WHETHER CITY BANK NA CAN ISSUE ZERO COUPON BONDS THROUGH PRIVATE PLACEMENT?

WHETHER BANK 1 CAN ISSUE ZERO COUPON BONDS THROUGH PRIVATE PLACEMENT?

We have perused the Societies Registration Act 1860. The Act does not place any restriction upon a Society restraining it from issuing zero coupon bonds or any other types of bonds.

The Securities & Exchange Ordinance 1969 was created to provide for the protection of investors, regulation of capital markets and issue and dealings in securities. According to Section 2 of the Ordinance, the definition of “securities” includes bonds and the definition of “issuer” means any person who has issued or proposes to issue any security and the definition of “person” includes an association or body of individuals whether incorporated or not, a company and every other artificial juridical person. Zero coupon bonds being a one of the variety of bonds, falls under the definition of “securities”. BANK 1 being a registered society is an artificial juridical person and as such falls under the definition of “issuer”.

Usage of the word “issuer” throughout the Ordinance implies that any issuer may issue securities. Chapter – IA of the Ordinance places certain restrictions upon the issue of capital (which according to Section 2 (ff) means the issuing of any securities whether for cash or otherwise) by a company incorporated in Bangladesh including obtaining the consent of the Securities & Exchange Commission (“SEC”) before such issue. But the Ordinance does not restrict or place any such restriction upon the issuance of securities by an artificial juridical person such as BANK 1. As such, we are of the opinion that BANK 1 may issue zero coupon bonds through private placement without any restriction and even without the need to seek the consent of SEC. However, to be on the safe side, BANK 1 should obtain necessary clarification from SEC regarding the issue.

WHETHER CITY BANK NA CAN ISSUE ZERO COUPON BONDS THROUGH PRIVATE PLACEMENT?

We have perused the Bank Companies Act 1991. The Act does not place any restriction upon a Banking Company restraining it from issuing zero coupon bonds or any other types of bonds.

According to Section 2A (2)(a) of the Securities & Exchange Ordinance 1969, no company, whether incorporated in Bangladesh or not, shall, except with the consent of SEC, make an issue of capital in Bangladesh. Therefore, before issuing zero coupon bonds BANK 2 shall require to obtain the prior consent of SEC regarding the issue.

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