corporate laws and practice
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Summary of Corporate Laws and PracticeApplication Level
Prepared By:Amitav Deb NathArticled Student
ACNABIN
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Companies Act, 1994
1. What do you understand by certificate of incorporation of a company? What are the principal
documents to be filed for the purpose of incorporation of a company? [Nov-Dec10]
The certificate issued by the registrar after a company is registered is called the Certificate ofincorporation. Section 25 of the Act states that the Certificate about the following matters:
1. All the requirements of the Act have been complied with respect of registration and matters
precedent and incident thereto;
2. The association is a company authorized to be registered and duly registered under the Act; and
3. The legal existence of the company begins from the date of issue of the certificate.
To obtain a certificate of incorporation the following documents need to submit:
1. Memorandum of association signed by each subscriber and dated.
2. The signature must be witnessed by a third party.
3. Articles of association signed, dated and witnessed as same subscribers.
4. A statutory declaration that all the legal formalities have been complied.
5. Notice of situation of registered office.
6. Particulars of directors, managing agent and Manager
7. A list of persons who have consented to become directors.
8. A written consent of the directors to act as such.
9. Thereafter, the proper stamp duty for registration has to be paid and the register shall enter the
name of the company on the register of the companies and issue a certificate of incorporation.
2. What conditions are to be fulfilled before a company commences business? [Nov-Dec10]
A public company, having a share capital and issuing a prospectus, cannot commence business until the
Registrar issues a certificate known as the "Certificate of Commencement of Business". This certificate isissued after the following formalities have been complied with:
i. The minimum subscription has been raised.
ii. Every director has paid the money payable on application and an allotment for the shares taken
up by him.
iii. No money is repayable for failure to obtain stock exchange recognition for the shares, where
such recognition was promised.
iv. A duly verified declaration by a director or the secretary has been filed with the Registrar that
the above requirements have been complied with.
However, a public company having share capital but not issuing a prospectus will get the
commencement certificate if the following conditions are fulfilled:i. A statement in lieu of prospectus has been filed with the Registrar.
ii. The directors have paid the money due from them on account of shares.
iii. A declaration by a director or the secretary has been filed with the registrar stating that
condition (b) has been satisfied.
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3. How far contracts entered into by a company before the commencement of business are binding
on the company? [Nov-Dec10]
A company cannot be bound by a contract which was made on its behalf by any Person (including a
promoter) before the company itself had been formed. At the time when the contract is made, the
company is non-existent, it cannot after its formation ratify a contract to which it could not have been a
party when the contract was made [Kenner v Baxter (1866)].
In Kenner's case goods had been ordered for the company's business before the company was formed.
But the company is not bound by a contract merely because it later performs it, e. g. by accepting the
goods or services. The company will, of course be liable if it makes a fresh contract after the company is
formed; but there must be clear evidence that it intended to do so.
ln the circumstances, the simplest and safest course for a promoter is to bring the negotiations to the
point of agreement but to postpone any binding contract until the company is formed and can enter
into the contract for itself. However, if it is essential to some formula of assignment or notation to be
made after incorporation and when it does so, or if it does not do so within a specified time, he is then
to be released.
4. Discuss the power to alter the Articles of Association of a company. Mention the restrictions/
limitations, if any, on the nature and extent of the alterations that can be made. [Nov-Dec10]
Subject to the provisions of this Act and to the conditions contained in its memorandum, a company
may by special resolution alter, exclude from or add to its articles: and any alteration, exclusion or
addition so made shall be as valid as if originally contained in the articles, and be subject in like manner
to alteration, exclusion or addition by special resolution.
Notwithstanding anything in the memorandum or articles of a company, no member of the company
shall be bound by an alteration made in the memorandum or articles after the due on which he
becomes, member, if and so far as the alteration requires him to take or subscribe for more shares thanthe number held by him at the date on which the alteration is made, or in any way increases his liability
is at that date to contribute to the share capital of, or otherwise to pay money to the company.
5. Distinguish between a floating charge and a fixed charge. When does a floating charge
crystallize? [Nov-Dec10, Nov-Dec09, May-June08]
A fixed charge is one which creates legal interest of a specific property of the company or all the
properties of the company. Thus a fixed charge is equivalent to mortgage. The company can sell, lease
etc. of the property, subject to the right of the charge holder.
The floating charge does not amount to mortgage. The owner of such a property can deal with it and the
transferee gets it, free of the charge.
The floating charge crystallize on happening of the following events-
1. Inability of the company to pay interest for 3 months.
2. When the court issues warrant for confiscation properties for 7 days
3. When the receiver of the company is appointed on application of debenture holders.
4. When the liquidation process of the company commences.
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6. Define Member of a company [Nov-Dec10]
Every subscriber of the memorandum of company shall be deemed to have agreed to become a
member of the company and on its registration shall be entered as a member in its register of
members.
Every other person who agrees to become a member of a company, and whose name is entered
in its register of members shall be a member of the company.
7. "Directors are trustees as well as agents of the company". Discuss [Nov-Dec10, May- June05]
Directors are trustee and agent of the Company
Directors are trustees as well as agents of the Company. All activities, business and transactions of the
Company for its developments, promotions is done by the directors for and on behalf of the Company
like an agent. The articles of association empowered the Directors to do/run the Company. The directors
can do the followings for and on behalf of the Company as contained in the articles of association:
1. To run the business of the company;
2. To recommend dividend;
3. To enter into contract;
4. To maintain reserves;
5. To issue, forfeiture of share;
6. To issue debenture;
7. To Invest fund;
8. To take, redeem loan; and
9. To appoint officers & staffs and to pay their emoluments.
The above activities are done by the directors as agent of the Company.
Directors are to do all activities as trustee of the Company. All assets resources are to be kept safety and
to utilize them for the interest of the Company. Under any circumstances Directors are not allowed to
use asset of the Company for their own without the approval of the Board. Directors are to maintain
proper accounts as required by law and to do many other activities as trustee of the company, such as:
1. To run the Company efficiently;
2. To optimum utilization resources;
3. To save the Company from losses/damages;
4. To maintain proper books of accounts;
5. To call the AGM;
6. To maintain secrecy of the organization; and7. To refrain from doing such activities prohibited by the act.
In the above sense it is said Directors are trustees of the Company.
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8. Discuss the provisions of Section 233 of the Companies Act, 1994 regarding protection of interest
of minority shareholders. [Nov-Dec10, Nov-Dec08, May-June07, Nov-Dec02]
(1) Any member or debenture holder of a company may either individually or jointly bring to the notice
of the court by application that-
(a) the affairs of the company are being conducted or the powers of the directors are being
exercised in a manner prejudicial to one or more of its members or debenture holders; or
(b) the company is acting or is likely to act in a manner which discriminated or is likely to
discriminate the interest of any member or debenture holder;
(c) a resolution of the members, debenture holders or any class of them has been passed or is
likely to be passed which discriminates or is likely to discriminate the interest of one or more of
the members or likely to debenture holder.
(2) The Court shall, on receipt of an application under sub-section (1) send a copy thereof to the Board
and fix a date for hearing the application;
(3) If after hearing the parties present on the date so fixed, the Court is of opinion that the interest of
the applicant or applicants has been or is being or is likely to be prejudicially affected for reasons
specified in the application, it may make such order as prayed for or such other order as it deems fit
including a direction-(a) to cancel or modify any resolution or transaction ; or
(b) to regulate the conduct of the company's affairs in future in such manner as is specified
therein; or
(c) to amend any provision of the memorandum and articles of the company.
