This assignment focused on practices of SHAREHOLDERS' DEMOCRACY in BANGLADESH. In this assignment the practice of shareholders' democracy in a listed company of Bangladesh is also discussed.

1. Assignment 1:
“Listed Companies” Shareholders Democracy in Bangladesh: An
Evaluation
Submitted To:
Dr. SWAPAN KUMAR BALA
PROFESSOR
Department of Accounting & Information Systems
University of Dhaka
Submitted By:
Anamika Hore
ID: 22-015
Section: C
Batch : 22nd
Course : 6102
Date of Submission:
31/08/2020

2. Table of Contents
1.0 Introduction.......................................................................................................................... 3
2.0 Concept of Shareholder Democracy .................................................................................... 3
3.0 Means of Shareholders’ Democratic Practices .................................................................... 4
3.1 Operation of the Participatory Role of Shareholders ....................................................... 4
3.2 Democracy by Exit........................................................................................................... 4
3.3 Other Mechanism of Shareholder Democracy................................................................. 5
4.0 Shareholder Democracy in Bangladesh ............................................................................... 6
4.1 Scope of Exercising Democratic Rights in Bangladesh................................................... 6
1) Annual General Meeting (AGM)........................................................................................ 6
2) Extraordinary General Meeting (EGM).............................................................................. 6
3) Provisions of the Companies Act Where Shareholder’s Meeting is required .............. 7
4) BSEC’s Notifications where Shareholders’ approval is needed................................... 7
4.2 State of Shareholder Democracy in a Bangladeshi Listed Company ................................... 8
5.0 Conclusion ................................................................................................................................ 9
References....................................................................................................................................... 9

3. 1.0 Introduction
Shareholder Democracy is a concept advocated by corporate shareholders to increase their access
to and influence over corporate governance. In general the power of shareholders to influence the
board of directors of a certain company through the exercise of voting rights associated with share
ownership is known as Shareholder Democracy. The opportunity of the voting of shareholders and
the ways they can be exercised has a significant impact on the confidentiality in capital market of
the country. Though Bangladesh Securities and Exchange Commission (BSEC) have taken many
steps to empower the increase of shareholders engagement by strengthening shareholders rights
and facilitating their voting rights also. However still conflict between shareholders and
management of listed companies is a common phenomenon in this country like the rest of the
world(Walton, 2010).
Here in this assignment it is discussed that is the democracy of shareholders of the listed companies
ensured in Bangladesh or not.
2.0 Concept of Shareholder Democracy
According to Donald E. Schwartz shareholders democracy, as it is used in context means one of
two things:
1) That in a decisive manner the shareholders participate in the governance of the corporation
and not merely as a matter of form: and
2) That by professionals the certain corporation is managed in order to the welfare of the
shareholders of the company.
Shareholders Democracy at the heart is not only the access of filing resolution of a particular
company but also they can claim any type of information and also make any kind of change in
the company. Yes that change can be contains of various kind of statements about facts along
with a resolved clause, those which are identified the changes in corporate policy specifically
or resolution-filers’ expected disclosers (Sauerwald, Van Oosterhout and Van Essen, 2015).
Most of the peoples’ idea about shareholders democracy states that it only focused on the
effective and efficient participations of shareholders but this idea is not works well always.
According to most of the critical observers of companies, due to rational discourage of

4. shareholders in participating different corporate affairs and lack of their practical knowledge
most of the time ‘shareholders’ participation’ failed to achieve the desired working well
environment.
3.0 Means of Shareholders’ Democratic Practices
There are many ways through which shareholders democracy is exercised in most of the firms of
Bangladesh. Some means of Shareholders’ democratic practices are given following.
3.1 Operation of the Participatory Role of Shareholders
1) Majority Voting Movements:
Voting in order to selecting future board of directors is considered as the prime right of
shareholders of any company (Poulsen, Strand and Thomsen, 2010). In ancient time companies
used to a voting system that majority shareholder’s vote was neglected and a plurality system
was followed. Now a days the governance has changed and the candidate got majority votes
from the shareholders are elected as the board of directors of a company. This ingredient
creates a wide way for shareholders democracy.
2) The Decline of Classified Boards:
In order to conduct the election inside a certain company in any given financial year ‘Classified
Boards’ are created as a part of the main board members. According to most of the shareholders
of various listed company are arguing that either classified shareholders are effective for a
company or not however more than 50 percent shareholders of almost each company are going
for the decline of classified shareholders as they think that this system is a hindrance about the
question of their democracy.
3.2 Democracy by Exit
When the share price of a company fall into a very low price for any reason in that time
shareholders can sell their owned share to another shareholder or return their share to the

