of the business
5. Rights issues are a relatively cheap way of raising capital for a
quoted company

30. Disadvantages of Rights Offer
A. Company’s earnings per share will decrease as earnings
allocated to each ordinary share an investor has invested in will
be diluted
B. company faces much more intense scrutiny and regulations from
the BSEC, DSE,CSE and shareholders

31. Eligibility for Rights Offer
1. Such rights issue and price thereof have been approved by the
shareholders in a general meeting;
2. Proceed of previous IPO, RPO & rights issue has been utilized
fully;
3. AGM has been held regularly;
4. Financial statements of the company is prepared as per BFRS &
BAS
5. Issuer or any of its directors is not a bank defaulter;

32. Eligibility for Rights Offer (2)
6. Profitability record in the immediate preceding year;
7. Full compliance of corporate governance guidelines
8. Sponsor/promoter and Directors group should maintain a minimum
post-issue shareholding of Thirty percent (30%)
9. Each Director should hold at least 2% of Share Capital except
Independent Director.
(Reference:
1. Rights Issue Rules, 20 February, 2006
2. BSEC Notification dated 02 November, 2011
3. BSEC Notification dated 22 November, 2011
4. BSEC Notification dated 18 August, 2013)

33. Additional Conditions for Premium
1. Issuer has been credit rated by a credit rating company, if the offer
is at a premium
2. No issuer of a listed security shall price its rights share above par
value, if it has not been in commercial operation for immediate past
three years having a track record of profitability.
(Reference:
1. Rights Issue Rules, 20 February, 2006
2. BSEC Notification dated 02 November, 2011)

34. Other Additional Conditions
1. Number of rights share proposed shall not exceed five for each
existing share held in the company (i.e. 5R:1).
2. Rights issue has been fully underwritten on a firm commitment
basis by the underwriter (Merchant Banks are only eligible for
underwriting of Rights Issue)

35. Private Placement of Debt Securities

36. Applicable of This Law
 This law shall be applicable for the issuance of debt
securities by any issuer though private placement.
 Issuer shall not offer debt securities and publish an IM
unless it obtains consent of Commission

37. Definitions
Debt Securities or Debt Instruments: means securities those evidence
the indebtedness of the issuer to the eligible investors in the form of bond or
debt or any other instrument of indebtedness, whether secured or not.
Secured Debt Instruments: means debt securities, in which the issuer
owes the holders an indebtedness and which is secured by first claims over
all present and future assets of the issuer
Unsecured Debt Instruments: means debt securities, in which the issuer
owes the holders an indebtedness and which is secured by claims over all
present and future assets of the issuer subsequent to all secured
lenders/eligible investors.

38. Eligible Investor
Eligible Investors:
a)Banks
b)Insurance companies
c)Financial institutions
d)Mutual funds
e)Provident funds
f)Pension funds
g)Corporates
h)Primary dealers
i)Non-resident Bangladeshis
j)Individuals

39. Eligibility for Issuance of Debt Securities
Issuer should have good track record of profitability and liquidity or its
forecasted financial position indicates a significant profitability, liquidity
and ability to pay-back with reasonable basis of making such forecasts.
Issue should be rated by a credit rating company and its periodical
surveillance rating shall be done by the said rating company up to the full
and final redemption or conversion of the debt securities.
Issuer should have a valid enforceable interest over its assets and the
right to create charges thereon in course of issuance of the debt
instruments.
Issuer should obtain necessary permissions or consents from its primary
regulator in order to issue of debt securities, if required.

40. Eligibility for Issuance of Debt Securities
Issuer should appoint a trustee for the issue.
Financial Statements of the issuer is prepared as per Bangladesh
Accounting Standards (BAS) as applicable in Bangladesh
Issue has been approved by the Board of Directors or governing body of
the issuer and in case the issuer is a listed company, by the shareholders
in a general meeting.
In case the issuer is a listed company, the information concerning the
issue is disseminated as price sensitive information immediately upon
Board decision as well as upon approval at the general meeting
Trustee to the issue, if applicable, has examined all the documents
including the legal and title documents and has provided a due diligence
certificate as per Schedule ‘D’.

41. Application Procedure
Application shall submit within 120 days of the end of the period of
accounting period

42. Approval Time Limit
Commission shall accord consent in writing to the issue of debt securities
within 07 (seven) working days of receipt of the application with all
required documents.
If Commission finds that the application does not fulfill all the
requirements, it may, within 15 (fifteen) days of receipt of the application,
direct the applicant to fulfill the requirements within such time as the
Commission may determine, and on fulfillment of such requirements the
Commission shall accord the consent as prayed for, within 07 (seven)
working days of such fulfillment.
If the applicant has failed to fulfill such requirements, Commission may
reject the application, stating the reasons thereof.
Issuer may apply to the Commission for review of its decision within 30
(thirty) days from the date of such rejection, and the decision of the
Commission thereon shall be final.

43. Consent Fee & Validity
Pay consent fee at the rate of 0.10% on the total face value of securities to
be issued through a bank draft or payment order issued in favour of the
Securities and Exchange Commission within 15 (fifteen) days of issuance
of the letter of intent.
1 (one) year from the date of consent or for such a period as determined
by the Commission in the consent letter.

44. Conditions After Consent
Before Issuance Of The Debt Securities Issuer Required To Fulfill:
Issuer shall execute the deed of trust as approved by the Commission in
favor of the trustee and register the same under the Registration Act, 1908
(XVI of 1908) and shall submit a copy of the registered trust deed to
Commission
Issuer shall create charges over the assets only for issuance of secured
bond, through execution of Charge Document(s) in favor of the trustee
Issuer shall execute guarantee(s) in favor of the trustee through
observation of required legal procedures;
Trustee shall submit a report to the Commission to the effect that all
charges and/or guarantee(s) as per the deed of trust, Subscription
Agreements and IM have been executed properly;
Issuer of a listed company shall place the IM and the Deed of Trust in
electronic form on the websites of the issuer and the trustee up to closing
of subscription.
Issuer shall submit a status report to the Commission within 30 days of
issue of the securities or expiry of consent letter, whichever comes earlier.

