Companies Act 1994

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Md. Sayduzzaman Tuhin, S.F. Ahmed & Co, Mob:01552-639307,01740599898; E-mail:[email protected]

Chapter-1

The Companies Act, 1994

Question 1: Definition of Private Company & Public Company.

Ans : 1. PRIVATE COMPANY: According to section 2 (q) private company means a

company which by its articles-

i. restricts the right to transfer its share, if any;

ii. prohibits any invitation to the public to subscribe for its shares or debenture, if any;

iii. limits are number of its members to fifty not including persons who are in its

employment;

Where two more persons hold or more shares in a company jointly, they shall be treated as

single member. Private companies may be limited by shares or limited by guarantee. Three

cannot be a private company with unlimited liability.

2. Public Company: Section 2 states that public company means a company incorporated

under this Act or under any law at any time in force before the commencement of this

Act and which is not a private company.

Question 2: What are the privileges of a Private Company

Ans : There a number of privileges and exemptions allowed to a private limited company by

the Companies Act in different sections. Of these, the most important ones are listed below:

1. It may consist of two members only (section-5)

2. Statutory meeting and the connected statutory report are not applicable [section 88

(12)].

3. Two directors will suffice [section 90(2)].

4. Retirement provisions not applicable [ section 91(2)]

5. No need to file a statement in lieu of prospectus [section 91 (2)]

6. No restriction on allotment of shares [section [48 (13)]

7. No need to obtain a certificate of commencement [ section 150 (6)]

8. Submission of annual accounts to members not required [section 191 (5)]

9. Regulations 79 to 87 of Schedule-1 on retirement and rotation of directors are not

compulsory for inclusion in the articles of association of a private limited company.

Question 3: What are the difference between Private & a Public Ltd. Company?

Ans : Difference between public limited company and a private limited company:

Sl.

No. Point of Difference Public Ltd. Company Private Ltd. Company

1. Minimum nos. of members 7 2

2. Maximum Numbers of

Members

Limited by Share

50

3. Issuance of share in the public Shares can be issued Prohibited

4. Transfer of share Transferable Restricted to transfer

5. Listing Can be listed with stock

Exchanges

Cannot be listed

6. SEC regulations Are required to be complied Compliance are minimum

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Question 4: State the steps involved in the formation of a company under The Companies Act-

1994?

Ans : 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 Directors

(v) Selection of objectives.

Registration:

(i) Submission of Memorandum & Articles of Association

(ii) Payment of stamp duty & Registration fees.

(iii) Obtaining certificate of incorporation.

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.

Question 5: What conclude the certificate of incorporation?

Ans : That the Certificate of Incorporation is conclusive evidence about the following matter:

1. All the requirement 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.

3. The legal existence of the company begins from the date of issue of the certificate.

One the certificate is issued, the incorporation cannot be challenged even though there were

irregularities prior to registration.

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Question 6: What is the way of conversion of a Private Ltd. Company to a Public Ltd.

Company?

Ans : Conversion of a private limited company to public limited company-(section 231)

A private limited company having at least seven members can be converted into a public

limited company by altering its articles in such manner that they no longer include the

provisions which, under clause of subsection (1) of section 2 of the companies Act, are required

to be included in the articles of a company in order to constitute it a private company. Form

the date of such alteration the company ceases to be a private limited company and is

required to be submitted with the register a prospectus or a statement in lieu of prospectus

within a period of 30 days

Question 7: What is the way of conversion of Public Company into Privet Company?

Ans : Conversion of a public limited company to a private limited company

According to section 232

(1) A public limited company, having not more than 50 member of members at the time of

conversion, may be converted into a private limited company by altering its articles by

passing a special resolutions 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) If the company has secured creditors, their written consent shall have to be obtained

before passing a resolution as per provision of subsection (1) and the share enlisted

with stock Exchange shall have to be delisted.

Question 8: What is Memorandum of Association?

Ans : The Memorandum of Association is a document which contains the fundamental rules

regarding the constitution and activities of a company. It is the basic document which lays

down how the company is to be constituted and what work it shall undertake. The purpose of

the memorandum is to enable the members of the company, its creditors, and the public to

know what its powers are and what is the range of its activities. The memorandum contains

rules regarding the capital structure, the liability of the members, the objects of the company,

and all other important matters relating to the company. The memorandum is altered only

after certain formalities are observed.

Question 9: What is Articles of Association? Contents of Articles?

Ans : ARTICLES OF ASSOCIATION

The Articles of Association is a document which contains rules, regulations and bye-laws

regarding the internal management of the company. Articles must not violate any provision of

the memorandum or any provision of the Companies Act. The rules laid down in the articles

must always be read subject to the rules contained in memorandum.

Contents Articles

Articles of Association usually contain provisions in respect of the following matters:

a. Share capital, rights of shareholders, payment of commissions, share certificates.

b. Lien on shares.

c. Calls on shares.

d. Transfer of shares

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e. Transmission of shares

f. Forfeiture of shares.

g. Conversion of shares into stock.

h. Share warrants.

i. Alteration of capital

j. General meetings and voting rights of members.

k. Appointment and remuneration of directors, board of directors, managers and

secretary.

l. Dividends and reserves.

m. Accounts and audits.

n. Capitalization of profits

o. Winding up

Question 10: State the point of difference between the Memorandum of Association and

Articles of Association of a Limited Company?

Ans : The difference between the Memorandum and Article of Association are as follows:

Sl.

No. Memorandum Articles

01 The memorandum is the fundamental

constitution of the Company Determining

its Objectives.

The Articles are rules regarding Internal

Management

02 Memorandum is main guideline of the

company/ articles

Any rules in the articles contrary to the

memorandum is invalid.

03 Alteration of Memorandum is difficult, in

some cases it requires Courts permission

Alternation of article is casy; it requires a

special resolution only.

04 Memorandum defines the power of the

Company

Articles define the internal regulation

and Management Process.

05 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 the Memorandum.

06 There are 5 clause There are long list of clauses.

Question 11: Who is promoter? Describe the Position and remuneration of a Promoter.

Ans : Promoter

A promoter is a person who undertakes to form a company with reference to a give project and

to set it going and who takes the necessary steps to accomplish that purpose. A professional

man who forms a company a client is not a promoter, the client is, a person whether he is a

promoter or not depends upon the circumstance of each case. However, a person who takes a

conspicuous part in formation of the company is promoter.