9. In which ground the Registrar of Joint Stock Company can present a petition for winding up a
company? [Nov-Dec10]
Petition for winding up by the Registrar:
Under the following grounds as contained in Section - 197(b) the Registrar of Joint Stock Companies and
firms can present a petition for winding up a company as per Section-204 of CA 1994:i. That the business of the company is being conducted with intent to defraud its creditors,
members, any other persons or otherwise for a fraudulent or unlawful purposes; or
ii. That the persons concerned in the formation of the company or the management of its affairs
have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the
company or towards any of its members; or
iii. That the members of the company have not been given all the information with respect to its
affairs which they might reasonably expect.
10. Define a foreign company as envisaged under Section 378 of the Companies Act, 1994. What are
the documents to be delivered to the Registrar of Joint Stock Companies by foreign companies
carrying on business in Bangladesh? [Nov-Dec10, May-June09]
When a company which is incorporated outside Bangladesh but establishes business in Bangladesh with
same name and nomenclature with or without a place of business in the country, it is regarded as a
foreign company in Bangladesh.
Documents to be delivered
According to section 379, if foreign companies establish a place of business in Bangladesh shall, within
one month of the establishment of the place of business, deliver the following to the Registrar for
registration:
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1. A certified copy of the charter or statutes or memorandum and articles of the company or other
instrument constituting or defining the Constitution of the company; and if the instrument is not
written in Bengali or English language, a certified Bengali or English translation thereof;
2. The full address of the registered or principal office of the company;
3. A list of the directors and secretary, if any, of the company;
4. The name and address or the names and addresses of one or more Persons resident in
Bangladesh, authorized to accept on behalf of the company service of process and any notice or
other document required to be served on the company
5. The full address of the office of the company in Bangladesh which is to be deemed its principal
place of business in Bangladesh.
11. Define a Company and mention its essential characteristics. [May-June10]
A company in ordinary non-technical sense however, means an association for attaining some common
objectives which may be with or without profit.
Essential characteristic:
1. A company is regarded by law and it has a legal personality;2. A company has perpetual succession;
3. The liability of the members of a company is limited;
4. A company is required to comply with various statutory obligations regarding management.
12. Distinguish between Holding Company and Subsidiary Company what are the relationships
between the two? [May-June10]
Holding Company
When a company acquires controlling interest in the affairs of another company or companies, it is
known as the holding company. The Companies Act in its definition clause at section 2 clarifies, interalia,
that the holding of such controlling interest should take all or one of the following forms:1. its assets may consist in whole or in part of shares in another company;
2. such shares or other interests may be held either directly or through a nominee.
3. such interest should be in the form of holding more than fifty percent of shares or voting rights
in that other company.
4. such voting right gives power directly or indirectly to appoint the majority of the directors in
that other company otherwise than by virtue of the provision of a trust deed.
Subsidiary Company
It is a company more than fifty percent of whose issued share capital or voting power is held by another
company or the majority of whose directors can be appointed by another company. A subsidiary
company may be a public or private company or not even be a company at all within the meaning of the
Companies Act. Where the shares of such a company are held as security by a company the ordinary
business of which is lending of money or where the majority of directors can be appointed by a
company by virtue of powers contained in a debenture trust-deed, the former company will not be
deemed to be a subsidiary company of the latter.
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13. State the rules relating to conversion of a public company into a private company. [May-June10]
According to section 232-
1. A public company, having not more than fifty members at the time of conversion, may be
converted into a private one by passing a special resolution altering its articles so as to exclude
provisions if any, in the articles of association applicable to public company and include therein
provisions applicable to a private company.
2. lf the company has secured creditors, their written consent shall have to be obtained before
passing a resolution as per provision of sub section (l) and the shares enlisted with the Stock
Exchange shall have to be de-listed.
14. What is a Memorandum of Association? State the contents of the Memorandum of Association.
[May-June10]
The memorandum of association is the charter /constitution of the company. It is the written
documents containing the object and power of the company upon which the company is incorporated
and the company cannot go beyond the limitation/contained in the M/A. It cannot change without the
consent of the court / Govt. The memorandum shall be:1. Printed
2. It shall be divided into paragraphs and numbered consecutively, and
3. It shall be signed by each subscribed (giving his address and description) in the presence of at
least one witness who shall attest his signature.
Contents of Memorandum of association:
1. Name clause: The memorandum shall state the name of the company with limited as the last word
in its name. It signature that the liability of the shareholders is limited. The liability may Limited by
shares or by guarantee.
2. Registered office situate clause: After the name the M/A usually state the name of the place where
the registered office of the company. The reasons why the place of its registered office is stated in the
M/A
It fixed the domicile of the company and determines jurisdiction of the court with regard to the
company
It provides some definite places at which notice and other processes may be served on it.
It also determines where the records of the company are to be kept
Changes the register office
3. Object clause: The third requirement of the M/A is object clause. It determines:
The power of the company and
It restricts the power of the company
4. Liability clause: The fourth particular in an M/A is a statement that the companys liability is limited.
In case of a company limited by shares is wound up the members of company will not be liable to
contribute more than the amount up paid on their shares But if the number of members is reduced in
case of Pvt. Limited co below two and in case of public limited co. below seven and the business carried
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on more than 6 months thereafter, then the member are personally liable irrespectively of limited
liability for all debts contracts during the period (U/S 222).
5. Capital clause: The amount of the nominal capital of the company and the number of the shares must
be clearly stated in M/A. There is or legal limit to the amount of the capital or of each shares. Alteration
of capital clause: may by usually. The article of association contains the power and procedure to alter
the capital clause. Otherwise a special resolution has to be passed in a general meeting to alter the A/A
in this regard. A notice in this regard shall have to be filed to the registrar within 15 days.
15. State the points of difference between the Memorandum of Association and the Articles of
Association of a Limited Company. [May-June10, May-June06]
The differences between the Memorandum and Article of Association are as follows:
Memorandum of Association Articles of Association
The memorandum is the fundamental
constitution of the Company determining itsObjectives
The Articles are rules regarding internal
management.
Memorandum is the main guideline of the
company
Any rules in the articles contrary to the
memorandum is invalid
Alteration of Memorandum is difficult, in some
cases it requires Court's permission
Alternation of article is easy; it requires a
special resolution only.
Memorandum defines the power of the Company Articles define the internal regulation and
Management process
Acts done by the company beyond the power of
the memorandum is void which cannot be
ratified
Acts done by the Company beyond the
articles can be ratified by the share holders
provided they are within the power of theMemorandum
There are 5 clauses There are long list of clauses
16. Define prospectus. State the contents of a prospectus. [May-June10]
A prospectus is an invitation to the public to purchase shares or debenture of a company. In other
words, a prospectus may be defined as any document that includes any notice, circular, advertisement
or other document inviting deposits from the public or inviting offers from the public for the
subscription or purchase of any share in, or debentures of a body corporate. Prospectus has the
following characteristics:
It is a document described or issued as a Prospectus.
It includes any notice, circular, advertisement inviting deposits from the public.
It is an invitation to the Public.
The public is invited to subscribe the shares or debentures of a company.
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Contents of the Prospectus
Every prospectus issued by or on behalf of a company shall state the matters specified in Part- I of
schedule 111 of the Companies Act 1994. According to the Part I of Schedule III, the following items are
to be included in the Prospectus:
1. The names, addresses, descriptions and occupations of the signatories to the memorandum and
the number of shares subscribed for them;
2. The number and classes of shares and the nature and extent of interest of holders in the
property and profits of the company;
3. The number of redeemable preference shares intended to be issued with the date of
redemption;
4. The rights in respect of capital and dividend attached to different classes of shares;
5. The number of shares fixed by the articles as the qualification of director;
6. Particulars regarding directors, managing agents, manager, secretaries and treasures etc;
7. Remuneration of the directors;
8. The minimum amount of subscription and amount payable on application;
9. Time of opening of subscription list;
10. Preliminary expenses incurred;11. Particulars regarding purchase of property;
12. Details of any premium or under-writing commissions paid;
13. Particulars of reserves including reserve capital;
14. Nature and extent of interest of every director and promoter;
15. Names and addresses of the auditors of the company;
16. The nature and extent of restrictions upon members at company meetings;
17. Restrictions upon Powers of the directors; and
18. Voting rights, capitalization of reserves and surplus of revaluation.
17. Explain how the share capital of a company can be increased? [May-June10]
(1) Where a company having a share capital, has increased its share capital, beyond the registered
capital, it shall file with the Registrar, in the case of an increase of share capital, within fifteen days after
the passing of the resolution authorizing the increase and the Registrar shall record the increase.
