10th Week Lecture Company Act Full 28.09.14

1

Companies Act

Definition of a CompanyTypes of Company

Details of Private & Public CompanyMemorandum of Association

Articles of AssociationFormation of A CompanyCompany Management

Winding Up

2

DEFINITION OF COMPANYA voluntary association formed and organized to carry on a business is called a Company. In a broad sense -A company is an association or collection of individuals, people or else contrived "legal persons" (or a mixture of both). A company can be defined as an "artificial person", invisible, intangible, created by or under Law, with a discrete legal entity, perpetual succession and a common seal. It is not affected by the death, insanity or insolvency of an individual member.

Companies Act 1994 of Bangladesh defines it as in section 2(c) "company" means a company formed and registered under this Act or an existing company.

Company Act

3

Types of Companies:There are various types of Company that can be formed

depending on the nature of business and shareholders, but the most common types of company’s are-

Private Limited Company: A private company is one which, by its articles (article of

association), restrict the rights of the member to transfer their shares; limits the number of its members to 50; and prohibits any invitation to the public to subscribe for any

shares in, or debentures of the company. Section 5 of the Companies Act 1994 provides the idea of this company

as “(a) a company limited by shares, that is to say, a company having the liability of its member limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them”.

Such as – Prime Bank Ltd. / Beximco Pharmaceutical Ltd. Transcom Ltd.

Company Act

4

Public Limited Company: The standard legal designation of a company which

has offered shares to the general public and has limited liability. A Public Limited Company's stock can be acquired by anyone and holders are only limited to potentially lose the amount paid for the shares.

Public company may be classified into 2 (two) types-

a) Companies limited by Share: In this Company there is a share capital and each

share has fixed nominal values which the shareholder pays at a time or by installments. The member is not liable to pay anything more than the fixed value of the share.

Company Act

5

Types of Companiesb) Companies limited by guarantee: In these companies each member promise to pay a

fixed sum of money in the event of liquidation (shutting down) of the Company. This amount is called the guarantee. Sometimes the members are required to buy a share of a fixed value and also give a guarantee for a further sum in the event of liquidation. There is no liability to pay anything more than the value of the share and the guarantee.

Section 5 of the Companies Act 1994 provides “(b) a company limited by guarantee, that is to say, a company having the liability of its members limited by the memorandum to such amount as the members may respectively thereby undertake to contribute to the assets of the assets of the company on the event of its being wound up”.

Company Act

6

Chrematistics of Private & Public Companies with Differences:

Company Act

Base Private Ltd. Public Ltd.

1. Minimum Paid-up Capital:

A company to be Incorporated as a Private Company must have a minimum paid-up capital of Rs. 1,00,000

A Public Company must have a minimum paid-up capital of Rs. 5,00,000

2. Minimum number of members :

Minimum number of members required to form a private company is 2

A Public Company requires atleast 7 members.

3. Maximum number of members :

Maximum number of members in a Private Company is restricted to 50

There is no restriction of maximum number of members in a Public Company.

4. Transerferability of shares :

There is complete restriction on the transferability of the shares of a Private Company through its Articles of Association

There is no restriction on the transferability of the shares of a Public company

7


Company Act


5 .Issue of Prospectus : A Private Company is prohibited from inviting the public for subscription of its shares, i.e. a Private Company cannot issue Prospectus

A Public Company is free to invite public for subscription i.e., a Public Company can issue a Prospectus.

6. Number of Directors : A Private Company may have 2 directors to manage the affairs of the company

A Public Company must have atleast 3 directors.

7. Consent of the directors: There is no need to give the consent by the directors of a Private Company

The Directors of a Public Company must have file with the Registrar a consent to act as Director of the company.

8. Qualification shares : The Directors of a Private Company need not sign an undertaking to acquire the qualification shares

The Directors of a Public Company are required to sign an undertaking to acquire the qualification shares of the public Company

8


Company Act


9. Commencement of Business :

A Private Company can commence its business immediately after its incorporation

A Public Company cannot start its business until a Certificate to commencement of business is issued to it.