A promoter may have three possible position:

1. He may be promoter to acquire the property for the company, in which case, all the

rules of agency would apply. Accordingly, any profit he may make will belong to the

company.

2. He may acquire the property himself and then decide to form a company and sell the

property to it, in which case no question of agency of trusteeship arises. He can make

where bargain he chooses without being under any obligation to disclose the profits.

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3. He may acquire the property with a view to result it to the company which he intends

to promote, in which case he becomes bound by the fiduciary obligation and if he

makes a profit he must disclose it to the company.

Promoter remuneration

A promoter is entitled to a reasonable remuneration. The following could be the modes of

payment:

i. The vendors may agree to pay him a commission on sale of their property to the

company.

ii. The promoter may purchase a property and sell in to the company at a profit.

iii. The promoter may be given deferred of founders shares full paid up.

Question 12: All listed companies are public companies but not vice- versa- Discuss the

statement.

Ans : Listing Companies

As per listing regulations clause 7 (1) only the Public Limited Company can be listed with the

Stock Exchange as per Companies Act. 1994, Securities of a private limited Company are

prohibited for transfer and it cannot be sold publicly. So, the Stock exchange deals 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 Exchange for listing. So, it can be said that. All listed companies

are public companies but not vice-versa.

Question 13: What is prospectus? What do you know about registration of prospectus?

Ans : Prospectus:

A prospectus is an invitation to the public to purchase shares or debenture of a company. In

other word, 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 of publication. 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 included in the prospectus. The registrar shall not register a

prospectus unless the prospectus contains all the required elements as per Companies Act,

1994, Public Issue Rules 1998, and other SEC regulations and the prospectus is accompanied

by the consent in writing of the person if any, named there in as the auditor, legal adviser,

attorney, solicitor, banker or broker of the Company to act in that capacity. No prospectus

shall be issued more than ninty day after the date on which a copy thereof is delivered for

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registration. If a prospectus is issued without delivering a copy thereof to the Registrar, the

Company and every person from those who have knowingly been a party to the issue of the

prospectus shall be punishable with a fine which may extend to five thousand taka (Section

138)

Question 14: List the financial contents of a prospectus.

Ans : Financial Condition to be incorporated in the prospectus:

(a) If the company had no revenues from operations in each of the last two years, the

companys plan of operations for the next twelve months shall be described in the

prospectus which shall, among others, include:

1. A discussion of its cash requirements;

2. A summary of any product research and developments;

3. Any expected purchase or sale of land;

4. Any expected change in the number of employees

(b) If the Company had revenue form operations in above period shall include the

following:

1. Resources of cash;

2. Expected capital expenditures;

3. Cause of changes of income, cost, operating expenses and net profit;

4. Seasonal aspects of business;

5. Loan taken by the company;

6. Taxation yet to be paid;

7. Operating and finance lease;

8. Payment to manager to the issue, underwriter.

Question 15: What could be an alternative to prospectus? Write a few lines about it.

Ans : 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.

Question 16: What are the documents to be prepared and submitted for registration with

RJSC.

Ans : For registration, the preparation and the filling of certain documents are necessary.

These documents are to be filled with the Registrar of joint Stock Companies together with

the requisite fees. The documents to be delivered are the following:

(a) Memorandum of association signed by each subscriber and dated. The signatures of the

subscribers must be witnessed by a third person, Each of the subscribers undertakes to

subscribe for one or more shares of the company.

(b) Articles of association signed dated and witnesses as for the Memorandum (and b the same

subscribers).

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(c) A statutory declaration of compliance by an advocate entitled to appear before High Court

who is engaged in the formation of a company or by a person named in the articles as a

director, manager or secretary of the company to the effect that the requirements of the act as

to registration have been complied with [Section 25(2)]

(d) Notice of situation of registered office (Sec. 77)

(e) Particulars of Directors, Managing Agent, Managers (Sec. 115)

(f) A list of persons who have consented to become directors (Sec. 92)

(g) A written consent of the Directors to acc (5.92). This does not apply to a private company.

Thereafter the proper stamp duty for registration has to be paid and the Registrar then enters

the name of the company on the register of companies and issues a certificate of incorporation.

The company then comes into existence as legal person.

Question 17: Regulation of schedule-1 to be included in Articles.

Ans : The article of association of a company may include all cr. any of the regulations

contained in the First Schedule of the Companies Act 1994. But whatever may be the case,

there are certain mandatory .. which must find places in the Arciles. Based on Section 17(2)

the following regulation of schedule -1 are compulsory for all companies, including private

companies.

No of Regulation Description

56 About meetings at different places and adjournment

66 On signature of proxies

71 Directors qualification shares

95 Defect in appointment not to invalidate acts of directors

96 Directors may pay interim dividend

105 Books of account to be at head office and open for directors inspection

108 Contents of profit and loss account

112 About appointment of auditors

113 to 116 Provisions for sending notices.

Question 18: What is stock? Distinction between Shares and Stock.

Ans : When all the shares of a company have been fully paid, they may be converted into

stock in a general meeting if so authorized by the articles [sec 53(1). The use of term stock

merely denotes that the company have recognized the fact of the complete payment of the

shares, and that the time has come when these shares may be assigned in fragments, which

for obvious reasons could not be permitted before Per Lord Cairns in Morris Vs. Aylmer.

Shares and stock are two methods of denoting the interest of a member of a company. The

difference between share and stock are stated below:

1. The shares of the same company are of equal nominal value. But stock may be divided

into unequal amounts. Thus Tk. 100 worth of stock can be divided into parts of Tk. 50

each.

2. Shares cannot be issued or transferred in fragments. Thus member cannot hold half of

a share. But as stock can be transferred in fragments.

3. Share may be partly paid. Shares can be converted into stock only when fully paid.

4. Stock cannot be issued when a company is initially formed. Shares re issued when a

company is formed.

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5. Shares are numbered consecutively. Stocks are not numbered. But the names of the

stock-holder are recorded in Books of the Company.

6. Shares can be directly issued to the whereas stock cannot be issued directly.

Question 19: What is a Debenture? Describe the characteristics of Debenture?