(2) The notice under sub section (1) shall include particulars of the classes of shares, affected and the
conditions, if any, subject to which the new shares are to be issued.
18. What are the consequences of the failure by a company to hold its Annual General Meeting?
[May-June10]
If default is made in holding annual general meeting of the company in accordance with section 81, the
company and every officer of the company who is in default, shall be punishable with fine which may
extend to ten thousand taka and in case of a continuing default, with a further fine which may extend to
two hundred fifty taka for every day after the first day during which such default continues.
19. Explain the provision of the Companies Act 1994 relating to appointment of the auditors of a
company. [May-June10]
There are the following rules as per the Companies Act 1994 dealing with the appointment of auditor:
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Every company shall appoint auditors at each AGM and the auditor will hold office until the next
AGM. Provided that, no person can be appointed as auditor unless his written consent has been
obtained prior to his appointment or re-appointment.
Every auditor will inform to the registrar in writing his acceptance or refusal within 30 (thirty)
days from the date of receipt of appointment.
A retiring auditor shall have right to be re-appointed at AGM, unless: He is not qualified for re-appointment.
He has given written notice for his unwillingness.
A resolution has been passed at that meeting appointing somebody instead of him.
20. Can a director be removed? How? [May-June10]
As per section 106 of the Companies Act 1994
(1) The company may be extraordinary resolution remove any share-holder director before the
expiration of his period of office and may by ordinary resolution appoint another person in his stead and
the person so appointed shall be subject to retirement at the same time as if he had become a director
on the day on which the director in whose place he is appointed was last elected director.
(2) A director so removed shall not be re-appointed a director by the Board of Directors.
21. State the steps involved in the formation of a company under the Companies Act 1994. [Nov-
Dec09, May-June 06]
Formation of a Company:
2 (two) or more persons (not more than 50) and 7 or more persons (unlimited) may form a Private or a
Public Limited Company respectively by subscribing their signature in the Memorandum of Association.
They may form -
a Company limited by shares;
a Company limited by guarantee;
an unlimited Company.
There are 3 stages for formation of a company -
i. Promotion;
ii. Registration;
iii. Commencement of business.
Promotion stages -
i. Promoters
ii. Clearance of name
iii. Sponsors' equity
iv. Consent of the Directorsv. Selection of objectives.
Registration:
i. Submission of Memorandum & Articles of Association.
ii. Payment of stamp duty & Registration fees.
iii. Obtaining certificate of incorporation.
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Commencement of business:
For a Private Limited Company, the business of the Company can be commenced after
getting the registration i.e. certificate of incorporation.
For a Public Limited Company, the Company shall obtain the certificate of
commencement of business from the Registrar.
22. Discuss the disqualifications of Directors as laid down in section 94 of the Companies Act, 1994.
[Nov-Dec09]
Disqualifications of directors as per section 94 of the Companies Act 1994:
(1) A person shall not be capable of being appointed director of a company, if -
(a) he has been found to be of unsound mind by a competent court and the finding is in force; or
(b) he is an undischarged insolvent; or
(c) he has applied to be adjudicated as an insolvent and his application is pending; or
(d) he has not paid any call in respect of shares of the company held by him, whether alone or
jointly with others, and six months have elapsed from the last day fixed for the payment of the
call; or
(e) he is a minor.(2) A company may in its articles provide additional grounds for disqualification of a director.
23. Discuss the procedure of calling Annual General Meeting and Extraordinary General Meeting of a
company. State what businesses are transacted in an Annual General Meeting. [Nov-Dec09]
A general meeting shall be held (within eighteen months from the date of its incorporation and
thereafter once at least in every year) at such time (not being more than fifteen months after the
holding of the last preceding general meeting) and place as may be prescribed by the company in
general meeting.
Proceedings at General Meeting
Fourteen days' notice at least (exclusive of the day on which the notice is served or deemed to
be served, but inclusive of the day for which notice is given) specifying the place, the day and
the hour of meeting.
No business shall be transacted at any general meeting unless a quorum of members is present
at the time when the meeting proceeds to business
If within half an hour from the time appointed for the meeting a quorum is not Present, the
meeting, if called upon the requisition of members, shall be dissolved.
The Chairman selected among them by the Board of Directors shall preside as chairman at every
general meeting of the company. Provided that the Chairman and the Managing Director shall
not be the same person.
lf there is no such chairman, or if at any meeting he is not present within thirty minutes after
the time appointed for holding the meeting, or is unwilling to act as chairman, the members
Present shall choose someone of their number of be chairman'
The chairman may with the consent of any meeting at which a quorum is present, adjourn the
meeting from time to time and from place.
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Extra Ordinary Meeting:
All meetings of the shareholders other than the annual meetings or those provided for in the articles are
known as extra ordinary meeting. These meetings may be called by the directors either suo moto
or the requisition of not less than one-tenth of the shareholders and where the directors fail to call such
a meetings so requisitioned within the prescribed time limit, by the requisitions themselves.
Businesses that are transacted in an Annual General Meeting:
1. To receive, consider and adopt the Directors Report and the Audited Balance Sheet and the
Profit and Loss Account with Auditors Report thereon.
2. To declare dividend.
3. To elect Director (s)
4. To appoint the auditors and fix up their remuneration.
5. To transact any other business which can be transacted by ordinary resolution, with the
permission of the chair.
24. Name the mortgages and charges required to be registered compulsorily with the Registrar of
Joint Stock Companies. What is the effect of non-registration of such mortgages and charges?
[Nov-Dec09, May-June08]
The mortgages and charges those are required to be registered compulsorily with the Registrar of Joint
Stock Companies:
a) a mortgage or charge for the purpose of securing any issue of debentures; or
b) a mortgage or charge on uncalled share capital of the company, or
c) a mortgage or charge on any immovable property wherever situated or any interest therein, or
d) a mortgage or charge on any book debts or the company, or
e) a mortgage or charge, not being a pledge on any moveable property of the company except
stock-in- trade.
Due to non-registration of above mentioned mortgages and charges to be considered void and when a
mortgage or charge becomes void, the money secured thereby shall immediately become payable.
25. State the circumstances in which a company may be wound up by the Court. [Nov-Dec09]
Section 241 states the following circumstances under which a company may be wound up by the Court:
i. lf the company has by special resolution resolved that the company be wound up by the Court;
or
ii. lf default is made in filing the statutory report or in holding the statutory meeting; or
iii. lf the company does not commence its business within a year from its incorporation, orsuspends its business for a whole year; or
iv. lf the number of members is reduced, in the case of a private company below two, or, in the
case of any other company, below seven; or
v. lf the company is unable to pay its debts; or
vi. If the Court is of opinion that it is just and equitable that the company should be wound up.
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26. What are the procedures for reduction of share capital and how the same is confirmed? [Nov-
Dec09]
Reduction of share capital
The power to reduce capital must be given by the articles. If no such power, the articles may be changed
by a special resolution. According to section 59, the share capital may be reduced by:
a) reducing or extinguishing the liability of members for uncalled share capital; or
b) writing off lost share capital; or
c) paying off share capital which is in excess of the wants of the company; or
d) All these are to be done only by way approve by the court.
