Scaling Your Company with 1000 Shareholders: Not a Dream—A Regulated Process

Making 1000 persons shareholders in a public limited company in Bangladesh, especially “initially” beyond the very first subscribers to the Memorandum of Association, typically involves a formal share issuance process that complies with the regulations of the Registrar of Joint Stock Companies and Firms (RJSC) and, crucially, the Bangladesh Securities and Exchange Commission (BSEC), particularly if the scale of the offer is deemed public. Here’s a breakdown of the likely procedures, keeping in mind that directly having 1000 subscribers sign the initial Memorandum of Association is highly impractical and not standard: Fundamental Point: An offer of shares to 1000 persons will almost certainly be considered a public offer under Bangladeshi regulations (generally, an offer to 50 or more persons triggers public offer rules). Therefore, the process will closely mirror an Initial Public Offering (IPO) or a similar regulated public issue. Procedure:

Incorporate the Public Limited Company:
Minimum Subscribers: The company must first be incorporated with the RJSC. A public limited company requires a minimum of seven subscribers to its Memorandum of Association (MoA) and Articles of Association (AoA). These are the very first shareholders.
Name Clearance: Obtain name clearance from RJSC.
Documentation: Prepare the MoA and AoA.
Registration: Submit all required documents, forms (including particulars of directors and subscribers), and fees to RJSC to obtain the Certificate of Incorporation.
Board Decision and Planning for Share Issue:
Once incorporated, the Board of Directors must pass a resolution to issue shares to raise capital and accommodate the 1000 new shareholders.
Authorized Capital: Ensure the company’s authorized share capital (as stated in the MoA) is sufficient to issue the desired number of shares to these 1000 persons plus existing shareholders. If not, the authorized capital must be increased by passing a special resolution of shareholders and filing the necessary forms with RJSC.
Appointment of Issue Manager: The company must appoint a BSEC-registered merchant bank as the “Manager to the Issue.” The issue manager will guide the company through the complex process of a public issue, including due diligence, document preparation, and regulatory approvals.
Preparation of the Offer Document (Prospectus):
A detailed prospectus must be prepared as per the Companies Act 1994 and, more importantly, the BSEC (Public Issue) Rules, 2015 (and any amendments).
The prospectus will include comprehensive information about the company, its financials, the object of the share issue, risk factors, management details, and terms of the offer.
Valuation: Determine the issue price of the shares. This can be done via the “Fixed Price Method” or the “Book Building Method” (which has additional eligibility criteria).
Regulatory Approvals from BSEC:
Application to BSEC: Submit the draft prospectus and other required documents to the BSEC for review and approval to issue capital to the public.
BSEC Scrutiny: BSEC will thoroughly review the application and prospectus to ensure compliance with all regulations and to protect investor interests. They may raise queries or require revisions.
Consent for Capital Issue: Upon satisfaction, BSEC will grant consent for the public issue of shares.
Filing Prospectus with RJSC:
After BSEC approval, the final prospectus, signed by all directors (or their authorized agents), must be filed with the RJSC before it is circulated to the public or the intended 1000 persons.
The Offering Process:
Publication of Prospectus: The prospectus is made available to the potential investors (in this case, the targeted 1000 persons and, if a wider IPO, the general public).
Subscription Period: The share subscription is opened for a specific period. The 1000 identified individuals would need to formally apply for the shares during this period.
Bankers to the Issue: Designated banks are appointed to collect application money.
BO Accounts: All applicants (the 1000 persons) must have Beneficiary Owner (BO) accounts with a Depository Participant to receive shares in electronic form.
Allotment of Shares:
Targeted Allotment vs. Public Lottery:
- If the offer is structured and approved by BSEC as a specific offer where these 1000 individuals are guaranteed allotment (and they all apply correctly), the allotment will be made to them.
- If it’s part of a broader public offer and the issue is oversubscribed (more applications than shares offered), allotment for the general public portion (which these 1000 individuals might fall into if not under a specific reserved category) is often done via a lottery system supervised by BSEC and the stock exchanges. Getting a specific 1000 people shares in an oversubscribed general IPO can be challenging unless they qualify under a specifically approved quota (which is uncommon for 1000 distinct retail individuals without a defined category like “employees” if an employee stock option plan is part of the IPO).
BSEC Approval of Allotment: The allotment process and list are often subject to BSEC oversight or approval.
Refunds: If shares are not allotted or fewer shares are allotted than applied for, the excess application money is refunded.
Post-Allotment Compliances:
Filing Return of Allotment: File a “Return of Allotment” (Form XV) with RJSC within the prescribed time, detailing the names, addresses, and number of shares allotted to each of the 1000 new shareholders.
Crediting Shares to BO Accounts: The allotted shares are credited to the respective BO accounts of the 1000 shareholders.
Issuance of Share Certificates (less common now): While physical share certificates can be issued, shares are now predominantly held in electronic (dematerialized) form.
Updating Register of Members: The company must meticulously update its Register of Members with the particulars of the new 1000 shareholders.
Listing on Stock Exchange(s) (If a Public IPO):
If the shares were issued through a public offering intended for public trading, the company will proceed to list its shares on the Dhaka Stock Exchange (DSE) and/or the Chittagong Stock Exchange (CSE). This involves an application to the exchange(s) and signing a listing agreement.
Key Considerations for 1000 Shareholders:
Regulatory Burden: This process involves significant regulatory compliance, time, and cost.
Role of Intermediaries: Engaging competent issue managers, legal advisors, and other intermediaries is essential.
Nature of the 1000 Persons: If these 1000 persons are, for example, employees under an Employee Stock Option Plan (ESOP) that is part of the IPO, there are specific rules and disclosures for that. If they are just 1000 distinct individuals from the public or a pre-identified group, the standard public issue rules will largely apply to ensure fairness and transparency.
Continuous Compliance: Once the company has a large shareholder base, it must adhere to ongoing compliance requirements for public limited companies, including regular reporting, holding annual general meetings (AGMs), and corporate governance norms.
Given the current date (May 2025), it is imperative to consult with legal and financial professionals in Bangladesh who are up-to-date with the latest BSEC circulars, rules, and RJSC procedures to ensure full compliance for such a significant share issuance. An offer to 1000 individuals is not a simple private placement and will be treated with the diligence of a public issue by the regulatory authorities.