In the notice, the capital market regulators asked the Beach Hatchery MD to explain the company's position in seven days.

SEC officials said the action was taken as the company's failure in the payment of preference dividend affected the investors.

Before serving the notice the SEC had repeatedly directed the company to submit the status of dividend distribution as well as the compliance report. "But the company failed to show all its dividends to be distributed," a senior official of SEC said.

Beach Hatchery is the first company to introduce preferential shares in Bangladesh. In 2001, the company issued 80 lakh such shares and declared 15 per cent dividend.

The company was supposed to pay dividends amounting over Tk 1.15 crore. But in its compliance report submitted to the SEC on August 21, 2003 the company said, Tk 88 lakh was paid to the preferred shareholders within August 20.

However, both the individual and institutional investors lodged separate complaints with the capital market watchdog that the dividend warrants issues by Beach Hatchery were repeatedly dishonoured by the bank concerned.

SEC officials said the company had announced the book closure on April 6, 2003 and as per the securities law, the company was required to have completed distribution of all dividend warrants by June 6, 2003.

But the company failed to complete dividend distribution not only in due time but also within the extended period.

Bangladesh Krishi Bank (BKB) is the guarantor of the 15 per cent dividend declared by the company. The SEC in the meantime asked BKB to prepare for paying the dividends to preference shareholders in case the company defaults.

Beach Hatchery, a Satkhira-based company set up in 1995, raised the funds from the stock market mainly to finance expansion of land development, purchase of hatchery equipment and setting up of a nursery at Satkhira.