BANGLADESH Law and Practice Contributed by: Nasirud Doulah and Amina Khatoon, Doulah & Doulah
ent advice procured from outside includes valuation certificates from independent auditors, due diligence reports and opinions from legal counsel on compli - ance with applicable laws and due issuance of shares and tax advice from tax advisors. 8.5 Conflicts of Interest As mentioned in 8.2 Special or Ad Hoc Committees , directors are required to disclose their interests in oth - er entities. Directors are required to ensure that their interests do not conflict with those of the company and any interested director is not allowed to partici - pate in meetings or vote on matters in which they have an interest. The BSEC (Prohibition of Insider Trading) Rules of 2022 impose stringent disclosure rules for insiders, includ - ing directors, managers, shareholders, or advisers, to address concerns about conflicts of interest and pre - scribe the framing of internal policies, limitations on trading and disclosures on conflicts of interest. Bangladeshi regulations do not expressly recognise the term “hostile offer”, which is understood to mean an unsolicited bid made without the agreement of the persons in control of the target company. Hostile ten - der offers are not prohibited, but they are also not common, due to complications in their implementa - tion as compared to negotiated transactions. Under the Bangladesh Securities and Exchange Com - mission (Substantial Acquisition of Shares and Takeo - vers) Rules, 2018, another mechanism is prescribed for the acquisition of listed distressed businesses. Distressed businesses have been defined as those companies which: • are as financially weak; • have a negative net worth; • share price below face value for a continuous three years; • have not paid any dividend for five years; or • any other company so listed by BSEC. 9. Defensive Measures 9.1 Hostile Tender Offers
For such a bailout takeover mandated for the acqui - sition of listed distressed businesses, shares may be purchased in cash, swapped, or a mix of both. The bailout scheme was publicly announced in a newspaper by a financier with provisions for a future corporate governance framework. Thereafter, the financier (or the lead institution in the case of a con - sortium) needs to evaluate share purchase tenders to select an appropriate offer or, in the case of purchase from existing shareholders, negotiate a purchase price to implement the scheme. A bail-out takeover may be exempted from certain substantial share acquisition requirements, such as the requirement to purchase shares through an exchange for cash. 9.2 Directors’ Use of Defensive Measures Whereas there may be limited defences available to non-listed companies (as stated in 8.3 Business Judgement Rule ), none are available to listed compa - nies. As soon as a consortium acquires a 75% or more shareholding in the target, it can control the board. 9.3 Common Defensive Measures As stated in 9.2 Directors’ Use of Defensive Meas- ures , there are no common defensive measures avail - able to the board of a listed company. The only way could be to convince the sponsors and directors with frozen shares not to sell their shares and find a friendly new investor. 9.4 Directors’ Duties As stated in 9.3 Common Defensive Measures , avail- able defensive measures are very limited. Nonethe - less, as per 8.1 Principal Directors’ Duties , the board of directors of the target company is required to ensure the running of the business in its ordinary course and that there is no disposal of material assets or change in capital structure, etc, when a takeover offer is open. Also, directors must not cause the company to enter into any contract which such directors reasonably believe that the company would not be able to fulfil. 9.5 Directors’ Ability to “Just Say No” As stated in 9.2 Directors’ Use of Defensive Meas- ures , whereas for non-listed private companies,
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