Procedure for Reduction of Share Capital
Reduction of capital is possible only by passing a special resolution and confirmation by the court. The
court would inquire into the objections, if any, raised by the creditors. In this respect the court settles
the list of creditors entitled to object and issues public notices (sec. 62). On hearing the objections, the
court may confirm the reduction on such terms and conditions as it may dam fit (sec. 64).
27. Discuss the requirements of law relating to filing of accounts of companies operating in
Bangladesh but incorporated outside Bangladesh [Nov-Dec09, May-June08]
(1) Every foreign company shall, in every calendar year-
(a) make out a balance sheet and profit and loss account or in the case of a company not trading for
profit, and income and expenditure account it the company is handling company, group accounts in
such form and consigning such particulars and including such documents, and under the provision of this
Act it would, if it had been accompany within the meaning of this Act, have been required to make out
and lay before the company in general meeting; and
(b) Deliver three copies of those documents to the Registrar:
Provided that the Government may by notification in the official Gazette direct that in the case of aforaging company or class of foreign Combines the requirements of clause (a) shall not apply, or shall
apply subject to such exceptions and modification as many be specified in the notification.
(2) If any such document as is mentioned in sub-section (1) is not written in Penal or English language,
there shall be annexed to it a certified translating thereof.
28. What documents, registers and books are maintained in a companys registered office? [May-
June09, Nov-Dec07, May-June04, May-June03, Nov-Dec02]
Books:
Statutory Books: The companies Act requires every company to keep the following books:
a) Register of members:
1. Name & address & occupation
2. Respective shares,
3. Date of registration as member,
4. Date at which any person ceased to be a member
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b) Register of Directors:
1. In case of individual director- name, address, nationality, occupation & particulars of
directorship,
2. In case of a corporation- corporate name, principal office and name, address & nationality of
each of its directors,
3. In case of a firm- name, address & nationality of each partner and the date on which each
became a partner.
c) Register of qualifying share of directors,
d) Register of debenture holders,
e) Register of mortgages and enter there in specific description,
f) Minutes of meetings,
g) Register of contracts,
h) Books of accounts:
i) Statement of receipts & payments,
j) Statement of sales & purchases,
k) Statement of assets &liabilities,
l) Cost records, if applicable.
Statistical books: (Sec. 36)
1. Share application & allotment,
2. Addition of shareholder,
3. Share transfer,
4. Dividend,
5. Interest on dividend.
29. Who can inspect those documents and books and take copies thereof? [May-June09, Nov-
Dec07, May-June04, May-June03, Nov-Dec02]
The books of account and other books and papers of every company shall be open to inspection duringbusiness hours by the registrar or by such other Government officer as may be authorized by the
Government in this behalf-
It shall be the duty of every director or other officer of the company to produce to the person
making inspection.
It shall also be the duty of every director and other officer of the company to give to the
inspection person all assistance in connection with the inspection, which the company may be
reasonable, expected to give.
Where an inspection of the books of account and other books and papers of the company has
been made under this section the inspecting person shall make a report to the Government.
30. State the provisions of the Companies Act, 1994 as to appointment, terms and remuneration of
Managing Directors [May-June09, Nov-Dec05, May-June03].
The managing director is a director who is entrusted with any substantial power of Management
The appointment of managing director:
The appointment of a managing director or of a whole time director can be made by any of the
methods:
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1. An agreement with the company
2. A clause in a memorandum or articles of the company
3. A resolution passed by a company in its general meeting
4. Resolution of the board of director
No company shall, after the commencement of this Act, appoint or employ any individual as its
managing director for a term exceeding five years at a time.
Power and duties of a managing directorThe power and duties of a managing director are specified in
the agreement with the company by which he is appointed
in the memorandum or articles of the company
in a resolution passed by the company in general meeting
a resolution by its board of director
31. What remedies are available to an applicant who has been induced to buy shares of a company
by a material mis-representation of facts in a prospectus? [May-June09, Nov-Dec03, May-
June08]
Remedies available to the shareholders for untrue statement in the prospectus:
In case of untrue and misleading information furnished in the prospectus its promoters and directors
will be held liable. The shareholders may claim to refund the value of shares allotted and the
Shareholders may claim demurrage for any losses incurred for such misstatement furnished in the
prospectus. But they cannot retain the Ave and claim the demurrage simultaneously.
32. What are the liabilities of contributories as present and past members in case of winding-up of a
company [May-June09].
Section 235 states that
1. In the event of a company being wound up, every present and past member shall be liable to
contribute to the assets of the company to an amount sufficient for payment of its debts and
liabilities and the costs, charges and expenses of the winding up, and for the adjustment of the
rights of the contributories among themselves, with the qualifications following, that is to say:-
i. A past member shall not be liable to contribute if he has ceased to be a member for one year or
upwards before the commencement of the winding up;
ii. A past member shall not be liable to contribute in respect of any debt or liability of the company
contracted after he ceased to be a member;
iii. A past member shall not be liable to contribute unless it appears to the Court that the existing
members are unable to satisfy the contributions required to be made by them in pursuance of
this Act;
iv. In the case of a company limited by shares, no contribution shall be required from any member
exceeding the amount, if any, unpaid on the shares in respect to which he is liable as a present
or past member;
v. In the case of a company limited by guarantee, no contribution shall be required from any
member exceeding the amount undertaken to be contributed by him to the assets of the
company in the event of its being wound up;
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vi. Nothing in this Act shall invalidate any provision contained in any policy of insurance or other
contract whereby the liability of individual members on the policy or contract is restricted or
whereby the funds of the company are alone made liable in respect of the policy or contract;
vii. A sum due to any member of a company in his character of a member, by way of dividends,
profits or otherwise, shall not be deemed to be a debt of the company payable to that member
in a case of competition between himself and any other creditor who is not a member of the
company.
2. In the winding up of a company limited by guarantee which has a share capital, every member
thereof shall be liable to pay the following amounts namely:
(a) The amount undertaken to be contributed by him to the assets of the company in the event
of its being wound up; and
(b) An amount to the extent of any sums unpaid on any shares held by him.
33. Discuss about the remedies available to a debenture holder when his/her debentures are in
jeopardy [May-June09].
If the company fails to pay interest or principal on the due date or fails to comply with any of the terms
and conditions under which the debenture was issued, the debenture holder can adopt any of thefollowing remedial measures:
1. He may file a suit for the recovery of money by sale of the assets which were charged for the
payment of the money.
2. He may file an application for the appointment of a receiver by the court.
3. He may himself appoint a receiver if the terms of the debenture entitled him to do so.
4. The trustees may sell the properties charged, if such a Power is given to them under the terms
of the debenture.
5. He may apply to the court for the foreclosure of the company's right to redeem the properties
charged for the Payment of the money.
6. He may present Petition for the winding up of the company.
34. Distinguish between a Private Ltd. Company and a Public Ltd. Company [May-June09].
Private ltd co. Public ltd co.
Members Minimum-02, Maximum-50 Minimum- 07, Maximum ltd by
share.
Transfer of share Share can only be transferred among
person.
No restriction of transfer of share.
Invitation of
subscription
Can not invite to general meeting Can invite to general
meeting
Statutory meeting
of Report
Statutory meeting of filling statutory
report to register of JSE in not
obligation.
After start of business the company
is bound to call statutory meeting
within 1 to 6 month of submit
statutory report.
Commencement of
business
Can start business only after getting
the certificate of incorporation
Can start business after getting the
certificate of commencement from
JSE
No of Directors At least 2 directors. At least 3 directors.
Consent of
Directors
No consent and certificate is to be
Required.
Consent and certificate is to be
required.