5. company at the cost price and leave the ownership of the company this type of power of
shareholders are known as democracy by exit.
3.3 Other Mechanism of Shareholder Democracy
1) Say on Pay
Agency problem is a common term in Corporate Governance. Sometimes it occurs because of
the unethical willingness of managers of a company to pay extra amount to themselves in a
direct or indirect way. Through this means called say on pay shareholders can play a role inside
a corporate law when a firms’ shareholders have the power to implement vote on the issue of
paying remuneration to its executives.
2) Environmental and Social Proposals
In recent few years shareholders can exercise the role of placing proposals about the
environmental and social policies more often. Now a days companies are bound to disclose all
the information about what the firms’ environmental policy and what type of corporate social
responsibility the firm perform for social welfare (Ueda, 2009). Shareholders can also claim the
information about company’s political involvement and performance and can place their
valuable suggestions.
3) Strengthening Internal Governance Mechanism
It is the common culture of most of the corporations of Bangladesh that Board of Directors are
treated as prime and starting institutions of Corporate Governance (Caton and Goh, 2008).
Generally in a family controlled firm it is a rare practice of the Board of Members that they
focus on their representing role about the interests of minority shareholders rather than the
owners who are controlling the firm and appoint them. As majority of the firms in Bangladesh
are family oriented firms so that if the governance mechanism is enriched for each and every
firms then it will be a great scopes for shareholders to practice their democracy here in
Bangladesh.
4) Minority Shareholder Protection and Shareholder Empowerment
Minority shareholders right protecting law can widely help to found the power of claiming on
companies of shareholders about several issues. If the corporate governance is strong enough

6. to protect the legal rights of all companies shareholders then shareholders democracy will be
protected properly.
In Bangladesh, various initiative have been taken regarding the reservation of the legal rights
of minority shareholders For instance, trading of securities in stock exchange became fully
automated in 1998, which replacing the ‘outcry’ system that is 44 years old.
5) Priority in New Issue
If any listed company of Bangladesh want to issue any new shares that company must have to
issue them first to the existing shareholders according to The Bangladesh Companies Act,
1994. This law also provides shareholders the pre-emption rights in Bangladesh
4.0 Shareholder Democracy in Bangladesh
According to corporate laws present in Bangladesh there are several scopes about shareholders
democracy in Bangladesh. Following is some list of those scopes that are exercised in Bangladesh
to preserve the democratic rights of shareholders.
4.1 Scope of Exercising Democratic Rights in Bangladesh
1) Annual General Meeting (AGM)
According to the BSE (Bangladesh Securities and Exchange) Ordinance, 1969 and the rules of
Dhaka Stock Exchange and Chittagong Stock Exchange when an interim or final dividend is
approved by the Board of directors of a Bangladeshi listed company. That decision will be subject
to the approval of shareholders’ in the AGM if that dividend is a finalize dividend (Annual General
Meeting Spring 2011, 2011).
2) Extraordinary General Meeting (EGM)
An EGM or Extraordinary General Meeting is a meeting of shareholders which is not actually an
AGM. An Extraordinary General Meeting is held when some urgent issues about the company
come front or any crisis situation and the company requires the input of all Senior Executives and
the Board. Shareholders must be introduced with the purpose of the meeting previously so that
they can prepared their respective input and unanimously take decision about the further course of
actions (KIM YOUNG KYOON, 2016).

7. 3) Provisions of the Companies Act Where Shareholder’s Meeting is required
In accordance with the provision of the Article of Association, the General Meetings of
Shareholders (Chung, 2019) is authorized to pass all kids of resolution concerning the company, the
following powers being namely reserved thereto, without prejudice to any powers vested by the
applicable resolutions:
a) To resolve on the individual annual accounts of the company, and, where appropriate, on
the consolidated accounts of the company and its group, as well as the distribution of
income-loss.
b) To appoint, re-elect and remove the directors, and to ratify or revoke any provisional
appointment of said directors made by the BOD itself, and to review their management.
c) To conduct as a separate item of the agenda an advisory ‘Say on pay’ vote on the annual
report on the remuneration of directors.
d) To authorize of the directors from the duty of preventing conflicts of interests of the
prohibitions arising from the duty ad loyalty, when the authorization to release them is
attributed by statute to the General Meeting of the Shareholders, as well as from the
obligation not to compete with the company.
e) To authorize the Board of Directors to increase the Company’s share capital, or to proceed
to the issue of bonds convertible into Company’s shares.
4) BSEC’s Notifications where Shareholders’ approval is needed.
Shareholders’ Approval is defined as such approvals as may be required by the applicable rules
and regulations of the BSEC from the shareholders of a company with respect to the transactions
completed by the transactions documents, including the issuance of all of underlying shares.
Followings are BSEC’s Notifications where Shareholders’ approval is needed.
a) In case of the adoption of remuneration systems consisting of the granting either of shares
or stock options, as well as any other remuneration system linked to the value of shares, for
the benefit of directors.
b) In case of taking any remuneration policy of the Directors pursuant to statutory terms.
c) When a company is buying a substantial asset from a director of the company or any other
person or entity connected with a director or is selling a similar asset to a director or any
person connected with a director.
d) When a company is proposing to make a loan to a director provide a guarantee (or other
form of security) for the benefit of a director
e) When a company is looking to enter into a service contract with a director which is for a
fixed time of two or more years.

