Listed firms fail shareholders
KATHMANDU,JAN 23:
The financial institutions that are considered to be compliant on following rules are not unable to conduct annual general meeting on time.
Only 23 financial institutions have conducted the annual general meeting within the mid-December this fiscal year, of which 13 are commercial banks.
“The regulations require the financial institutions to conduct AGM within five months of the completion of fiscal year, but they can request three months extension period,” said spokesperson for Nepal Rastra Bank (NRB) Bhaskar Mani Gyanwali.
The regulation requires financial institutions to publish the audited financial report and detailed balance sheet including long-form audit reflecting the institutions’ actual health.
“Since getting the balance sheet audited by internal and external auditors take time financial institutions find it difficult to hold AGM on time,” he pointed out.
The annual event also elects new board of directors and is a forum to inform the shareholders of future and previous activities. For the public companies like financial institutions, AGM is the perfect platform for the minority stakeholders allowing them to voice their opinions regarding the company’s decisions and workings.
“The central bank takes action and reduce the facilities being meted out in case they fail to conduct AGM on time,” Gyanwali said, adding that financial institutions owe their shareholders and depositors to conduct the AGM on time but they prefer to postpone and make situation difficult.
The companies try to avoid being lashed out in the public for not performing well as per their incredulously high expectations. The shareholders are never satisfied with the amount of dividend being distributed by the companies. This year Nabil Bank had to postpone its AGM due to differences with shareholders.
The late AGM means the shareholders do not get the adequate information regarding the companies they have invested in on time. The stale information and statistics are of no use to the investors in investment related decision making.
Last fiscal year also less than 30 financial institutions conducted AGM within the stipulated time of five months. Despite the extension of three months less than half of the financial institutions failed to hold these mandatory meetings on time.
The financial institutions are considered relatively transparent in their dealings due to tight regulatory rein of the central bank on publication of financials and holding AGM.
The case of other public companies listed in Nepal Stock Exchange is worse as only six companies belonging to real sector have conducted AGM within the stipulated time.
To increase compliance from the public limited companies, the capital market regulator — Securities Board of Nepal — is introducing the provision of penalising the defiant public limited companies in the amendment of Securities Act.
“The current provision allows monetary penalty but the conditions attached to it are quite harsh thus Sebon refrains from fining the companies,” according to the director at Sebon Niraj Giri.
If the regulator slaps monetary fine to the companies then according to the rule, all of the promoters are disqualified to hold the position of director or be appointed on managerial posts in any of the public limited company for next ten years, which according to the regulator is an extreme punishment.
“The companies do not understand that by being compliant to the regulators they are promoting the goodwill of their own institutions,” he lamented.
Source: THT