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35. What is the purpose of stating the "object clause" of a company in its memorandum? Can it be
altered? How? [Nov-Dec08, Nov-Dec04]
Objective Clause:
Objective clause is one of the important elements of Memorandum of Association. The main objects of
the company are disclosed clearly in the objective clause. The Companies Act 1994 requires disclosingthe main ' objectives relating to form a company under his Act. The main objects and objects incidental
are identified in the objective clause to enable the members of the company, its creditors and the public
to know the range of activities of the company. Without stating objective clause no company can be
registered under this Act.
A company can change the objective clause under the following circumstances (Section 12):
1. To carry on its business more economically and efficiently;
2. To attain its business operation by new and improved way;
3. To enlarge the area of operation;
4. To carry on some operation which will be more advantageous for the interest of the company;
5. To restrict, abandon any of its objects; and
6. To amalgamate with any other company or body.
Objective clause can be changed by passing a special resolution and having permission of the court.
36. What is the effect of carrying on business by a Company with less than the legal minimum
number of members? [Nov-Dec08]
If at any time the number of members of a company is reduced, in the case of a private company, below
two or, in the case of any other company, below seven and it carries on business for more than six
months, while the number is so reduced every person who is a member of the company during the time
that it so carries or business during that periods and is cognizant of the fact that it is carrying on
business with fewer than two members or seven members, as the case may be, shall be individuallyliable for the payment of the whole debts of the company contracted during that time and may be used
for the same without joinder in the suit of any other member.
37. What are the effects of irregular allotment of shares? [Nov-Dec08]
(1) An allotment made by a company to an applicant shall be voidable at the instance of the applicant
within one month after the holding of the statutory meeting of the company and not later or, in any
case where the company is not required to hold a statutory meeting or where the allotment is made
after the holding of the statutory meeting, within one month after the date of the allotment and not
later, and shall be so voidable notwithstanding that the company is in the course of being wound up.
(2) If any director of a company knowingly contravenes or permits or authorizes with respect to
allotment, he shall be liable to compensate the company and the allottee for any loss, damages or costs
which the company or the allottee may have sustained or incurred thereby:
Provided that Proceedings to recover any such loss, damages or costs shall not be commenced after the
expiration of two years from the date of the allotment.
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38. What is meant by the term "ultra Vires"? [Nov-Dec08, Nov-Dec07, May-June05]
Meaning of the term "ultra Vires":
Any transaction, activity or business done by the Company beyond the power of the Memorandum and
Articles of Association is "ultra vires" i.e. void. The Company cannot do anything outside the
memorandum of association.
39. Distinguish between member's voluntary winding up and creditor's voluntary winding up. [Nov-
Dec08]
Members' voluntary winding up: When the company is solvent and is able to pay its debts in full, in
which case it is not necessary to consult the creditors or call their meeting, then the company in general
meeting must appoint one or more liquidators for winding up the affairs of the company and fix his or
other remuneration. On such appointment, all the powers of the directors of the company come to an
end except in so far as the company in general meeting, or the liquidator, sanctions the continuance
thereof (Section 292).
Creditors' voluntary winding up: In the case of the creditors' voluntary winding up, the company is
obliged to convene a meeting of the creditors on the day on which the meeting for passing the
resolution for winding up is to be held. The company must send the notices of such meeting to the
creditors simultaneously with the notice of the company's meeting. The duty of the creditors of the
company is to cause a full statement of the position of the company's affairs, together with a list of the
creditors of the company and the estimated amount of their claims, to be laid before the creditors'
meeting to be held as aforesaid. They must also appoint one of their members to preside at the
meeting. At the same meeting, the creditors and the company may respectively nominate a person to
be a liquidator or the purpose of the winding up. lf they each nominate a different person, the one
nominated by the creditors shall be the liquidator unless, on an application of any director, member or
creditor of the company made within seven days after the date of the nomination by the creditors, theCourt orders that the person nominated by the company shall be the liquidator instead of or jointly with
the one nominated by the creditors (Section - 299).
40. Under what circumstances may a company limited by shares
(i) pay interest out of capital;
(ii) write off preliminary expenses? [Nov-Dec08, Nov-Dec04, May-June03]
Power of company to pay interest out of capital
i. Power of company to pay interest out of capital in certain cases where any shares of a company
are issued for the purpose of raising money to defray the expenses of the construction of any
works or building or the provision of any plant which cannot be made profitable for a
lengthened period, the company may pay interest on so much of that share capital as is for the
time being paid up for the period and subject to the conditions and restrictions in this and may
charge the same to capital as part of the cost of construction of the work or building or the
provision of plant.
ii. The writing off of preliminary expenses is the discretion of the company. The company may
amortize the preliminary expenses over several according periods as may be determined in the
Article of association or as per the decision of the Board of Directors meeting.
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41. Discuss the provisions of the Companies Act, 1994 as to the issue of shares at a discount [Nov-
Dec08, May-June05, Nov-Dec04]
Following rules relates to the issuance of shares at a Discount:
1.It should be an existing company which has issued share earlier;
2.Court permission must be taken and to be confirmed at Annual General Meeting;
3.Maximum rate would be 107, which is to be confirmed at Annual General Meeting;
4.The Company shall not issue share at a discount within one year from the date of commencement
of business;
5.The shares to be issued within 6 months from the date of the approval of the Court to issue share
at a discount.
42. What are the pre-conditions of reduction of share capital of a Company? [Nov-Dec08, May-
June03, Nov-Dec04]
Reduction of share capital:
As contained in section 59 of the companies Act 1994, any company limited by share if it is authorizedby its articles, by passing a special resolution, having approval from the Court can reduce the share
capital as follows:
By reducing or extinguishing the liability on any shares not paid-up;
Cancel any paid-up share capital which is lost or not represented on the assets;
Repay the capital, which is in excess of the wants of the company;
Reduce the share capital and shares as required by alteration of memorandum.
43. What do you understand by the pre-emptive rights of shareholders in respect of further issue of
shares? [Nov-Dec08]
Where the directors decided to increase the subscribed capital of the company by issue of further
shares within the limit of the authorized capital, such further shares shall be offered to the members in
proportion, to the capital paid up on the existing share held by such member, irrespective of class, at the
date of the offer. This is the pre-emptive rights of shareholders to get such offer.
44. What is the tenure of an auditor duly approved in an AGM of a limited company? [Nov-Dec08]
Every company shall appoint an auditor or auditors to hold office from the conclusion of annual general
meeting until the next annual general meeting and shall within seven days of the appointment, give
intimation thereof to every auditor so appointed.
45. Describe the provisions of the section 211 of the Companies Act concerning appointment and
termination of auditors. [Nov-Dec08]
Special notice shall be required for a resolution at an annual general meeting appointing as auditor a
person other than a retiring auditor, or providing expressly that a retiring auditor shall not be re-
appointed.
On receipt of such notice the company shall forthwith send a copy thereof to the retiring auditor.
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46. Discuss the provisions of section 150 of the Act about the Restriction on Commencement of
Business. [Nov-Dec08, Nov-Dec04]
Certificate of commencement of business: (Section 150)
A company (Public Limited) shall not commence any business or exercise any borrowing powers unless:
a) Shares held subject to the payment of whole amount thereof in cash have been allotted to an
amount not less than the minimum subscription;
b) Every Director of the company paid in cash each of the share held;
c) A certificate of compliance by the Company Secretary or a Director that above formalities have
been complied;
d) A statement in lieu of prospectus has been submitted where no prospectus is issued for
invitation to subscribe the share to the public.
47. Describe the legal positions of pre-incorporation contracts. What are the exceptions to those
contracts? [May-June08, May-June02]
Pre-incorporation contract
A company cannot be bound by a contract which was made on its behalf by any person and excluding apromoter before the company itself had been formed. The company cannot ratify any pre-incorporation
contract and the promoters will be personally liable.