Ans : When the capital of the company is not sufficient to meet the needs of business of the

company, it can raise loan by the issue of what is known as debenture. So debenture

represents the loan of the company. In fact debenture is an instrument acknowledging

the debt by a company issued under its common seal and containing provisions as to

payment of interest and repayment of principal.

Characteristics of Debenture

1. Each debenture is numbered.

2. Each debenture contains a printed statement of the terms and conditions,

3. A debenture usually creates a floating charge on the assets of the company,

4. A debenture may create a fixed charge instead of a floating charge.

5. Sometimes debenture holders are given the right to appoint a receiver in case of

non-fulfillment of the terms of the debenture by the company.

6. Sometimes a series of debentures are issued with a trust deed by which trustees

are appointed to whom some or all the properties of the company are transferred

by way of security for the debenture holders.

Question 20: Describe the rights and remedies of debenture holders.

Ans : 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 the following remedial measures.

1. He may file a suit for the recovery of 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,

5. He may apply to the court for the foreclosure of the company right to redeem the

properties charged for the payment of the money.

6. He may present petition for the winding up of the company.

Question 21: Shareholders VS Debenture Holsters?

Ans :

1. A share holder has a proprietary interest in the company. A debenture holder is

only a creditor of the company.

2. Every share is included in the capital of the company. Debenture is a loan to the

company

3. Debentures generally have a fixed or floating charge upon the assets of the

company. Shares do not have any charge on the assets of the company because the

shareholders are the proprietors of the company.

4. A debenture holder is entitled to a fixed interest. Equity holder is entitled to

dividend on profit.

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5. Debenture holders get priority over shareholders when assets are distributed

upon liquidation.

6. Debenture interest is a charged against profit. The dividend on share are part of

profit.

Question 22: How Directors are appointed?

Ans : There are certain mandatory previsions which must be observed while appointing

directors in the case of public limited companies. For private companies, it is usual that the

articles provide the mode of appointment of the directors. But they have to look for the

provisions applicable both for the public as well as private companies. The provisions for

appointment of director in public limited companies are:

1. Every company shall have at last three directors [(sec.90 (1)]

2. Only natural persons can be appointed directors [(sec.90 (3)]

3. The directors shall be appointed by the members in general meeting [91 (1)(C)]

4. Causal vacancy may however, be filled up by the directors [91 (1)(C)]

5. The duration of office of a director shall be liable to determination at any time by

retirement in rotation [91 (2)].

6. A consent in writing by persons to act as directors must be filed with the registrar

[92 (1) (a)]

7. A consent of directors to take qualification shares must be filed with the register

or sign the memorandum of association by taking qualification shares [92 (1) (b)]

8. A signed consent to act as director should accompany the proposal for directorship

to the company (93).

9. A director away from Bangladesh for a consecutive period of a at least three

months may appoint his alternate director if so authorized by the article or by a

resolution of the general meeting (sec.101).

Question 23: Discuss the qualification and disqualification of a director of a company.

Ans : Qualification of Directors: Sectio 97

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 time as may be specified in the Articles whichever is earlier.

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.

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Disqualification of Directors: (Section-94)

Following persons shall not be eligible for appointment as director:

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/ six month

have elapsed from the last day fixed by the call.

- A minor;

- Any other person/ persons as may be prescribed in the article.

Question 24: Is it binding on a director to hold qualification shares?

Ans : Qualification shares of Directors

The Articles of a Company usually fix a minimum number of shares which every Director

must, subscribe in order to become a Director. This minimum number is known as the

qualification shares of Directors. It is the duty of every Director who is required by the

articles to hold a specified number of shares for qualification and who has not already

qualified himself accordingly, to obtain his qualification within 60 day after his appointment

or such shorter time as may be fixed by the articles. If after the expiration of the period

mentioned above any such unqualified person acts as a Director of the Company, he shall be

liable to a fine not exceeding two hundred taka for every day between the expiration of the

said period and the last day on which it is proved that he acted as a Director (both days

inclusive), Section -97(2).

Q 25: When office of a director stands vacated? [nd-10]

Ans : Vacation of the office of the Director

As per section 108 of the Companies Act, the office of a Director shall become vacant under

the following circumstances:

1. If he fails to obtain within the due time or at any time thereafter ceases to hold the

qualifications shares, if any, necessary for his appointment; or

2. If he is found to be of unsound mind by a competent court; or

3. If he is adjudged an insolvent; or

4. If he fails to pay calls money made on him in respect of shares held by him within six

months from the date of such calls being made; or

5. If he or any firm of which he is a partner of any private company of which he is a

director, without the sanction of the company in general meeting accepts or holds any

office of profit under the company other than that of a managing director or manager

or a legal or technical adviser or a banker; or

6. If he absents himself from three consecutive meeting of the Directors or from all

meeting of the Directors for a continues period of three month. Whichever is the longer,

without leave of absent from the Board of Director; or

7. If he or any firm of which he is a partner or any private company of which he is a

director accepts a loan or guarantee from the company in contravention of section 103;

or

8. If he acts in contravention of section -105.

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Q 26: Explain briefly the procedures of rotation of director.

Ans : Rotation of Directors

(1) At the first general meeting of the company the whole of the directors shall retire from

office, and at the general meeting in every subsequent year one-third of the directors

for the time being or, if their number is not three or a multiple of three then the

number nearest to one-third shall retire from office.

(2) The Directors to retire in every year shall be those who have been longest in office

since their last election, but as between persons who become directors on the same day

those to retire shall (unless they otherwise agree among themselves) be determined by

lottery.

(3) A retiring director shall be eligible for re-election.

(4) The company at the general meeting at which a director retires in manner aforesaid

may fill up the vacated office by electing a person thereto.

(5) The directors shall have power at any time and from time to time, to appoint a person

as an additional directors who shall retire from office at the next following ordinary

general meeting but shall be eligible for election by the company at that meeting as an

additional director.

Q 27: State the provisions of companies Act. 1994 as to appointment of Managing Director.

Ans : Appointment of the Managing Director

The Managing Director is normally appointed by the shareholders in the general meeting of

the Company amongst the members of the Board of Directors. The first Managing Director is

appointed by the signatories of Memorandum of Association.

As per section 109 of the CA 1994 no Public Company, no Private Company which is a

subsidiary of a Public Company shall after the Commencement of this Act, appoint any person

as a Managing Director, if he is a Managing Director or Manager of any other Company.

