BANGLADESH Law and Practice Contributed by: Nasirud Doulah and Amina Khatoon, Doulah & Doulah
valuation of the assets used as consideration must be conducted and 20% of the consideration must be deposited with the stock exchange as security, to be returned upon completion. However, for schemes requiring express approval from BSEC, it is possible to propose a scheme con - ditional on the bidder obtaining financing by a prede - fined time and, if approved by BSEC, the public offer may be floated once that condition is fulfilled. The same approach is taken for the takeover of distressed companies as outlined in 9.1 Hostile Tender Offers . 6.7 Types of Deal Security Measures Non-solicitation and confidentiality clauses, along with standstill provisions, are commonly employed as deal security measures in acquisitions in Bang - ladesh. “Material adverse effect” clauses are also widely adopted, enabling a party to walk away under specified circumstances. Support clauses that require seller and/or target company assistance with regula - tory approvals are also very common. Break fees are not common practice, though in some cases, a break cost payment obligation is incorpo - rated into the sale and purchase agreement. Gener - ally, when a sale and purchase agreement is short of closing, the defaulting party is required to pay the non-defaulting party the break cost. In the case of the purchase of shares from other shareholders, the seller and/or the buyer assumes such liability. In the case of an asset sale and a share issue, the target and/or the buyer assumes such liability. However, as “break cost” as a term is not defined in the foreign exchange regulations, it is difficult to make such arrangements for cross-border deals in practice. In such cases, the parties often agree to pay accrued management fees in the form of consultancy or legal fees. Representation and Warranties (R&W) insurance as security is also gaining popularity in large-scale trans - actions, where either the seller procures it or the par - ties share the cost. 6.8 Additional Governance Rights In Bangladesh, proportional representation on the board is not mandated. For listed companies, the BSEC has stipulated the minimum and maximum
number of board members, as well as the required number of independent directors. Whereas voting is the generic tool for members to appoint/remove direc - tors, entitlement to extra representation on the board can also be granted under a contractual agreement. Acquirers of majority shareholdings are also well placed to appoint their own nominee as chief execu - tive officer (who is also a deemed director). Whereas, under local regulations, the right to appoint the major - ity of the board without a majority shareholding is not prohibited and does not need approval from BSEC, as long as other requirements, such as the following, are met, this may be considered a change in control subject to relevant competition regulations: • mandated board composition; • mandatory 2% shareholding by each non-inde - pendent director (or its nominee); or • composite 30% shareholding by sponsors and directors. 6.9 Voting by Proxy Shareholders of a company are allowed to be repre - sented by a proxy in any general meeting of mem - bers. Companies are also allowed to hold shareholder meetings by audiovisual means. 6.10 Squeeze-Out Mechanisms Non-Listed Companies In an acquisition, there is no way to acquire the remaining shares belonging to dissenting sharehold - ers unless there are drag-along or call option agree - ments among the shareholders. In the event of a merger after the court approves the scheme and at least 75% of the shareholders approve, the transferee company may give 21 days’ notice to acquire the shares of dissenting shareholders. Unless the dissenting shareholders apply otherwise to the court on the grounds that their individual rights have been prejudiced, within 30 days from receipt of the notice, the transferee company can acquire the shares. Listed Companies There are no provisions on the squeeze-out of any remaining minority shareholders and there is no pos - sibility for minority shareholders to “sell out” in gen -
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