BSEC fines Dominage Steel board Tk5.10cr over IPO fund diversion, fake proxy votes
BSEC Fines Dominage Steel Board Over IPO Fund Use
Bdbusinessdaily.com – The BSEC fines Dominage Steel board case has resulted in combined penalties of Tk5.10 crore against five directors and two former senior officials of Dominage Steel Building Systems Limited. Bangladesh’s capital-market regulator cited the diversion of IPO funds, alleged fake proxy votes and failures to disclose important operational information.
The Bangladesh Securities and Exchange Commission issued the enforcement order on 7 September after reviewing an inspection by Dhaka Stock Exchange PLC. The inspection examined company sites, financial records and the use of money raised through Dominage Steel’s initial public offering.
Chairman Muhammad Shamsul Islam, Managing Director Mohammad Rafiqul Islam, and directors Sujit Saha, Rakibul Islam and Abul Kalam Bhyian were each fined Tk1 crore. Former Chief Financial Officer Zillur Rahman and former Company Secretary Jamir Hosen Chowdhury were fined Tk5 lakh each.
All seven individuals were instructed to pay the penalties from their personal funds within 30 days through bank drafts or pay orders.
IPO fund reallocation and proxy-vote allegations
A key issue in the BSEC fines Dominage Steel board decision was the proposed change in the use of IPO proceeds. The regulator found that proxy voting during the company’s 15th annual general meeting in December 2021 had been manipulated to suggest that public shareholders approved the revised fund allocation.
The company showed that 51% of public shareholders had supported the proposal. However, random checks by the inspection team found that several major institutional investors had not been informed about the proposed change. The inquiry also found allegations that unauthorised signatures had been used to obtain proxy votes.
The commission concluded that public investors had not validly approved the revised plan. Despite the lack of genuine shareholder consent, the board used IPO funds to purchase a cutter suction dredger, according to the regulator.
Changes to the planned use of IPO money can be significant for investors because the funds are raised for purposes disclosed at the time of listing. Material revisions require transparency and proper shareholder approval so investors can assess the proposed investment.
Dredger purchase and inactive factories
The dredger acquisition was another focus of the BSEC’s investigation. Dominage Steel said it paid Tk14.73 crore to Arena Construction and Engineering Limited for the vessel.
Maritime registration records identified Sundarban Shipbuilders as the manufacturer and showed an official vessel cost of Tk21.42 lakh. Sundarban Shipbuilders later informed the regulator in writing that it had not built the dredger and had no connection with the entity involved.
The vessel remained unused for nearly three years after its purchase and generated no revenue during that period. Required survey certificates had also not been renewed.
Inspectors found that the company’s plant in Palash, Narsingdi had been closed for between seven and 10 years, meaning it was inactive before Dominage Steel was listed in November 2020. A second facility in Ashulia was also found fully closed.
The regulator said the operating condition of the two factories had not been disclosed as price-sensitive information. It also found that about Tk3.27 crore had been misappropriated from Tk5.83 crore allocated for factory expansion, linked to major overstatement of civil construction expenses.
Management response
During the proceedings, Dominage Steel’s management denied the allegations. It argued that the annual general meeting resolutions had been properly approved, that the dredger purchase followed turnkey-contract practices, and that the factories operated when orders required production.
The BSEC rejected those arguments and imposed the penalties after considering the inspection findings. The BSEC fines Dominage Steel board action highlights the regulator’s concerns over shareholder rights, disclosure obligations and the use of public investment funds.
FAQ for Bangladesh investors
Why did the BSEC fine Dominage Steel officials?
The regulator cited the use of IPO funds without valid public-shareholder approval, alleged manipulation of proxy votes, inadequate disclosure of factory closures and findings related to factory-expansion spending.
How much were the penalties?
The combined fines totalled Tk5.10 crore. Five directors were fined Tk1 crore each, while two former senior officials were fined Tk5 lakh each.
What should shareholders watch after this decision?
Investors may monitor company disclosures, the operating status of production facilities, updates on the dredger and any further regulatory or corporate actions connected to the findings.