Provided that no appointment shall be made to any person as the Managing Director of the

Company without the consent of the shareholders in the General Meeting.

As per Section 110 no Company shall appoint or employ any individual as its Managing

Director for a term of exceeding five years at a time.

Appointment of the Managing Director of Banking Companies:

As per Banking Companies Act 1991 and Financial Institution Act. 1993 Managing Director is

appointed as contractual employee. Any person who has at least 10 years of experiences in the

line of Bank and Financial institutions with well conversant for Managing the Bank or

Financial Institutions is eligible for appointment as the Managing Director, following rules to

be complied with.

1. Term of appointment will be three years and will be eligible for reappointment.

2. The Managing Director shall not be a shareholder of the bank.

3. Prior approval of Bangladesh bank should be taken for the appointment of the

Managing Director.

4. Terms and condition of appointment including salary and allowances and other

benefits to be specified and to be informed to the Bangladesh Bank for approval.

5. The Managing Director will not be eligible for any special bonus.

6. A person aged over 65 years will not be appointed as the Managing Director.

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Question 28: Directors are trustees as well as agents of the Company. Discuss.

Ans : 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

or 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

9. To appoint officers & staffs and to pay their emoluments.

The above activities are done by the directors as agent of the Company.

Director 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

7. To refrain from doing such activities prohibited by the act.

In the above sense it is said Directors are trustees of the Company.

Question 29: Discuss the position, powers and liabilities of directors.

Ans : Legal position of Directors.

There are different views about the legal position of Directors. They have been described

sometimes as trustees of the company and sometimes as its agents. Neither view is wholly

correct but both contain elements of truth.

Fiduciary Position:

It is generally agreed that the Directors occupy a fiduciary position in relation to the

Company. They must make full disclosure of all material facts of the Company.

Officers:

The Section 2(i) (o) of the Companies Act provides that a Director is an officer of the Company.

Power of Directors

Directors derive their power and authority from two sources (i) the Articles of Association of

the Company and (ii) the Companies Act.

The articles of association generally contain a list of the powers, which may be exercised by

Directors and the limitation on those powers.

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All acts and things done by the Board of Directors, within the powers given to it by the

articles, are valid and binding on the company.

It may be noted that a Director individually has no authority over the affairs of the Company

except as regards matters, which have been specifically delegated to him by the Board.

Liabilities of Directors

The liabilities of Directors may be analyzed with reference to liability of Directors to third

parties, liability to the company, liability for breach of statutory duties and liability for acts of

his Co-Directors. Directors, liability may be civil liability, criminal liability and unlimited

liability.

Civil Liability

The directors may, under certain circumstances, be liable to pay compensation to the

Company and to outsiders, such as:

1. Untrue statements in the prospectus.

2. Ultra vires acts.

Criminal liability

For certain breaches of duty the Companies Act imposes criminal liabilities upon Directors

such as:

1. Untrue statements in prospectus, failing to keep certain register, falsification of books

and reports etc.

Question 30: Section 103 lays down about Directors Loan- Rewrite the contents in your way.

Ans : Loan of Directors

Section 103(1) of CA 1994 states that no company other than a lending company mentioned

below shall make any loan or give any guaranty or any security in connection with a loan

made by third party to

a) Any Director of the lending company

b) Any firm in which any Director of the lending company is a partner;

c) Any private company of which any Director of the lending company is a Director or

Member;

d) Any public company, the Managing agent, Manager or Director where of this

accustomed to act in accordance with the directions of any Director of the lending

Company;

However the loan may be given in case of banking company or the loan is approved by the

Board and AGM.

Question 31: What documents, register and books are to be maintained in a companys

registered office?

Ans : Books of Accounts, Documents Registers are to be maintained

As per Section181 following books of Accounts, records are to be kept by the Company.

Records relating to:

1. All receipts and payments

2. All purchase and sales;

3. All assets and liabilities;

4. Records relates to the production, process, distribution, wages and overhead;

5. Books and accounts and records are to be kept and retained for at least 12 years for the

Company;

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6. Penalty for non compliance is six months imprisonment or with fine of Tk. 5,000 or

with both:

In addition to above following documents are also to be maintained by the company:

A register of members

A register of minutes

Question 32: Who can inspect all those documents and books and take copies thereof? What do

you know about time limit, if any, in this regard?

Ans : Inspection of books of accounts etc. of companies, Section -182

The books of account, records and papers of every company shall be kept open for inspection

during business hour by the Registrar or by such other Government officer as may be

authorized by the Government in this behalf.

The inspecting person may, during the course of inspection made or cause to be made copies of

books of account and other books as he deems to be required.

There is no time limit for such inspection other than only the inspection is to be made or the

books of accounts to be kept open during business hour.

Question 33: Returns to be filed and the time from?

Ans : Companies Act 1994 is the prescription to guide and control the activities of the

registered companies. It also, in its text and spirit, exercises some protection to the

shareholders, in that it requires some returns to. be filed to the Registrar of Joint Stock

Companies which have bearing on the shareholders interests. Returns are nothing but

disclosure of some facts as per the relevant sections, in the prescribed format to the Registrar.

The submission of returns are mandatory, failure of which leads to various penalties and

other complications. Therefore, due care is to be laid in submitting returns as per statutory

time limit and according to various provisions. Some important returns as per different

sections are given below:

1. Returns of Allotment (Form XV]:- To be filed within 60 days after the date of

allotment (Section 151). The capital allotted to be added and entered in the next

annual list of members and summary.

2. Particulars of Mortgage (PM):- To be filed within 21 days after the date of execution

of the mortgage deed (Section 159).

3. Particulars of Modification of Mortgages (PMM):- To be filed within 21 days after

the date of execution of modification deed [Section 167(3)].

4. Particulars of Satisfaction of Registration of Office (PSPI): To be filed within 2 days

from the date of satisfaction of the loans or debts (Section 172).

5. Notice of situation of Registration of Office: To be filed within 28 days after

establishment or change of the registered office [Section 77] [Form VI]

6. Proceeding of Special or Extra Ordinary General Meeting: To be filed within 5 days

from the date of meeting (Section 88).

7. Prospectus: On or before the date of issue of the prospectus (Section 38).

8. Change of name of the company: To be filed within IS days from the date of special

resolution relating to change of name [ Section11(6) and 88].

