corporate laws practices

7/26/2019 Corporate Laws Practices

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CORPORATE LAWS & PRACTICESTime allowed3 hours

Total marks100

[N.B. The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take

account of the quality of language and of the way in which the answers are presented. Different parts, if any, of

the same question must be answered in one place in order of sequence.]

Marks

1. (a) Foreign Investors, Mr. Jones and his 5 associates, a client of your CA Firm- desire toincorporate a Limited Company in Bangladesh with the view to investing USD 2 million inTextile Sector. They choose any one of the two following names for their proposed company;(a) JA Bangladesh and (b) Cleopatra Apparels Limited.As a senior articled student of the CA Firm, you were asked by your principal to inform the client

clearly with reference to appropriate legal provisions contained in the Companies Act 1994:i) How Jones & his associates will confirm that their proposed names are not identical. 3ii) After incorporation, what are the legal procedures which should be followed if your client

desires to change their company name in the future. 2iii) Whether your client would be able to choose the first name i.e. JA Bangladesh for their

proposed Limited Company? State the reasons. 3iv) What type of limited company should you suggest to Mr. Jones to incorporate i.e. Private

Limited Company or Public Limited Company? Why? 3

(b) Can a company hold 2 AGMs in one English calendar year? Discuss. 5

2. A Company Limited intends to change its name. It has availed two separate loans from B CompanyLimited and C Company Limited. In such situation what is the procedure to be followed forchanging the name of the company? Will the right of the lenders be any way affected by the changeof name of their borrowing company? 7

3. The 157thMeeting of the Board of Directors of ABC Company Limited was scheduled to be held

on 16thNovember 2014 at 11.00 am at Head Office to discuss and resolve 15 nos. of agenda of

which agenda number 13, 14 & 15 are very important and sensitive for the company. The meetingwas started on time being required numbers of quorum were present (5 Directors were present out

of 7) and for some valid reason with the request of the members present in the meeting, the meetingwas adjourned immediately after the agenda no. 12 was resolved. The Chairman of the meetingdeclared the next date of adjourned meeting to be held on 20thNovember 2014 at 11.00 at the same

place to resolve the rest of the three agenda.

As a Company Secretary, you made a gentle reminder to all the Directors over phone about themeeting. The adjourned meeting was started on time and all the Directors were present. The twoDirectors who were absent in the original meeting, raised an objection that the notice was notserved. They reminded the chairman that as per articles of association of ABC Company Limited,notice must be served 3 days before the Board Meeting or any Adjourned Meeting and so themeeting has no legal validity. They also raised voice to cancel the meeting and to call a freshmeeting while chairman decided to continue the meeting.

You are asked by the Board to state the legal provisions contained in the Companies Act 1994 with

regard to the following:i) Whether calling of the adjourned meeting was valid? Explain. 4

ii) What is the remedy to the aggrieved Directors against the violation of articles of association bythe Chairman regarding serving of notice? Explain with reasons. 4

iii) Frame the time limitations prescribed in the Companies Act 1994 to serve notice in respect ofholding of: a) Board meeting b) Statutory Meeting c) General Meeting d) Extra OrdinaryGeneral meeting. 4

4. You are the Company Secretary of SRT Ltd., a Public Limited Company engaged in textile &garments business, where you are the witness of many inappropriate corporate politics inside theboard. As per the Articles of Association, the maximum number of directors is 9 and the board hascurrently 8 directors. Meanwhile, whereabouts of a Director Mr. Y is unknown for the last sixmonths. During the period of his absence, 4 legally valid Board meetings (meeting no: 123, 124,125 & 126) were convened. As directed by the Chairman, you have served notice to all the


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Directors except Mr. Y for the 127thno. of Board of Directors Meeting to be held on 17/07/2014 at

11.00a.m. where three special agenda were included among others:

* To declare the office of director Mr. Y is vacated and appointment of Mr. K in place of Mr. Ywho is a nephew of the powerful Chairman.

* Appointment of Mr. L as a new director who is a son of the Vice Chairman.* To appoint Director Mr. Q in SRT Ltd. in the position of Marketing Director at a monthly

salary & allowances of BDT 5,00,000/- with immediate effect.

In that meeting, Mr. Y was by chance present and raised his strong voice against the agenda whichhas concerned him. He said right now he (Mr. Y) is present in the Board and still he is a validdirector. 3 other directors supported Mr. Y and said that directorship of Y is valid and appointmentof director Mr. K is no longer required and illegal.The decision was a tie and finally Chairmanhad applied his casting Vote and resolved these agenda by declaring the office of Mr. Y as vacatedfrom the position as a director, appointed Mr. K as a new director and appointed director Q asMarketing Director at a monthly salary & allowances of BDT 5,00,000/- per month.

You are required to give your opinion regarding the actions of the board with reference to the legalprovisions contained by the Company Act 1994;

(i) Is the declaration by the board to vacate the office of director of Mr. Y was lawful? Explain. 4

(ii)

Is Mr. K a valid director? What is his legal position in the board? On what legal ground he wasappointed as a director? 4(iii)Is Mr. L a valid director? What is his legal position in the board? On what legal ground he was

appointed as a director? 4

(iv)Justify the appointment of director Mr. Q in line with appropriate legal provisions. 4

5. ABC Ltd. is a publicly traded company engaged in production and distribution of FMCG having yearlyturnover of BDT. 7,000 million and listed with DSE & CSE. Products of the ABC Ltd. are recognizedby different International bodies by certifications and maintain high qualities which are eligible to be

exported in the advanced countries. The Company in its 53rd Meeting held on 29.10.2015 (Thursday) at2.00 p.m. approved the following matters:

(i) Two directors of the board of ABC Ltd. Mr. X and Mr. Y have been authorized to travel toU.K. and France with the view to exploring the export opportunities of ABC product inEuropean Market. Initially, these two directors have contacted with Maya plc. a UK basedcompany and had several conversations with them over phone from Dhaka. Company expectsthat the directorsvisit to UK and France may be fruitful which will lead them to start exportand to boost up sale up-to BDT 9000 million within next year. In this regard company alsoapproved a budget of Taka 20 lac as foreign travelling expenses.

