Shurwid Industries Limited would have no restriction to reduce its paid-up capital subject to the court's permission and compliance with the companies act, according to legal experts and officials.
Officials at the securities regulator said the company could reduce its paid-up capital after ensuring the interests of the general shareholders.
On May 24 last, the shareholders of Shurwid Industries, a 'Z' category company, got shareholders' approval when the latter endorsed a resolution to reduce the company's paid-up capital.
The company will reduce paid-up capital to lessen its accumulated loss and enhance its capacity so that it could recommend dividends.
The company incurred losses in last three consecutive years and disbursed no dividend during these years.
Supreme Court lawyer Barrister Tanjib-ul Alam said a company could reduce its paid-up capital if its objectives match with the conditions of the section 59 of the companies act, 1994.
With reference to the section, he told the FE that Shurwid Industries has no bar to reduce paid-up capital in order to reduce accumulated losses.
The section reads, subject to confirmation by the Court, a company limited by shares, if so authorised by its articles, may by special resolution reduce its share capital in any way, and in particular the company may, as part of this general power-- (a) extinguish or reduce the liability on any of its shares in respect of share capital not paid-up; (b) either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost or presented by available assets; (c) either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the wants of the company; (d) so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.
A senior official at Bangladesh Securities and Exchange Commission (BSEC) said Shurwid Industries could reduce its paid-up capital as per the court's permission despite there is no provision in the securities rules.
"Shareholders have also given the consent in favor of reducing the company's paid-up capital," he said.
After getting the court's permission, the securities regulator will examine some issues regarding shareholders' interest and mandatory capital of a listed company, he added.
Niloy Cement was the first listed company that had reduced the paid-up capital in 2010 to adjust its accumulated losses.
Later the company, however, shifted to the over-the-counter (OTC) market due to poor performance.
As per the shareholders' approval, Shurwid Industries would reduce the paid-up capital at a ratio of 5:2.
Asked about the adjusted share price, the chairman of Shurwid Industries said if the price of five shares is Tk 100 now, the price of three shares will then be Tk 100.
The company's present paid-up capital would then stand at Tk 312.91 million, after a deduction of above Tk 208.61 million.
Engineer Mahmudul Hasan, chairman of Shurwid Industries, said finding no other way of reducing losses they have taken initiative of reducing paid-up capital.
He said their company would not be able to disburse dividend even in next five to seven years provisioning losses.
"Our company will be able to recommend dividend this year through reduction of the paid-up capital," Mr. Hasan said.
In response to a question, the chairman of Shurwid Industries ruled out the possibility of incurring losses by general investors as the capital will be reduced at adjusted price.
"The company's will also require up-gradation from 'Z' category for banking finance," said the chairman of Shurwid Industries.
The company's sponsor-directors hold only 9.99 per cent shares of Shurwid Industries despite sponsor-directors are required to hold at least 30 per cent shares compared to paid-up capital.
The chairman of Shurwid Industries was also asked whether they want to reduce paid-up capital to ease sponsor-directors' compliance regarding minimum share holding.
In his reply, the chairman said the ratios of shareholding by sponsor-directors and general shareholders would remain unchanged even after reduction of paid-up capital at a certain ratio.
