Cabinet nods draft of Finance Companies Act, 2023

The final approval to the draft Finance Companies Act, 2023 was given on Monday.

The final approval to the draft Finance Companies Act, 2023 was given on Monday.

The final approval was given at the cabinet meeting held at the Prime Minister's Office (PMO) on Monday. Prime Minister Sheikh Hasina presided over the meeting.

According to the new Finance Companies Act, someone can be considered a wilful defaulter for three reasons. If the money is not paid within two months, a criminal case can be filed against the wilful defaulter. The defaulter will not be able to go abroad and there will be a trade licence ban.

The three reasons why someone can be declared a wilful defaulter are if the person does not repay the loan on time despite having the ability, if he uses the loan for other reasons instead of using it for the reason the loan was given, and if the documents he took the loan by submitting are later identified as fake.

After the meeting, Cabinet Secretary Mahbub Hossain told reporters at the Secretariat that the existing law did not specify what percentage of shares a person can hold in a financial institution. It is now being said that no more than 15 percent of the shares can be taken from the same family.

"The number of directors was not specified in the current law. It can now have two independent directors and 15 directors in total. However, if the amount of shares from a family is less than 5 percent, there will be a director. If more than 5 percent, there can be a maximum of two. You can't have more than two directors from one family," the cabinet secretary added.

In the existing law, there was no term of the director. Now the director's term is being extended to three years. “You can be a director for three consecutive terms,” he also said.

“Banks can create subsidiary companies. According to the new law, financial institutions in Bangladesh cannot be made subsidiary companies without the approval of the bank. There was no directive in the existing law regarding interest waiver. Now it has been said that interest cannot be waived without the permission of Bangladesh Bank. Full interest can never be waived. The cost of funds must be recovered,” Mahbub said.

In some cases, fines have been increased. The punishment for not complying with the conditions of the licence has been increased from Tk 10 lakh to a maximum of Tk 50 lakh. Under the existing law, the company has to pay a fine of Tk 10 lakh if the loan is given in violation of the rules. It has been amended to say that Tk 10 lakh or whichever is higher than the existing status of the loan released will have to be paid as penalty to every director and officer.

Mahbub Hossain also said that when a person is listed as a wilful defaulter, the Bangladesh Bank can prepare a list of wilful defaulters from the concerned agencies and impose a ban on foreign travel, ban on trade licences, Bangladesh Securities and Exchange Commission (BSEC), registrar of Joint Stock Companies and Firms (RJSC). This means that when he is identified as a wilful defaulter, he will be banned from doing any business or going abroad.

If he does not repay within two months, a criminal case can be filed directly, he said.