(ii) The Company has been doing banking with SB Bank Limited and approved to shift to KL BankLimited. KL Bank has offered ABC to take over entire loan outstanding balance with SB Bankwith a sanction of loan facility of BDT 1400 million. The present total loan outstanding withSB Bank is BDT 820 million. KL Bank Limited has also offered interest rate 1% less than theexisting rate of SB Bank.

(iii)

The company has approved its 3rdQuarter unaudited financial statements ended on 30

thSept 2015.

(iv)The Company has approved to shift some of its core departments (Marketing, Sales and R&D) fromHeadquarters, Motijheel, Dhaka to Savar, Dhaka which is 20 k.m. away from Headquarters.

(v) Company has approved to purchase 500 decimal land at Savar besides Dhaka-Aricha highway at avery cheap price of BDT 300 million from a Bangladeshi USA Citizen Mr. Z. The deal wasfinalized by the Chairman while visiting USA in the last month and the land may be used to set up anew factory in future. The current price of this land has been estimated to BDT 530 million. Theboard of directors has asked all to keep the matter as highly confidential and must not leak untilmaking any valid contract with Mr. Z.

As a Company Secretary of ABC Ltd, you are well aware that any material decision must be

communicated with DSE & CSE within 30 minutes through fax/email of making such decision underregulation 43 of the both DSE & CSE Listing Regulation. On the basis of the above 5 decisions of theboard, you are required to explain the materiality of the cases that requires immediate public disclosures. 10


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6. (a) You are in a discussion meeting with the Chairman, CEO and CFO of the Company to discussabout holding of the next 20thAGM which management expects to hold in February 2016. CFO

said that considering the profitability of ABC Ltd., only 5% cash dividend is projected. Chairman isconsidering to bring the following two agenda among others in the same board meeting where the

date of AGM will be declared:

(i) Shareholders may be aggrieved on the recommendation of 5% dividend. To convince the crazyshareholders and for smooth holding of 20thAGM, the Company may consider to pay BDT

2,000 in cash to each shareholder as entertainment allowance who will be present in person orby proxy at the AGM. In this regard, a memo will be placed before the board of directors forapproval.

(ii) Company may continue to appoint PQR & Co., Chartered Accountants for the 4th

term as itsStatutory Auditors and such a memo may be placed for board recommendation which will

finally be considered by the shareholders in the 20thAGM.

You are required to give your legal opinion on the above issues. 6

(b) What are the reasons for which a listed company can be delisted or suspended by the Dhaka StockExchange as per its listing Regulations in force? 4

7. The draft audited financial statements for the year ended 31st December 2014 of CD Bank Ltd. (a

schedule commercial bank) has been placed in the board meeting for authorization to issue. Thefinancial results depict that as per BSEL-III ,the total capital of the bank stood at BDT 7130 million(Paid up-capital BDT 4,000 million, Statutory Reserve BDT 1,830 million, Retained Earnings BDT 825million, 1% Provision of Loans & Advances BDT 475 million). The Risk Weighted Assets (RWA) of

Bank as per BASEL-III stood at Taka BDT 69,200 million and as per BRPD circular ref: 18 dated21/12/2014, the minimum required Capital Adequacy Ratio is 10% and as such the Risk Based Capitalrequirement is BDT 6,920 million. In a confidential note, the Risk Management Division (RMD) of thebank has informed to the Managing Director that some of big clients rating maybe downgraded in thenext year due to Middle East Crisis and RMD has forecasted that RWA may rise to BDT 73,500 in the

next quarter. Face value of share is BDT 10 per share. The majority of the members in the board opined20% cash divided while a few including chairman opined to keep the limit to 10% cash and 10% bonusas dividend.

(a) As a CFO of the Bank, chairman is seeking your professional advice as to how to resolve the dividenddecision as per Bank Companies Act 1991 considering the capital maintenance issue of the bank. 5

(b) Assume that, the RWA is 73,500 i.e. required capital maintenance increased to BDT 7,350 million.You are required to brief the board on dividend issue, Capital Reservation and future legalconsequences with reference to section-13 & 22 of Bank Companies Act1991. 5

(c) In another agenda, the Treasury Department has the following proposals for board approval:(i) to enhance the existing investment limit of BDT 900 million to 1800 million in capital market.

The existing limit has dried up and treasury had good performance in the capital market in thelast two years and Management has full confidence on Treasury Head.

(ii) The entire budget (enhancement) would like to invest in the securities of CSD Ltd. It is

mentioned here that that paid up capital of CSD Ltd. is BDT 5000 million.

As a CFO, you are also required to suggest the maximum amount of investment limit for thecapital market and the amount to be invested in CSD Ltd. in line with the provisions 26KA of

Bank Companies Act 1991. 7

Hints: As per BASEL -I I I , total capital means = Shareholders Equity + 1% General Reserve on

Loans & Advance + 50% Revaluation Reserve)

8. What aspects are to be taken into consideration by Bangladesh Bank while granting license to a financialInstitution? 5

9. (a) What do you mean by the surrender value of life insurance policy? 4(b) Mr. X had taken a Life Insurance Policy for 15 years for BDT1,50,000 and the premium payable

was BDT 12,000 per annum. X paid premium for three years and then stopped. The premium paidis BDT 12,000 x 3=36,000 and payable is BDT 12,000 x 15= 1,80,000. Calculate the surrendervalue of the above policy. 3

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