In these circumstances, the simplest and safest course for promoter is to bring the negotiation to the
point of agreement but to postpone any binding contract until the company is formed and can enter
into the contract for itself. In this regard a fresh contract can be accorded by the company after the
incorporation.
48. What contracts are required to be made under the Seal of a company? [May-June08, May-
June03]
Use of common seal
The common seal of the company shall not be affixed to any instrument except by the authority of
resolution of the Board of Directors, and in the presence of at least two Directors and of the secretary or
such other person as the directors may appoint for the purpose, and those two directors and secretary
or other person as aforesaid shall sign every instrument to which the seal of the company is so affixed in
the their presence.
49. What is a prospectus? Do all the companies issue it? What could be an alternative to prospectus?
Write a few lines about it. [May-June08, May-June04, Nov-Dec-03]
Prospectus
A prospectus is an invitation to the public to purchase shares or debenture of a company. In other words
a prospectus may be defined as any document that includes any notice, circular, advertisement or other
document inviting offers from the public for the subscription or purchase of any share or debentures of
a body corporate.
No, all the companies do not issue a prospectus. Only the Public Limited Companies having permission
from the Securities and Exchange Commission may issue a prospectus.
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Alternative to a prospectus
As per Section-141 a Public Limited Company having a share capital and not issuing prospectus must at
least 31 days before the first allotment of shares or debentures, file with the Registrar for registration a
statement in lieu of prospectus. The statement must be in the form prescribed in schedule - IV of the
Companies Act-1994. Every private limited company which is converted to a public limited company
shall also a statement in lieu of Prospectus as per Schedule-V.
50. Who are authorized to make an application to the court for the winding up of a company?
Tabulate the difference between the winding up of a company and the dissolution of a
partnership. How does the winding up affect the position of servants and the Directors of the
company? [May-June08, Nov-Dec-02]
Application to the Court for winding-up:
According to Section 239, the winding-up of a Company may be done in any one of the following three
ways:
1. Compulsory winding up by court;
2. Voluntary winding up by the members or by creditors;
3. Voluntary winding up under the supervision of the court.
In above all cases winding up may be made by the application of:
i. Any member of the Company with the special resolution;
ii. Any member of the Company with the Extra-ordinary resolution;
iii. The regulatory authority in case of default in filing the statutory meeting, report, etc.
iv. Any creditors/members if the Company is unable to pay its debts.
Winding up and dissolution or a partnership firm
Point of difference Winding up of a company Dissolution of
partnership Firm
Meaning of winding
up/ dissolution
The activities of the
company is ended
Dissolution of
partnership among all
the partners
Related laws Companies act 1994 Partnership Act 1932
Liability of the owner Liability is limited Liability is unlimited
Distribution of assets As per companies Act As per partnership deed
Cause of winding up/
dissolution
By the death of a member
it is not wound up. Because
it has perpetual subsection.
Partnership will
dissolved by the death
of a partner
Winding up affecting the position of officers
As per Section - 252(3), a winding-up order by the court executed as a dismissal or discharge of the
servant of the Company. Such discharge relieves the servant from all obligations under his contract of
service. The power of the directors is also usually cease on the winding-up of a Company.
a) Misfeasance: Under section 331, if any promoter, director, liquidator or officer of the Company
has misapplied or retained money or property of the Company or has been guilty of misfeasance
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or breach of trust, the court may, on the application of the liquidator or of any creditor or
contributory, examine into his conduct and order him to repay or restore money or property or
to pay compensation.
b) Criminal Liability: Section-332 provides punishment for falsification, or fraudulent secretion of
any of the books, papers of securities of the Company which is being wound-up.
51. What is the effect of an "ultra vires" transaction as far as the company and its directors are
concerned? [Nov-Dec07, May-June05]
Effect of an ultra vires transaction:
The company and its Director's shall do all activities within the power of Memorandum and Article of
Association any transaction beyond the power is "ultra vires" and the transaction will not bind the
Company, effect of an ultra vires transaction relating to the Memorandum and Article of Association are
as follows:
1. Transaction beyond the memorandum.
2. Transaction beyond the article of association.
Transaction beyond the memorandum:
The transaction is ultra vires and void. It will not bind the Company and the Directors will be personally
liable. Transaction beyond the Articles:
The transaction is also ultra vires and Directors are personally liable, but if the transaction is incidental
or non-sequential then the transaction will be valid and binding on the Company.
52. Statutory Meeting is a must within a specified time for a new company. State the specified time.
What matters can be transacted in such meeting? [Nov-Dec07]
Every public company limited by shares and every company limited by guarantee and having a share
capital, must within a period of not less than one month and not more than six months from the date atwhich the company is entitled to commence business, hold a general meeting of members which is to be
called, the Statutory Meeting. In this meeting the members are discuss a report by directors, known as
the Statutory Report, which contains particulars relating to the formation of the Company.
53. State the modes of winding up of a company as per Company Act, 1994 [May-June07].
According to section 234, the winding up of a company, may be done in any one of the following three
ways:
1. Compulsory winding up by the Court
2. Voluntary winding up b), the members or by creditors
3. Voluntary winding up under the supervision of the court.
54. State the circumstances in which a company may be wound up by the court. [May-June07, May-
June04]
As per section 241, a Company shall be wound up if the Company:
i. Passed a special resolution for winding up of the company by court.
ii. Fails to furnish statutory report or fails to hold statutory meeting.
iii. Suspend its business operation for one year or fails to commence business within one year of its
incorporation.
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iv. Members reduced to less than 2 or 7 for Private & Public Limited Company respectively.
v. Unable to pay its debt.
vi. Court is satisfied that it is just and equitable to wind-up the Company.
55. Can a contributory present a petition for winding up of a company? When? [May-June07]
A contributory shall not be entitled to present a petition for winding up a company, unless
(i) either the number of members is reduced in the case of a private company, below two, or, in
the case of any other company, below seven; or
(ii) the shares in respect of which he is a contributory or some of them either were originally
allotted to him or have been held by him, and registered in his name for at least six months
during the eighteen months before the commencement of the winding up, or have devolved on
him through the death of a former holder;
56. What are the conditions that a contingent or prospective creditor has to fulfill for hearing of his
petition for winding up before the court? [May-June07]
The Court shall not give a hearing to a petition for winding up of a company by a contingent or
prospective creditors until such security for costs has been given as the Court thinks reasonable anduntil a prima facie case for winding up has been established to the satisfaction of the Court.
57. How many copies of Balance Sheet and Profit & Loss A/C and within how many days from the
date of AGM are to be filed with the registrar? Who can sign these? What are the consequences
of default? [May-June07]
As per section 190 of the Companies Act, three copies of the balance-sheet and the profit and loss
account or the income and expenditure account shall be filed with the Registrar, within thirty days after
Annual General Meeting.
The balance-sheet and the profit and loss account or the income and expenditure account signed by the
managing director, managing agent, a manger or secretary of the company or if there be none of these,by a director of the company.
If a company makes default in complying with the requirements of this section, it shall be liable to a fine
not exceeding one hundred taka for every day during which the default continues, and every office of
the company who knowingly and willfully authorizes or permits the default shall be liable to the like
penalty.
58. Are Balance Sheet and Profit & Loss A/C required to be filed with registrar - (1) If there is no AGM
held? When? (2) If the shareholders do not adopt the Balance Sheet laid before the AGM?
Explain why? [May-June07]
Where the annual general meeting of a company for any year has not been held, there shall be filed
with the Registrar within thirty days from the last day on which that meeting should have been held.
If the shareholders do not adopt the Balance Sheet laid before the AGM, a statement of that fact and of
the reasons therefore shall be annexed to the balance-sheet and to the copies thereof required to be
file with the Registrar.