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9. Change of Memorandum of Association: To be filed 90 days from the date of order

of the court or within the extended period sanctioned by the court [ Section-12 and

54].

10. Notice relating to consolidation or sub-division of shares or conversion of shares

into stock: To be filed within 15 days from the date of change or conversion

[Section- 54].

11. Conversion of private company into public company: To be filed within 30 days

after the date of taking decision of conversion [Section- 231].

12. Conversion of public company into private company: To be filed within 15 days

from the date of taking decision of conversion [Section 232].

13. Notice of increase of share capital or the number of number: To be filed within 15

days from the date of taking decision of such increase [Section- 56].

Question 34: What are the statutory Returns?

Ans : A company having share capital and incorporated under the Companies Act. 1994 shall

have to file the following statutory returns to the Register every year.

1. The annual list of members and summary [Schedule-X]:- To be filed within 21 days

after the date of holding the annual general meeting. The transfer of share if any

shall be entered or reflected in return.

2. Balance sheet and Profit & Loss accounts: To be filed within 30 days from the date

of annual general meeting (section 190). The profit and loss accounts to be filed

separately in the case of a private company.

3. Consent of Auditor [section 210]:- The company shall inform the auditor or auditor

or auditors in respect of his/their appointment within 7 days form the date annual

general meeting and the auditors shall inform the Register whether the

appointment has accepted or refused by him or them within 30 days form the date

receipt of such information.

4. Statutory Report: It is a applicable in the case of public limited companies (section

83).

5. Particulars of directors (Form XII): The information in respect of appointment of

Directors or any change thereof and in the case of retirement of Directors by

rotation and re-election in public company.

6. The consent of Directors to act (Form IX). Section 92.

Question 35: Statutory Books and Registers?

Ans : To meet the requirements of Companies Act, it is obligatory to maintain certain books

and registers which should record the important data and information of the company.

Because those, are specifically prescribed by the statute, in addition to the customary books

and records, they are called the statutory registers. The Act also requires the registers to be

open for inspection by those concerned. Also there are some other books the purpose of which

cannot be dispensed with. Those are the subsidiary registers. The fact that various statistical

and financial information are available in those documents, they are called the statistical

registers.

The following are the statutory registers:

1. Member Registers (section 34): It contains names, addresses and descriptions of the

members, number of shares held, distinctive numbers, number of certificates, amount

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paid, shares transferred, date of becoming a shareholder and the date of ceasing to be

shareholder.

2. Register of Directors (sec.115): The company is obliged to maintain a register of its

director. The names, nationalities, address, occupations and other business

connections of all directors, with date of becoming or ceasing to be directors are entered

in this book. All changes of the particulars of the directors are also to be noted in this

book with the date of change. If the company fails to maintain this register, the

company and every other officer of the company knowingly and in defaults shall be

liable to five Taka hundred.

3. Register to mortgage and charges (sec. 174) : There should be a register to record all

mortgage and charges specifically affecting the property of the company. This register

contains the kinds, particulars and descriptions of the mortgages, the amount received

and description of the property in respect of each mortgage and the names of the

mortgagees or the persons entitled thereto. If any director, manager or other officer of

the company knowingly and willfully authorizes or permits the omission of any entry

required under section 174, he shall be liable to a fine not exceeding Taka two

thousand.

4. Register contracts With Directors (sec. 130):- It must contain the full particulars of all

contracts or arrangements in which any director is directly or indirectly interested.

This register also is indispensable and every officer of the company who knowingly and

willfully acts in contravention of the provisions of this section shall be liable to a fine

not exceeding Taka one thousand.

5. Register of Debenture holders (sec. I 76): The full particulars of the debenture holders,

their names, addresses and occupations, the date of allotment and redemption, the

number of debentures held by each. distinctive numbers, amount paid upon each

debenture, the dates when paid, and transfers in respect of any debenture are all to be

incorporated in this register. The Act in this section does not say that this register is

necessary, but starts with inspection of such a register. However, treatment of this

book is almost the same as with the register of members.

6. Minute Books (sec. 89): These are used for recording all resolutions and the

proceedings of meetings of the directors and the members of the company. Two minute

books are maintained, one being directors minute book and another for the meetings of

the shareholder.

Question 36: Discuss the provisions of the Companies Act, 1994 relating to auditors as to:-

(i) Appointment;

(ii) Qualifications

(iii) Rights, and;

(iv) Duties.

Ans : Appointment and Remuneration of Auditors, Section -210

Auditors are appointed in the Annual General Meeting by the Shareholders;

First Auditors of the Company is appointed by the Directors;

The Directors may appoint Auditors in case of casual vacancy;

The Govt. may appoint an Auditor if the above authorities fail to appoint an Auditor;

Auditors remuneration is to be fixed by the authority of appointing the Auditor.

Qualification of Auditors, Section -212

The auditor shall be a Chartered Accountant as per P.O.2 of 1973.

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Following persons are not eligible for appointment as Auditor of the Company:

Officers and staff of the Company.

Any partner, staff or officers of the officers and staff of the Company.

Any person indebted to the Company for more than Tk. 1,000.00 or indebted by any

Guarantee for the above amount.

Any Director, Partner, Member of Managing Agent firm.

A person who hold the shares exceeding 5% in nominal value of the subscribed capital.

The SEC regulation imposed some additional qualifications for appointment of Auditors.

Right and duties of Auditor, Section -213.

The Auditors have right to access any books of accounts, information, voucher,

statement as required to perform the audit work.

The auditors may require any information explanation from any officers, staff of the

Company for the audit.

They should investigate the following:

Security given against loan and advances whether it is recorded or not and whether

the terms are detrimental to the interest of the company.

The transactions, which have been shown in the books of accounts, whether they are

determinate to the interest of the company.

Whether or not any assets shares debenture or any other securities have been sold

lower than the purchase price (other than banking).

Any loan and advances have duly been shown or not by the company.

Whether or not any personal expenditure has been shown in the revenue account.

Any share issued in cash whether the cash actually received or not and whether the

presentation in the Balance Sheet for the same is misleading or not.

