BANGLADESH Law and Practice Contributed by: A B M Nasirud Doulah and Amina Khatoon, Doulah & Doulah
6.7 Types of Deal Security Measures Non-solicit and confidentiality clauses, stand - still provisions, etc, are frequently used as deal security measures in acquisitions in Bangladesh. “Material adverse effect” clauses are also widely adopted, enabling a party to walk away in speci - fied situations. Support clauses ensuring seller and/or target company assistance for regulatory approval is also very common. Break fees are not common practice, although in some cases a break cost payment obligation is incorporated in the sale and purchase agree - ment. Generally, when a sale and purchase agreement is close to closing, the defaulting party is required to pay the non-defaulting party the break cost. For the purchase of shares from other shareholders, the seller and/or the buyer assumes such liability. In an asset sell and share issue, the target and/or the buyer assumes such liability. However, as “break cost” is not defined in the foreign exchange regulations, it is diffi - cult to make such arrangements in cross-border deals in practice. Often, the parties agree to pay the accrued management fees in the form of consultancy or legal fees. Representation and warranties (R&W) insur - ance as a security is also gaining popularity in large scale transactions where either the seller procures such insurance or the cost is shared among the parties. 6.8 Additional Governance Rights In Bangladesh, proportional representation on the board is not mandated. For listed companies, the BSEC has stipulated the maximum and mini - mum number of board members and required number of independent directors. While voting is the generic tool for members to appoint/remove directors, entitlement to extra representation on
the board can also be granted under a contrac - tual agreement. Acquirers of majority shareholdings are also well placed to appoint their own nominee to be the chief executive officer (who is also a deemed director). While under local regulations the right to appoint the majority of the board without a majority shareholding is not prohibited and does not need approval from the BSEC as long as other requirements such as the following are met, this may be considered a change in control subject to the relevant competition regulations: • mandated board composition; • a mandatory 2% shareholding by each non- independent director (or its nominee); or • a composite 30% shareholding by sponsors and directors. 6.9 Voting by Proxy Shareholders of a company are allowed to be represented by a proxy at any general meeting of members. Companies are also allowed to con - duct shareholder meetings through audio-visual methods. 6.10 Squeeze-Out Mechanisms Non-Listed Companies In an acquisition, there is no way to acquire the remaining shares belonging to dissenting share - holders unless there are drag along or call option agreements among the shareholders. In the case of a merger, after the court’s approval of the scheme and on approval of at least 75% of the shareholders, the transferee company can give 21 days’ notice to acquire the shares of the dissenting shareholders. Unless the dissenting shareholders apply to the court on the grounds that their individual rights have been prejudiced,
193 CHAMBERS.COM
Powered by FlippingBook