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59. Who can authenticate the proceeding or a document of a company? Is the authentication of
document needed under company seal? [May-June07]
A document or proceeding requiring authentication by a company may be signed by a director, secretary
or other authorized officer of the company, and need not be under its common seal.
60. One of your prospective clients from USA is contemplating to start their business in Bangladesh.
The client requests your opinion over the legal position of opening their business in the form of
Liaison Office, Branch Office and forming a subsidiary in terms of: (i) legal steps; (ii) taxation and
(iii) remittances and employment. [Nov-Dec06]
Regulations relating to legal steps, taxation, remittances and employment of a Foreign Company:
As per section 378(a) of the Companies Act (CA) 1994, any Company incorporated outside Bangladesh
which, establish a place of business within Bangladesh shall be treated as a Foreign Company. The
following regulations are related to Foreign Companies:
Legal Steps as required by the CA 1994: Registration of foreign Companies:
As contained in Section- 379 a Foreign Company can be registered in Bangladesh. The ForeignCompanies, which after the commencement of this Act establish a place of business within Bangladesh
shall, within one month of the establishment of the place of business, deliver the following documents
to the Registrar for registration.
1. A certified copy of the charter or statutes or memorandum and articles of the Company or other
instrument constituting or defining the constitution of the Company; and if the instrument is not
written in Bengali or English languages a certified Bengali or English translation thereof;
2. The full address of the registered or principal office of the Company;
3. A list of the Directors and Secretary if any, of the Company;
4. The name and address or the names and addresses of one or more persons resident in
Bangladesh, authorized to accept on behalf of the Company service of process and any notice or
other document required to be served on the company;5. The full address of the office of the Company in Bangladesh, which is to be deemed to be its
principal place of business in Bangladesh.
Accounts of Foreign Companies
Every Foreign Company shall, in every calendar year make out a Balance Sheet, Profit and Loss Account,
Group Account (if it is a holding company) and such other documents and information as required by
the Act and deliver 3 copies of the same to the Registrar (section-380).
Obligation to state name, etc. of Foreign Company
Every foreign company shall,
a) in every prospectus inviting subscription in Bangladesh for its shares or debenture, state the
country in which the company is incorporated;
b) exhibit on the outside of every office or place where it carries on business, the name of the
company and the country of incorporation in legible English or Bengali Character;
c) Disclose the name of the company, country of incorporation in English and Bengali in all bills,
letter head, notices and other official publications (section 381).
As per section 388 the company shall submit a certified copy of the prospectus to the Registrar if the
company wants to issue prospectus offering to the public for subscription of shares/debentures.
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Other related regulations
The Company shall be registered with the Board of Investments (BOI) as a foreign company or a joint
venture company by paying prescribed fees to Government.
Clearance from the Office of the Environment
A clearance letter from the office of the Environment is to be obtained by paying adequate fees along
with complying with other formalities to the Government.
Obtaining a trade licenseA trade license is also to be obtained by paying prescribed fees from the City Corporation or Union
Porishad concerned as the case may be to run its business in any City corporation, Pouroshabha or
Union Parishad area.
TIN Number
The Company would require TIN number from the Income Tax Office concerned as per IT Ordinance
1984 & recurrent finance bill.
VAT registrationThe Company will be registered with the Divisional Officer, VAT and collect a certificate of VAT
registration, i.e., 'VAT-8' as per VAT Act 1991.
Taxation of Foreign Companies
Income Tax:
The Foreign Company may get special Tax benefit if it is located in Export Processing Zone (EPZ). In this
case, the Company will get lax exemption period for 10 years. No Income Tax will be deducted at source
from the income of the Company as well as from the import value of the Company. In case the company
is an export oriented one it will pay no Duties, Tax, VAT, etc. on import of raw materials. After the Tax
holiday period the Company will also enjoy 50% Income tax relief on its export earnings.
VAT:
The VAT rate for export of items of any company is Zero. But if the company sells its products locally it
will pay VAT as per VAT Act 1991 and amendments thereto.
Remittance and Employment
After registration of the Company by the Registrar, it will take permission from the Bangladesh Bank
through the Board of Investment for remittance from the overseas by way of loan, equity, etc. and for
remittance from Bangladesh for payment of dividend, interest etc. For recruitment of any foreigners in
the company, the company will take work permit of the employees from the Board of Investment. For
Bangladeshi employees no such permission is required to work in foreign companies.
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61. Your client is a listed company in both Dhaka and Chittagong Stock Exchanges. Board of Directors
of your client company decided to merge with another company. You are asked to advise your
client on the legal steps to follow in line with the regulatory requirements of relevant corporate
and regulatory authorities of Bangladesh. [Nov-Dec06]
Regulations relating to compromise for amalgamation/ Merger of Companies
A Company if it is authorized by its Articles may decide to merge with other Company by passing a
special resolution having permission from the Court.
Where a compromise or arrangement is proposed between two Companies the process of such
compromise or arrangement is to be conducted in a manner as the Court directs.
As per section 228(2) if a majority in number representing three-fourths in value of creditors or of
members as the case may be, present either in person or by proxy at the meeting, agree to any
compromise or arrangement, the compromise or arrangement shall if sanctioned by the court be
binding on all the creditors, members and the company.
As per section 228(4) a certified copy of the order of the Court is to be filed with Registrar. Where anapplication is placed before the Court for the sanctioning of a compromise arrangement purpose
between the companies in connection with a scheme for reconstruction of any company or companies
for the amalgamation of any two or more companies, and that under the scheme the whole or any part
of under taking and the property of the company concerned in the scheme (transferor company) is to be
transferred to another company (transferee company). In this regard the court may order that:
a) the transfer to the transferee company of the whole or any part of the undertaking and of the
property or liabilities of any transferor company;
b) the allotting or apportioning by the transferee company of any shares, debentures, policies, or
other like interests in that company to or for any person;
c) the continuation by or against the transferee company of any legal proceeding pending by or
against any transferor company ;d) the dissolution, without winding up, of any transferor company;
e) such incidental, consequential and supplemental matters as are necessary to secure that the
reconstruction or amalgamation shall be fully and effectively carried out.
A scheme or contract involves the transfer of shares or any class of shares in a company (Transferor
Company) to another company (Transferee Company). Within 120 days after making of the offer on that
behalf by the transferee company, the offers is to be approved by the holders of not less than 3/4th
in
value of the shared affected.
62. State the procedures of calling Annual General Meeting and Extraordinary General Meeting of a
Company State what businesses are transacted in Annual General Meeting. [Nov-Dec06]
Annual General Meeting
As per section 81(1) of the Companies Act 1994 every Company shall hold one Annual General Meeting
(AGM) of the Company in every Gregorian calendar year. But the period from one AGM to next AGM
shall not exceed 15 months. Every company shall hold its first AGM after incorporation within 18
months from the date of incorporation. But as per SEC regulations the AGM is to be held within 6
months from the end of its Accounting year.
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For calling AGM notice to the shareholders is to be given at least 14 days before the AGM, mentioning
the date, time, agenda and venue of the meeting therein. The annual report of the company is to be
accompanied.
Extra ordinary general meeting
As per Section-84, the above meeting can be called on requisition from holders of 1/10lh
members or1/10 holders of paid-up capital. If the Directors do not cause a meeting to be called within twenty-one
days from the date of the requisition being so deposited, the requisionist or a majority of them in value
may themselves call the meeting, but in either case any meeting so called shall be held within three
months from the date from the deposit of the requisition. Notice for holing the meeting is to be given at
least 21 days before the date of the meeting. The Agenda of the meeting is to be mentioned in the
notice.