The auditors will enclose the audit Report with the Accounts and their report shall includes.

i) Whether or not they have obtained all information and explanations as required by

them;

ii) Whether or not the Balance sheet and Profit & Loss Accounts exhibits a true and

fair review of the state of affairs of the company;

iii) Whether or not proper books of Accounts have been maintained.

iv) Whether or not the Balance Sheet and Profit and Loss Account are in agreement

with the books of Accounts kept by the company.

If any Ans is in the negative the Auditor should disclose the fact and report to the

shareholders.

Question 37: Who are authorized to make an application to the court for the winding up of a

company?

Ans : 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;

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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.

Question 38: State the circumstance in which a company may be wound up by the court.

Ans : 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.

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.

Question 39: In which ground the Registrar of Joint Stock Company can present a petition for

winding up a company?

Ans : 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 of otherwise for a fraudulent or unlawful

purpose; or

ii) That the person 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.

Question 40: Discuss the circumstances on which the court orders for winding up of a

Company on Just and equitable ground.

Ans : Just and equitable ground

If the Court is of opinion that it is just and equitable if the company should be wound up the

company would be wound up compulsorily. The interpretation of just and equitable clause

depends on the facts of each case, the Court may order winding up of a company in case of

just and equitable ground:

i. When the object for which it was incorporated has substantially failed or it is

impossible to carry on the business of the company except at a loss or the existing

and provable assets are inadequate to meet the liabilities;

ii. When the majority of the shareholders are using their powers unfairly; or

iii. Where there is a deadlock in the management of the company; or

iv. Where public interest is likely to be prejudiced;

v. When the company was formed to carry out fraudulent or illegal business.

vi. When the company is a mere bubble and does not carry on any business.

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Question 41: When a company is deemed to be unable to pay its debts and what consequence

may follow for such inability of payment of debts b y a company.

Ans : The Company unable to pay its debt would fall under following consequences:

As per section 242, under the following circumstances a Company may be treated as unable to

pay its debt:

i. Any creditors issue demand notice for his receivable amount for more than Tk.

5,000 and company does not take any action neglected for 3 weeks.

ii. Any order passed by the court for payment but no action is taken by the company

iii. If the Court is satisfied that the company is unable to pay its debt.

As per section 241 a company shall be wound up compulsorily if it is unable to pay its debt. As

per section 286 a Company may be wound up voluntarily if the Company is unable to pay its

debt and any extra ordinary resolution is passed for winding up of the Company.

Question 42: What is a contributory?

Ans : Contributory

As per section 237 of CA 1994, any person who is liable to contribute to the fund of the

company as per the provision of the act to meet up its financial obligation at the time of its

winding up. The contributory may include.:

- Any past and present directors

- Any shareholders

Question 43: To what extent are the different types of contributories liable on the winding up

of a company?

Ans : Extent of liabilities of different types of Contributories.

i) A past member shall not be liable to contribute if he ceased to be a member for one

year before the commencement of the winding up;

ii) A past member shall not be liable to contribute in respect of any debt or liability

create 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 case of a company limited by shares no contributions shall be required from any

member exceeding the amount of unpaid share capital;

v) In case of a company limited by guarantee, no contribution shall be required from

any member exceeding the amount of undertaken to be contributed by him in the

event of winding up:

Question 44: How does the winding up affect the position of officers of the company?

Ans : Winding up effect the position of officers

The power of the officers usually get ceased on the winding up of a company. Other provisions

are as under:

a) Misfeasance:

Under section 331, if any promoter, liquidator or officer of the company has misapplied

or retained money or property of the company or has been guilty of misfeasance or

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breach of trust, the court may examine into this conduct and order him to repay or

restore money or property or to pay compensation.

b) Criminal liability

Section 332 provides punishment of 7 year imprisonment or with fine for falsification,

destruction, alteration or any fraudulent activities in the books/ papers of the

company.

Question 45: Tabulate the difference between the winding up of a company and the

dissolution of a partnership.

Ans :

Sl.

No. Point of difference Winding up of a company

Dissolution of partnership

firm

01 Meaning of winding up/

dissolution

The activities of the

company is ended

Dissolution of partnership

among all the partners

02 Related laws Companies act 1994 Partnership Act 1932

03 Liability of the owner Liability is limited Liability is unlimited

04 Distribution of assets As per companies Act As per partnership deed

05 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.

Question 46: State the requirement of a liquidator to call general meeting at the end of each

year according to section 295 of the Companies Act, 1994.

Ans : Liquidator to call General Meeting

As per section 295, in the event of the winding up of company continuing for more than one

year, the liquidator shall summon a general meeting of the company at the end of the first

year form the commencement of the winding up and of each succeeding year, or as soon

thereafter as may be convenient within ninety days, of the close of the year, and shall lay

before the meeting an account of his acts and dealings.

Question 47: Power of an official Liquidator?

Ans :

Section 262 confers on the official liquidator the following powers:

to bring and defend actions in the name of the company.

i. to carry on the business of the company so far as may be necessary for the

beneficial winding-up of the company.

ii. to sell and transfer the property of the company by public action or a private

contract.

iii. to execute and seal documents and deeds on behalf of the company.

iv. to prove, rank and claim in the insolvency of any contributory for and balance

against his estate and to receive dividends in respect thereof.

v. to draw, accept, make and endorse any bills of exchange, hundis or promissory

notes with the same effect as if draw, etc, by the company in the course of its

business.

vi. to raise money on the security of the assets.

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vii. to take out in his own name, letters of administration to any deceased

contributory.

viii. to do all other things as may be necessary for wining-up the affairs of the

company and distributing the assets, and

ix. to appoint and advocate entitled to appear before the Court in order to assist

him in the performance of his duties, provided that where the official liquidator

is an attorney, he shall not appoint his partner unless the latter consents to act

without remuneration (sec.264.

Question 48: Duties of an Official Liquidator

Ans : The following are his duties;

i. He is required to keep proper books in which entries or minutes of proceeding at

meeting and of such other matters as may be prescribed is to be made.

ii. The liquidator is furthered twice a year to present to the Court and account in

duplicate of his receipts and payments as such liquidator in the prescribed form

and verified by a declaration in the prescribed from.

iii. He shall have regard to any directions that my be given by resolution of the

creditors and the contributories at any general meeting or by the committee of

inspection in regard to the administration and distribution of assets among the

creditors.

Question 49: 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; 9ii) taxation and (iii)

remittance and employment.

