The Bangladesh Securities and Exchange Commission (BSEC) has proposed amendments to initial public offering (IPO) rules, allowing companies to use up to 50% of IPO proceeds to repay bank loans, up from the existing 30%.

The proposed changes also introduce a hybrid IPO method, allowing companies to issue new shares alongside the sale of existing shares by sponsors and directors. The commission expects the changes to encourage more local and multinational companies to enter the capital market.

BSEC officials said no IPO had been launched in Bangladesh’s stock market for more than two years. Several companies have been reluctant to go public because of concerns over fair valuations and lengthy approval procedures.

Under the proposed hybrid method, eligible foreign-owned companies, registered telecom operators with assets of at least Tk 300 crore, and companies with annual sales or assets of at least Tk 500 crore would be able to list by offering at least 5% of their shares.

The proposed rules would also allow companies to repay loans taken for projects or balancing, modernisation, rehabilitation and expansion (BMRE) activities, provided the loans are neither classified nor rescheduled. A written certification from the bank’s managing director would be required.

The amendments propose changes to IPO share-allocation quotas. Under the book-building method, institutional investors would receive 35% of shares, mutual funds 10%, permanent employees of the issuing company 5%, non-resident Bangladeshis (NRBs) 10% and general investors 40%. The proposed rules would allocate 65% of shares to general investors under the fixed-price method. The existing quota for high-net-worth individuals would be scrapped.

The proposal also introduces a category for capital-intensive companies operating in sectors such as power, energy, infrastructure, telecommunications, healthcare and hospitality. Companies or projects with assets of at least Tk 500 crore could qualify for IPOs even if they have accumulated losses, subject to submitting a business plan explaining how they intend to become profitable within two years of listing.

To prevent the misuse of IPO proceeds, companies would be required to maintain a separate escrow bank account and use the funds only for the purposes specified in their prospectuses.

The proposed amendments would also strengthen accountability for auditors and issue managers. Before an IPO application, an independent auditor from the BSEC-approved panel would have to verify the company’s accounts, revenue, assets, liabilities, tax and VAT records, bank balances and factory operations through an on-site inspection.

Auditors could face legal liability for incorrect or fraudulent information. The prospectus would also have to clarify that BSEC approval does not guarantee the accuracy of a company’s financial information, for which the issuer, its board and auditor would remain responsible.

The commission has also proposed retaining the issue manager’s full responsibility and accountability even when other merchant banks or third parties are engaged to assist with IPO-related work.

The current BSEC commission, led by Masud Khan, had previously announced plans to revise the IPO framework to broaden companies’ access to capital-market financing. The proposed amendments come around 10 months after the previous commission’s revised IPO rules were gazetted

on December 30 last year.