45. Trustee
Trustee shall be registered by the commission under these rules and not
be a person
The Trustee shall apply for registration to the Commission as per
Schedule ‘E’ along with required information and documents and
application fee of Tk. 5,000 only

46. Alternative Investment

47. Alternative Investment Fund
“Alternative Investment Fund” means any fund established or
constituted in Bangladesh in the form of a trust which,
i.is a “private equity fund” or a “venture capital fund” or an “impact fund”
or any other type of fund as declared by the Commission as alternative
investment fund from time to time;
ii.is a privately pooled investment vehicle which collects funds from
eligible investors
iii.is a closed end fund with specific tenure;
iv.collect subscription by way of private placement only and does not
offer its units for public subscription;

48. Types of Alternative Investment Fund
Private Equity Fund: means an alternative investment fund which
invests primarily in equity or equity linked instruments of potentially high
growth non-listed portfolio companies with minimum 02 (two) years’
operational history or to conduct buyouts of listed companies according
to the stated objective of the fund.
Venture Capital Fund: means an alternative investment fund which
invests primarily in non-listed equity and equity linked securities of start-
ups with less than 02 (two) years’ operational history or green field
companies or emerging early-stage undertakings mainly involved in new
products, services, technologies or intellectual property rights based
activities or new business models.
Impact Fund: means an alternative investment fund which invests in
equity or equity linked instruments of companies, organizations, and
funds with the intention to generate a measurable, beneficial social or
environmental impact in addition to financial returns.

49. Registration of Fund Manger
 Fund manager of any alternative investment fund shall be
registered by the Commission
 No person shall act as fund manager of any alternative investment
fund without such registration
 Existing fund management company, which is not registered with
the Commission, shall submit application for registration under
these Rules within 01 year from commencement of these Rules
 A foreign entity or foreign fund management company intends to
act as fund manager in Bangladesh, it shall form a fund
management company incorporated in Bangladesh and such
company shall thereafter get registration under these Rules.

50. Registration of Alternative Investment
Fund
 No alternative investment fund shall be formed or operate unless it
has obtained registration from the Commission:
 A fund already in operation on the date of commencement of these
Rules and falling within the definition of alternative investment fund
which is not registered with the Commission, may continue to
operate, without having registration under these Rules, to complete
its agreed tenure but shall not raise any fresh money other than
realization of commitments already received
 If a foreign fund intends to operate as an alternative investment
fund in Bangladesh, it shall get registration or invest through a fund
registered under these Rules.

51. Prohibition of Listing
1. The units of a fund shall not be listed on any Exchange.
2. A non-listed portfolio company in which any alternative
investment fund invests shall not apply for listing with any
exchange within 02(two) years from the date of last investment
made in it by an alternative investment fund.

52. Quick Poll

53. Revaluation of Assets

54. Eligibility of Valuer
Revaluation of Assets should be done by an auditor from panel “A”
auditors of the Bangladesh Bank

55. Requirements for Revaluation
1. The valuer shall provide a report and fairness opinion where the
valuer shall confirm that the valuation has been undertaken in
accordance with the International Valuation Standards (IVS) and
other applicable law, regulation and notifications.
2. Revalued amount of asset should be included in the Financial
Statement as per BAS & BFRS
3. Valuation Report shall be present as annexure of the Financial
Statement of the period in which valuation was done
4. Auditor should examine all the documents and furnish their opinion
in the Audit Report regarding whether the Valuation Report has
been prepared as per BAS, BFRS
5. Auditor also certify that proper accounting treatment has been
made in the Financial Statement to consider the Valuation Report
(Ref: BSEC Notification dated 18.08.2013)

56. Eligible Fixed Assets for Upward Valuation
Upward Valuation of following assets are not allowed:
1.Leasehold lands and buildings of which total lease period is below 99
years and remaining lease period below 10 years
2.Plants and machineries acquired in second hand condition
3.Plants and machineries having remaining economic life of less than
50% of its total useful life and acquired in brand new condition
4.Vehicles, furniture & fitting s, office equipments, loose tools and
intangible assets;
5.Tin-shed buildings, buildings having remaining economic life of less
than 50% of its total useful life,

57. Corporate Governance Guidelines

58. Compliance of Corporate Governance Guidelines
 Board Size: Shall not be less than 5 (five) & more than 20
(twenty)
 Independent Directors: At least one fifth (1/5) of the total board
size
 Chairman of the Board & CEO: Chairman of the Board and the
Chief Executive Officer of the Company shall be filled by different
individuals
 CFO, Head of Internal Audit & CS: Company shall appoint a
Chief Financial Officer (CFO), a Head of Internal Audit (Internal
Control and Compliance) and a Company Secretary (CS) with
clearly define respective roles, responsibilities and duties of each.
(Reference:
1. BSEC Notification dated 07 August, 2012
2. BSEC Notification dated 18 August, 2013)

59. Compliance of Corporate Governance Guidelines (2)
 Audit Committee:
1. Company shall have an Audit Committee (at least 3 members)
as a sub-committee of the Board of Directors.
2. Chairman of the Audit Committee shall be an independent
director
3. All members of the audit committee should be “financially
literate” and at least 1 member shall have accounting or related
financial management experience

60. Thank You

61. Q & A