Ans : 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 establishes 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

Foreign Companies, which after the commencement of this Act establish a place of busies

within Bangladesh shall, within one month of the establishment of the place of business,

deliver the following documents to the Registrar for registration.

(a) 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;

(b) The full address of the registered or principal office of the Company;

(c) A list of the Directors and Secretary if any, of the Company;

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(d) 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.

(e) 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: (Section -380)

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

Obligation to state name, etc of Foreign Company : (Section 381)

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

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.

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 clearness letter from the office of the Environment is to be obtained by paying adequate fees

along with complying to other formalities to the Government.

Obtaining a trade license

A 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 Parisha area.

TIN Number

The Company would require TIN number form the Income Tax Office concerned as per IT

Ordinance 1984 & recurrent finance bill.

VAT registration

The 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.

Registration permission, approval, license will also be required from the regulatory

authorities related to the nature of business of the Foreign Company.

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 tax 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

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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.

Question 50: Describe different kinds of meeting ?

Ans : There are three kinds of meeting: Statutory, Ordinary, Extraordinary meeting. Each

type of meeting is highlighted below:

1. Statutory Meeting : Every company limited by shares and every company limited by a

guarantee and having a share capital is required to hold a Statutory Meeting of the

members of the company within a period of six months and not less than one month

from the date on which the company becomes entitled to commence business (Sec. 83)

2. General/Ordinary Meetings: A general meeting of a company should be held within 18

months from the date of its incorporation and thereafter one at least in every calendar

year. This meeting may also be called an Annual general Meeting. The period during

which the subsequent meeting should be held is 15 months from the previous general

meeting. The articles may provide such meeting shall be held on a certain date every

year. If no such meeting in held, the company and every director or manager who is a

party to the default shall be liable to a fine of TK. 10,000 and Tk. 250 for each day of

default and the Court may on the application of any member of the company, call or

direct the calling of such meeting (Sec. 81,82)

The directors of every company must lay before the company in general meeting a

balance sheet and profit and loss account or in the case of a company not trading for

profit and income and expenditure account for a period covering nine months from the

date of the meeting and in the case of the first meeting after incorporation, for a period

covering eighteen months from the date of incorporation. The balance sheet and the

profit and loss account or the income and expenditure account must be audited by the

company auditor and the auditors report must be attached therewith.

Every company other than a private company must send a copy of such balance sheet

and profit and loss account or income and expenditure account so audited together

with a copy of the auditors report to the registered address of every member of the

company, at least fourteen days before the meeting at which it is to be laid before the

members of the company and shall deposit a copy thereof at the registered office of the

company for the inspection of the members. The directors must also attach to every

balance sheet a report about the state of the company business, the amount if any

which they recommend to be paid by way of dividend and the amount, if any which

they propose to a reserve fund.

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3. Extra Ordinary Meeting: All meeting of the shareholders other than the annual

meeting or those provided for in the articles are known as extraordinary general

meeting. These meeting may be called by the directors wither suo moto or on the

requisition of not less than one-tenth of the shareholders. Where the directors fail to

call such a meeting so requisitioned within the prescribed time limit 84 (i) it would be

called, by the requisitionists themselves (84(3).

The requisition must state the objects of the meetings and must be signed by the

requisitionsts and deposited at the registered office of the company, and may consist of

several documents in like form, each signed by one or more requisitionists.

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 requisitionists 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 requisitions.

Any reasonable expenses incurred by the requisitionists by reason of the failure of the

directgors to convene the meeting duly must be repaid to the requisitionists by the company

and the company may deduct the sum so repaid from the fees or other remuneration of such of

the directors as were in default.

Question 51: Describe different kinds of Resolutions

Ans : Resolutions passed by a company are of three kinds:

1. Ordinary resolution: This is passed by a majority of members present at a general

meeting. Such a resolution is passed in the ordinary way and deals with ordinary

business, such as passing of accounts, appointing directors and so on. Unless required

by the articles, no notice of suich resolution needs to be given, But notice must be given

of all ordinary resolutions to be proposed at the statutory meeting.

2. Special resolution: This is passed at one meeting by a three fourths majority of the

members present in person or by proxy, provided notice for such meeting suecifying the

intention to propose the resolution is given at least twenty one days before the date of

the meeting. Special resolutions are necessary for the following among other purposes:

a. To change the name of the company with consent of the Central government (Sec. 11)

b. To alter the memorandum with leave of the court (Sec. 5.12)

c. To alter the articles of the company (Sec. 20)

d. To reduce the capital (sec. 59)

e. To convert any portion of the capital, uncalled, into reserve capital (Sec. 74)

f. To appoint inspectors to investigate the company own affairs (Sec. 207) (1).

g. To wind up a company voluntarily (Sec. 286(2)

3. Extra- ordinary resolution: This is passed by such majority as is required for the

passing of a special resolution at a meeting of which 14 days notice has been given. The

notice must specify the intention to propose the resolution as an extra ordinary

resolution (Sec. 87(1). Such resolution is necessary when a company is sought to be

wound up voluntarily on the ground that it cannot continue its business on account of

its liabilities and also for a number of other reasons.

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Question 52: What do you understand about MOTION?

Ans : Motion is a proposal which is formally put before a meeting for discussion and decision

with or without amendments. A motion when passed is called a resolution. A motion may ,

therefore, be called proposal resolution. The requirements to move a motion in a meeting are

that.

a) It has to be in writing so that a copy of the motion can be passed on to the Chairman

for his consideration.

b) It should usually be seconded by somebody. However, there is no hard and fast rule

that it is required to be seconded by someone.

c) It must be within the powers of the meeting and the scope of the notice covering the

meeting.

d) It need to be framed in definite and unambiguous words and in affirmative terms.

e) It should commence with word That so that when passed it reads Resolved that.

Question 53: Describe the formalities in public subscription?

Ans : The following are the steps required for making a public offer of shares.

1. Drafting of a prospectus.

2. Sanctioning of capital by the Securities and Exchange Commission beyond certain limit.

3. Approval of the prospectus by the SEC.

4. Filling of the prospectus with the Registrar of Joint Stock Companies.

5. Underwriting agreement with the underwriters.

6. Arrangement with bankers and Manger to the issue.

Question 54: When a company Can issue share at premium?

