Bangladesh Submarine Cable Company Limited (BSCCL), a state-owned company, has asked for 14 months to issue shares in favor of the government against the share money deposit.
In addition to resolving audit objections from the Department of Foreign Aided Projects Audit (FAPAD), the company’s board, ministries, shareholders, Bangladesh Securities and Exchange Commission (BSEC), Registrar of Joint Stock Companies and Firms (RJSC) and Central DPC The company has asked for time to complete the necessary approvals and preparations for the issue of shares.
BSCCL has recently written to the Financial Reporting Council (FRC) seeking guidelines on share issue and some related issues against share money deposit.
Following the notification of the FRC regarding share money deposit on February 11 this year, the submarine approached the FRC only on the issue of shares. On July 29 this year, the company wrote a letter to the FRC explaining its position on the share money deposit.
The letter said BSCCL received a total of Tk 16 crore in equity money from the government in 2015-16 and 2016-17 under the development project titled ‘Installation and Establishment of Second Submarine Cable System (SMW-5) for International Telecommunication in Bangladesh’. Subsequently, on September 22 last year, FAPAD raised an audit objection to the additional expenditure of Tk 65.62 crore from the government fund and recommended that the extra money be returned to the government fund.
BSCCL responded to the audit objections with reasonableness for disposal of the audit objections, which are currently under consideration by FAPAD. If BSCCL’s response is accepted by FAPAD, the money will not have to be refunded and it will be possible to issue shares against the full amount received from the government. And if BSCCL’s response is not accepted by FAPAD, the company will have to repay the money and issue shares in favor of the government against the rest of the money given as equity.
The FRC notification states that money received in the share capital sector which has been included in the capital or equity in the form of share money deposit or any other name will not be refundable or refundable in any way. BSCCL’s position in this regard is that it will be possible to finalize the amount of money received from the government in the equity sector under the development project only after the audit objection has been settled by FAPAD.
According to the notification of FRC, the money received as share money deposit has to be legally converted into share capital within a maximum of six months. The position of BSECCL in this regard is that it will not be possible to issue shares within the stipulated time after completing all the ancillary processes.
Moreover, the issue value of the DPP was not fixed at the time of payment of Tk 16 crore received as equity money from the government under the development project.
In this case, preparation of audited financial report for valuation of proposed issue, valuation of assets, approval of government on issue value, permission of shareholders through annual or special general meeting and approval of BSEC in the financial report for the financial year 2019-20 until conversion into equity. The company feels that it would not be possible to consider the fund as potential share capital and include it in the EPS calculation accordingly.
Therefore, to avoid complications, BSCCL wants to determine the issue price by considering the company’s financial report, asset valuation, average market price per share, etc. after confirming the amount of equity money after the audit objection has been settled by FAPAD. Moreover, if the EPS is calculated without the permission of the government and the shareholders about the fixed issue price, the company feels that there is a risk of adverse impact on the capital market as well as huge losses to the existing shareholders.
An unscheduled meeting of the BSCCL was held with the FRC officials on 5 August this year on these issues. At the meeting, it was suggested that the FRC should apply for extension of time with rationality and ask for guidelines on the relevant issues. In view of this, BSCCL sent a letter to FRC in this regard the day after the meeting. The letter asks for a minimum of 14 months to complete all the ancillary procedures. Besides, BSCCL has sought FRC’s guidelines on issue pricing and EPS calculation in case the share issue price has not been fixed considering the reality.