Following businesses are generally transacted in the AGM
1. Adoption of annual financial statements and auditors' report thereon;
2. Declaration of Dividend;
3. Appointment of Auditors and fix their remuneration; ,
4. Appointment of Director(s) after requirements thereof:
5. Any other matter with the permission of chair.
63. How and in which meeting a special Resolution of a Company is passed? [Nov-Dec06]
Special resolution:
This is passed in a General Meeting by the three-fourth majority of the members present in person or by
proxy where proxy is allowed. Notice for which 21 days specifying the-intention to propose the
resolution is to be given before the date of the meeting. Special resolutions are necessary for the
following purposes:
i. To change the name of the Company;
ii. To alter the Memorandum of Association;iii. To alter the Articles of Association;
iv. To reduce the share capital;
v. To convert any portion of the capital, uncalled in to reserve capital;
vi. To appoint inspectors to investigate the company's own affairs;
vii. For winding-up of a Company voluntarily.
viii. To pay interest out of capital for raising money to meet expenses of construction
work;
ix. To convert public limited company to private limited company
64. Discuss the qualification and disqualification of a director of a company. How directors are
appointed? [Nov-Dec06]
Qualification of Directors:
Articles of Association of a Company usually fix the minimum number of shares which every Director
must subscribe in order to become a Director. The minimum number which is determined by the Articles
is known as qualification number of shares as contained in Section 97(1) of CA 1994. Every Director shall
hold that minimum qualification shares within 60 days or within the lime as may be specified in the
Articles whichever is earlier.
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As per Section 97(2), if after the expiration of the period mentioned in sub-section (1) any such
unqualified person acts as a Director of the Company he shall be liable to pay fine not exceeding Tk.200
per day for the period of holding as an unqualified Director under this section.
As per section 92 every person shall not act as a Director unless he has -
signed and filed with the Registrar to consent in writing to act as such Director and;
signed the Memorandum for a number of shares not less than his qualification shares, or taken
from the Company and paid or agreed to pay for his qualification shares.
Disqualification of Directors:
Following persons shall not be eligible for appointment as director: (Sec-94j:
An unsound mind, declared by a competent court;
An insolvent or an un-discharged insolvent;
A person applied to be adjudicated as an insolvent and his application is pending;
Any person fails to pay his shares money after it is called up and 180 days have elapsed from the
last day fixed by the call;
A minor;
Any other person/persons as may be prescribed in the article.
As per Section 91 of CA 1994 directors are appointed as follows:
Subscriber of Memorandum shall be treated as the first Directors;
Generally Directors are appointed at the AGM by the shareholders among themselves;
One-third of Directors shall retire by rotation in each year;
Existing Director may appoint a person as Directors to fill up any casual vacancy.
65. What are the difference types of resolutions envisaged in the Companies Act 1994? What are the
processes of passing a special resolution? [May-June06, May-June04]
Different type of resolutions:
i. Ordinary resolution
ii. Special resolution
iii. Extra-ordinary resolution.
Special resolution:
This is passed in a General meeting by the three-fourth majority of the members present in person or by
proxy if proxy is allowed, Notice for which specifying the intention to propose the resolution is to be
given before 21 days the date of the meeting.
Special resolutions arc necessary for the following purposes:i. To change the name of the Company;
ii. To alter the Memorandum of Association;
iii. To alter the Articles of Association;
iv. To reduce the share capital;
v. To convert any portion of the capital, uncalled in to reserve capital;
vi. To appoint inspectors to investigate the company's own affairs;
vii. For winding-up of a Company voluntarily.
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66. Who are authorized to make an application to the court for the winding up of a company? [May-
June06, Nov-Dec02, Nov-Dec01]
Application to the Court for winding-up:
According to Section 239, the winding-up of a Company may be done in any one of the following three
ways:
1. Compulsory winding up by court;
2. Voluntary winding up by the members or by creditors.
3. Voluntary winding up under the supervision of the court.
In above all cases winding up may be made by the application of:
i. Any member of the Company with the special resolution;
ii. Any member of the Company with the Extra-ordinary resolution;
iii. The regulatory authority in case of default in filing the statutory meeting, report, etc.;
iv. Any creditors/members if the Company is unable to pay its debts.
67. You are Company Secretary of a public limited company. In the coming month the company's
annual general meeting has to be held, for which the Board of Directors meeting needs to beconvened. Following items arc included on the agenda:-
Investment in an associated company;
Approval of the annual financial statements;
Issue of shares to new foreign shareholders;
Approval of new company logo;
Remuneration of the recently appointed Chief Financial Officer & Chief Executive
Officer; and
Recommendation of final dividend.
Some of the directors representing the foreign shareholders with 30% shareholding/representation on
the Board may not be able to attend the meeting. You have been asked by these non-resident
directors to get their approval on the decisions through circular resolution or by any other means.
Discuss on this suggestion in the light of the corporate laws and practices. [May-June06]
A Board of Directors meeting is required after end of the financial year of a Company and before the
Annual General Meeting is held. The main cause of the requirements of the Board of Directors meeting
is for the Approval of annual accounts, Recommendation of dividend, Proposal for appointment of
Auditors and to fix their remuneration, retirement & appointment of Directors, etc. which are to be
placed before the shareholders for approval in the AGM.
As per section 95 of the Companies Act 1994, the notice of the Board of Directors meeting is to be
served to the Bangladeshi address. But notice of such meeting can be served outside Bangladesh by Fax,
e-mail or otherwise as may determined by the Articles of Association of the Company.
The decision of the Board meeting of the Company is taken by the majority vote of the members of the
Board present which requires quorum. The quorum of the Board meeting is determined by the Articles.
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The absence of any members of the Board will not hamper the decision of the Board meeting, if quorum
exists.
In this case, the member(s) of the Board are living outside Bangladesh which represents 30% voting
power of the Board but not majority. It may be opined that the notice of the Board meeting is to be
served to their Bangladeshi address by Fax to the address of the Members of the Board. But prior
approval or any other kinds of approval is not required to hold the meeting or to take decision in the
Board meeting.
However, the Directors may send their opinion to the Board by fax, e-mail, phone or otherwise relating
to the agenda mentioned in the notice that may be placed before the Board for decision. Any other
procedure may be followed if the Articles of Association provides any guideline in this respect.
68. "All listed companies are public companies but not vice-versa" - Discuss the statement. [Nov-
Dec05, Nov-Dec03, Nov-Dec01]
Listing CompaniesAs per listing regulations clause 7(1), only the public limited Company can be listed with the Stock
Exchanges. As per Companies Act 1994, Securities of a private limited Company are prohibited for
transfer and it cannot be sold publicly. So, the Stock exchanges deal with those securities which are
transferable. So, no private limited Company is eligible for listing with any stock exchange but a public
limited Company is not mandatory to be listed. It is the discretion of the shareholder/sponsors public
limited company as to whether their Company will be placed to the Stock Exchanges for listing. So it can
be said that "All listed companies are public companies but not vice-versa."
69. What is prospectus? What do you know about registration of prospectus? [Nov-Dec05]
Prospectus:
A prospectus is an invitation to the public to purchase shares or debenture of a company. In other
words, a prospectus may be defined as any document that includes any notice, circular, advertisement
or other document inviting offers from the public for the subscription or purchase of any share or
debentures of a body corporate. Prospectus has the following characteristics:
1. It is a document described or issued as a prospectus;
2. It includes any notice, circular, advertisement to the public for sale of securities;
3. It is an invitation to the public;
4. The public is invited to subscribe the shares or debentures of a Company.
Registration of Prospectus:
Before publication of a prospectus inviting people to subscribe shares or debentures of a Company, a
copy of the prospectus must be delivered to the Registrar for registration on or before the date ofpublication. It should be signed by the Directors or proposed Directors of the Company or by their agent.
On the face of the prospectus delivered to the Registrar for registration, it should be stated that a copy
has been delivered for registration; and must contain a list of statements includ
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