Ans : Shares may be issued at a premium that is at a price more than their face value. The

Companies Act provided that a company may issue shares at a premium, but stipulates

specific application of the premium fund (sec. 57). There is also no prohibition in the Act

against issue of shares at differential premiums. But such premiums are to be transferred to a

separate Share Premium Account and utilized for certain specific purpose, such as:

a) In paying up un-issued shares of the company to be issued to members as fully paid

bonus shares.

b) In writing off the preliminary expenses.

c) In writing off the expenses of or the commission paid or discount allowed on any issue

of shares or debentures of the company.

d) In providing for the premium payable on redemption preference shares or debentures

of the company.

e) Subject to prior approval, for adjustment or amortization of intangible assets.

Shares issued at a premium and accepted by the public establish the strength and trust

owned by the issuing company.

Question 55: When a company Can issue share at Discount?

Ans : There is specific statutory provision for issuance of shares at a discount. Section 153 of

the Companies Act provides that a company can issue shares at a discount, i.e. at a value lee

than its face value if the following conditions are fulfilled:

a) Such issuance of shares at a discount must be

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1. Sanctioned by the court,

2. Authorized by shareholders in general meeting.

b) The resolution of the shareholders must be specific that is

1. It must fix the rate of discount

2. This rate can not exceed 10% as the maximum.

c) The company can not issue shares at a discount before expiry of at least one year form

the date of its commencement of its business.

d) The issuance of shares at a discount must be made within six months of the sanction of

the court, or within such extended time as is allowed by the court.

It is provided further is sub section (2) of this section that the prospectus for the issue and the

balance sheet issued subsequently must contain detailed particulars of the discount allowed,

failing with a fine of Taka five hundred is prescribed in sub section (3) of this section.

Question 56: State the procedures of calling Annual general Meeting and Extraordinary

General Meeting of a Company, State what business are transacted in Annual

General Meeting.

Ans : 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.

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 1/10th

members or 1/10 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 requisitions being so deposited, the requisitionists

or a majority of them in value may themselves call the meeting but in either case any meeting

so called shall be held within 45 days from the date from the deposit of the requisition. Notice

for holding 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 business 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.

Question 57: What are the different type of resolutions laid down in the Companies Act,

1994? Please write done the purposes of the resolutions.

Ans : Kind of resolutions

There are three kinds of resolutions. These are:

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(i) Ordinary resolution;

(ii) Special resolution;

(iii) Extra ordinary resolution.

Types of resolution Purpose of resolution

1. Ordinary resolution - Passing of Accounts

- Appointment of Directors /Auditors

- Declaration Dividend

2. Special resolution - Changing the name of the company

- Alteration of M/A, A/A

- Reduction of capital

- Winding up of company voluntarily

3. Extra ordinary resolution - Winding up of a company voluntarily

Question 58: What is Share Certificate?

Ans : Letters of allotment are supposed to be exchanged by definitive scraps called the shares

certificates. A share certificate is after referred to as scrip (not script) by the trading circle,

meaning an instrument containing shares. This term is in vogue particularly in the stock

exchange.

The Act provides ninety days time after allotment by which period those certificates are to be

completed and kept ready for delivery (Sec. 185)(1)

Share certificates are issued only in pursuance of a Board resolution and in exchanges of

allotment letters. If the letter is lost or destroyed, sufficient indemnity in the form of an

indemnity bond and other formalities such as FIR at the police station and press

announcement shall have to be made by the incumbent if the share certificate is lost or

destroyed the same procedures need to be followed. Before issuance of a duplicate certificate,

it is a good practice to notify the Stock Exchange about the matter.

The share certificate should also conform to certain degree of standards so far as size,

thickness and contenst etc. are concened, However, there is no such rule framed so far in

Bangladesh in this regard. Based on the usage and practice, a share certificate should match

and include the following:

1. It should look like a certificate of worth with a consecutive number.

2. Name of the company with monogram, authorized capital with nominal value.

3. Specification of the shareholder

4. Number of hares, distinctive numbers and folio.

5. Embossed Common Seal of the company.

6. At least two authorized signatures.

7. Revenue stamp as per the Stamp Act (if required)

Share certificates should be delivered to the shareholders, without incorporating the details of

each certificate in the members register and in the scrip book. The best is to make out the

computerized print.

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Question 59: What is Share Warrants?

Ans : By virtue of section 46 of the Companies Act, a public limited company, limited by

shares, if authorized by its articles may in respect of fully paid shares, issue under its

common seal, a share warrant stating that the bearer thereof is entitled to shares therein

specified and may further provide for the payment of future dividends on the shares included

in the warrants by means of coupons or otherwise.

It is to be noted that, only public companies may issue share warrants and that too on the

fulfillment of certain conditions as stated below: A public company may issue share warrants

under its common seal provided:

1. There is authority in the articles to issue them;

2. The shares are full paid up.

Since share warrants entitle the bearer to the shares specified in it, and since the share may

be transferred by mere delivery of the share warrant, it follows that a share warrant, unlike a

share certificate, is a negotiable instrument.

Section 50 (1) provides that on the issue of a share warrant, the company must strike out of

its register of members the name of the member and must enter the following particulars.

1. The fact of the issue of the share warrant;

2. The description of the shares included in the warrant, distinguishing each share by its

number:

3. Date of issue of the warrant.

Question 61: What is Bonus Shares?

Ans : The company may capitalize its accumulated resources and profits by the issue of

shares called bonus shares. Bonus shares are issued by sloughing back un appropriated profit

or reserve in order to strengthen the capital structure or to meet the working capital needs of

the company.

The requirements to issuance of bonus shares are outlined below. If bonus shared by a

company:

1. There must be like provisions in the company articles.

2. Its authorized capital must be sufficient to cover the same.

3. The shareholders must resolve to capitalize profits or to apply the share premium

account or utilize other reserved and to issue bonus share.

4. The share must be allotted by a Board resolution in the proportion determined by

shareholders in general meeting.

5. A return of allotment must be submitted to the Registrar within sixty days after

allotment of shares.

Question 61: What is meant by the term ultra vires? What is the effect of an Ultra vires

transaction as far as the company and its directors are concerned?

Ans : 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.

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Md. Sayduzzaman Tuhin, S.F. Ahmed & Co, Mob:01552-639307,01740599898; E-mail:tuhinsf@yahoo