8. 4.2 State of Shareholder Democracy in a Bangladeshi Listed Company
‘BEXIMCO Pharma’ is a prominent listed company incorporated in Bangladesh. The followings
set out a brief summery about the salient means of practicing democracy of shareholders in
BEXIMCO Pharma Ltd. In accordance with the law and regulations following in Bangladesh.
1) Financial Disclosures
As a Bangladeshi listed company BEXIMCO Pharma is obliged to prepare accounts which are
audited annually by a chartered accountants firm and have to send it to the Bangladesh Securities
and Exchange Commission in order to checking whether democratic rights of shareholders are
followed properly or not.
Besides, BEXIMCO Pharma have to prepare half-yearly accounts also, which do not necessary to
be audited but do have to send to BSEC, to the concern and related stock exchange and all
shareholders of such company. This half-yearly accounts must be included Statements of Financial
position, Statements of profit, loss and other comprehensive income, Statements of Changes in
equity, Statements of cash flow and notes of the financial statements.
2) Enquiries into the Company’s Affairs
In BEXIMCO Pharma more than 5% shareholder of issued share capital can file petition to
Bangladesh Securities and Exchange Commission to make inquiries about various affairs of the
company or its transactions and business, under the BSEC Ordinance, 1969. If BSEC decides to
investigate, it has power to collect the information of production from BEXIMCO’s officers,
employees and directors.
3) Removal of Directors
The shareholders of BEXIMCO Pharma may by extraordinary resolution in a general meeting
can remove any director and also appoint a director for filling the vacancy. (Corporations:
Power of Shareholders to Remove Directors, 1930)

9. 4) Issue of Redeemable Shares:
BEXIMCO Company cannot issue and redeem redeemable shares without the permission of
existing shareholders’ approval in a meeting.
5.0 Conclusion
Inside corporate governance Shareholders democracy conduct a major role. It rooted by the
observation whether shareholders opinion in case of taking any major decisions of a company
increase its productivity or not (Dasgupta and Noe, 2011). However, like few countries Bangladesh
also maintain a culture of family ownership oriented business or only a few substantial
shareholders are controlled the whole things which system creates a great obstacles in the way of
practicing democracy of most of the minor shareholders. Though some initiative has taken since
1990s, with a high support from International Financial Association, but in accordance with
principal observers there is still a presence of numerous opportunities for further improvement in
order to ensuring shareholders democracy.
This article cannot serve with a critical and comprehensive study of why corporate governance are
differ from the laws implemented or supported by the Organization for Economic Cooperation and
Development to reserve the democratic rights of shareholders. Further research could explore
which domestic forces kept the corporate governance refrain from ensuring proper Shareholder
Democracy.
References
1) Poulsen, T., Strand, T. and Thomsen, S., 2010. Voting Power and Shareholder Activism: A Study
of Swedish Shareholder Meetings. Corporate Governance: An International Review, 18(4),
pp.329-343.
2) Michigan Law Review, 1930. Corporations: Power of Shareholders to Remove Directors.
28(5), p.617.
3) Caton, G. and Goh, J., 2008. Corporate Governance, Shareholder Rights, and Shareholder
Rights Plans: Poison, Placebo, or Prescription?. Journal of Financial and Quantitative
Analysis, 43(2), pp.381-400.
4) Dasgupta, S. and Noe, T., 2011. Does Pay Activism Pay Off for Shareholders?
Shareholder Democracy and its Discontents. SSRN Electronic Journal,.

10. 5) Sauerwald, S., Van Oosterhout, J. and Van Essen, M., 2015. Expressive Shareholder
Democracy: A Multilevel Study of Shareholder Dissent in 15 Western European
Countries. Journal of Management Studies, 53(4), pp.520-551.
6) Ueda, J., 2009. Shareholders’ access to company’s information: Towards ensuring
shareholders’ monitoring right and minority shareholders’ protection. Corporate
Ownership and Control, 6(4), pp.20-27.
7) Walton, N., 2010. On the Optimal Allocation of Power between Shareholders and
Managers. SSRN Electronic Journal,.
8) Chung, J., 2019. A Review of Improving Methods for Effective Management of General Meeting
of Shareholders - Focusing on the Current Issues related to the Convening Procedure of the
General Shareholders’ Meeting -. BUSINESS LAW REVIEW, 33(3), pp.103-131.
9) Entomological Research, 2011. Annual General Meeting Spring 2011. 41(3), pp.106-133.
10) KIM YOUNG KYOON, 2016. A brief review of the normalization of general meetings of
stockholders - chairman of the general meeting of stockholders, inspecting the general meeting -
. KYUNGPOOK NATIONAL UNIVERSITY LAW JOURNAL, null(55), pp.185-212.