Re: Legal opinion regarding “interest-concerned institution”.
We refer to your letter dated 23.06.2007 on the above subject.
From perusal of your letter and other documents it is apparent that Mr. X and Mr. Y were directors of Company 1. But their positions as directors were vacated due to some immoral activities on their part on 17.04.2007. Their some other business institutions were classified as per the CIB report of BANK 1. Mr. X and Mr. Y have 15.89% and 16.58% shares respectively in Company 1.
The question arises here whether the Company 1 can be defined as the “interest-concerned institution” of Mr.. X and Mr. Y.
Section 5 (CC) of the Bank Company Act, 1991 as amended by Act 23 of 2001 provided that unless a defaulting borrower is a director of a public company or holds more than 25% of the shares of such company, the said public limited company shall not considered to be an “interest-concerned institution”.
The said provision further provided that where the shareholding of a borrower does not exceed 20% shareholding of an institution other than a public limited company, the said institution shall not be considered to be an “interest-concerned institution”.
Since Mr. X and Mr. Y got only 15.89% and 16.58% shareholding of the Company 1Complex Ltd respectively, and since they are no longer directors in the Company 1, and their shareholding is less than 25%, the required shareholding in case of public limited company to be “interest-concerned institution”, where the concerned person(s) are not the directors of that company, as per Section 5 (CC) of the Bank Company Act, 1991, even if the company is a public company, Company 1 shall not be treated as “interest-concerned institution”.
In case of Company 1being a private company, the criteria to be deemed an “interest-concerned institution” requires that Mr. X and Mr. Y hold more than 20% shareholding of that company. As Mr. X and Mr. Y have only 15.89% and 16.58% shareholding respectively in Company 1, Company 1Complex Ltd shall not be treated as their “interest-concerned institution”.
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For: “The Lawyers & Jurists”