C&A Textiles’ managing director arrested in loan default case

Highlights:

• Failed to timely repay Tk20 crore loan from Union Capital
• Raised Tk45 crore through IPO in 2015
• The company's shares are traded under 'Z' category at the DSE
• Share price fell 7.14% to Tk2.6 per share after the news of the arrest
• Directors sold 1.22 crore ordinary shares without prior declaration

The Managing Director of C&A Textiles Ltd, Rukshana Morshed was arrested in Chattogram in a case filed over a defaulted loan.

Shahinuzzaman, officer-in-charge of Khulshi police station, Chattogram, told The Business Standard that Rukshana Morshed was arrested from Firingi Bazar on Thursday following a court order.

Sources at the police station said, C&A Textiles borrowed around Tk20 crore from Union Capital in 2013, but it did not repay the loan on time. Union Capital filed a case in 2019 at the money loan court (Artha Rin Adalat). A warrant was subsequently issued against Rukshana Morshed over the defaulted loan.

Chittagong-based company C&A Textiles, listed with the Dhaka Stock Exchange (DSE), floated 4.5 crore ordinary shares worth Tk10 each and raised Tk45 crore through an Initial Public Offering to purchase machinery, construct buildings and repay bank loans in 2015.

C&A Textiles' shares are traded under the "Z" category at the DSE. Unit share price of the company fell by 7.14% to Tk2.60 when news of her arrest was released. Its inaugural share price was Tk22.

On 7 June 2017, C&A Textiles announced a sudden shutdown of production for renovation work, and its office has remained closed since then.

Despite its legal obligations, the company has not provided any updates regarding its situation in the last two years. Annual financial reports have not been published, nor have any annual general meetings been held.

In the interest of investors, DSE officials visited the factory and the company's central headquarters in 2019 but found both premises closed.

On 29 July this year, the Bangladesh Securities and Exchange Commission (BSEC) found that C&A Textile's Managing Director, Rukshana Morshed, Director, Sharmin Akther Lovely and Bangladesh Shoes Industries Limited had together sold around 1.22 crore shares of the company without prior declaration, earning around Tk12 crore from these sales.

Operations were suspended after the sales, and the company has been shut since then.

As a penalty for violating several rules, the securities regulator has imposed a Tk19 crore fine on the company's directors, also banning them from assuming the roles of directors at any other listed company.

The BSEC also requested the Bangladesh Bank to freeze the directors' bank accounts, including those of C&A Textiles' managing directors.

Moreover, the textile company could not submit a single directors' monthly shareholding report between August 2017 and August 2018, and also breached rules by failing to respond to queries sent by BSEC and DSE.

Shareholders have also received no updates about the company since 2017. The last time the company had declared a dividend for their shareholders was 2016.

According to the most recent shareholding data released in July 2017, the owners' share in the company was only 22.14%.