Investors have received relief as a long-standing uncertainty over the future of closed-end mutual funds has eased following the removal of legal barriers to their conversion into open-end funds or liquidation.

The Appellate Division’s Chamber Court has stayed a High Court order that had imposed a status quo on the conversion and liquidation process, effectively clearing the way for trustees to proceed with the activities.

Earlier, the High Court had ordered a two-month status quo on the conversion and liquidation of certain funds after several unitholders filed writ petitions challenging the process. The Bangladesh Securities and Exchange Commission (BSEC) later appealed the order, and the Chamber Court suspended the stay after hearing both parties.

BSEC Executive Director and spokesperson Abul Kalam said the commission issued necessary guidelines on June 9 regarding the conversion of closed-end mutual funds. Following the High Court order, the regulator informed trustees on June 11 that the status quo applied only to the petitioners, while the conversion process for other unitholders could continue.

He said the latest court order has removed that limitation as well, meaning no unitholder is now excluded from the process and trustees can take necessary steps for all funds under their management.

Under the Mutual Fund Rules, 2025, issued in November last year, a trustee must convene an extraordinary general meeting (EGM) if the average market price of a fund’s units falls by more than 25 percent below either the acquisition cost or the declared net asset value (NAV), whichever is higher, within six months of the gazette publication.

A decision to convert a closed-end fund into an open-end fund or liquidate it can be taken with the support of at least 75 percent of voting unitholders present at the EGM, subject to BSEC approval.

Several unitholders had challenged the BSEC’s May 7 directive in the High Court, arguing that converting funds before the expiry of their extended tenure granted under a 2018 government gazette would undermine unitholders’ rights.

With the Chamber Court’s latest order, the future of all closed-end mutual funds will now be determined through unitholder voting and regulatory approval, with no legal impediment remaining to the conversion or liquidation process.