10. Shares Warrants : A Private Company cannot issue Share Warrants against its fully paid shares

A Public Company can issue Share Warrants against its fully paid up shares.

11. Further issue of shares: A Private Company need not offer the further issue of shares to its existing share holders

A Public Company has to offer the further issue of shares to its existing share holders as right shares. Further issue of shares can only be offer to the general public with the approval of the existing share holders in the general meeting of the share holders only.

9


Company Act


12. Statutory meeting : A Private Company has no obligation to call the Statutory Meeting of the member,

Public Company must call its statutory Meeting and file Statutory Report with the Register of Companies.

13. Quorum : The quorum in the case of a Private Company is TWO members present personally

In the case of a Public Company FIVE members must be present personally to constitute quorum. However, the Articles of Association may provide and number of members more than the required under the Act.

14. Managerial remuneration :

These restrictions do not apply on a Private Company.

Total managerial remuneration in the case of a Public Company cannot exceed 11% of the net profits, and in case of inadequate profits a maximum of Rs. 87,500 can be paid

10


Company Act


15. Special privileges: A Private Company enjoys some special privileges

Are not available to a Public Company

11

Memorandum of Association

The memorandum of association of a company, often simply called the memorandum, is the document that governs the relationship between the company and the outside. It is one of the documents required to incorporate a company in the United Kingdom, Ireland, India, Bangladesh, Pakistan and Sri Lanka, and is also used in many of the common law jurisdictions of the Commonwealth.

Company Act

12

Memorandum of AssociationMemorandum of company limited by shares: Section 6 of the Act provides that, in the case of a company limited by

shares.-

(a) the memorandum shall state.-- (i) the name of the company, with "limited" as the last word in its

name; (ii) The address of the registered office; (iii) the objects of the company, and, except in the case of trading

companies, the territories to which they extend; (iv) that the liability of the members is limited; (v) the amount of share capital with which the company proposes

to be registered, and the divisions thereof into shares of a fixed amount;

(b) each subscriber of the memorandum shall take at least one share;

(c) each subscriber shall write opposite to his name the number of shares he takes.

Company Act

13

Memorandum of AssociationMemorandum of company limited by guarantee: Section 7 of the Act provides that, in the case of a company limited by

guarantee--

(a) the memorandum shall state-- (i) the name of the company, with "limited" as the last word in its

name. (ii) the address of the registered office; (iii) the objects of the company, and, except in the case of trading

companies, the territories to which they extend; (iv) that the liability of the members is limited; (v) that each member undertakes to contribute to the assets of the

company in the event of its being wound up while he is a member or within one year afterwards, for payment of the debts and liabilities of the company contracted before he ceases to be a member, ad of the charges and expenses of winding up, and for adjustment of the right of the contributories among themselves, such amount as may be required, not exceeding a specified amount;

Company Act

14

Memorandum of AssociationMemorandum of company limited by guarantee: (b) if the company has a share capital-- (i) the memorandum shall also state the amount of

share capital with which the company proposes to be registered and the division thereof into shares of a fixed amount;

(ii) each subscriber of the memorandum shall take at least one share;

(iii) each subscriber shall write opposite to his name the number of shares he takes.

Company Act

15

Article of Association:A document that specifies the regulations for a company's operations. The articles of association define the company's purpose and lays out how tasks are to be accomplished within the organization, including the process for appointing directors and how financial records will be handled.

It often identify the manner in which a company will issue stock shares, pay dividends and audit financial records and power of voting rights. This set of rules can be considered a user's manual for the company because they outline the methodology for accomplishing the day-to-day tasks that must be completed.

Company Act

16

Article of Association:Section 17 of the Act provides that, A company limited by guarantee and an unlimited company shall, and a company limited by shares may have an articles of association herein provision shall be made for regulating the affairs of the company; and the article shall be signed by the subscribers of the memorandum and be registered together with the memorandum.In the case of a company limited by guarantee, the articles, if the company has a share capital, shall state the amount of share capital with which the company proposes to be registered. In the case of an unlimited company or a company limited by guarantee, if the company has not a share capital, the articles shall state the number of members with which the company proposes to the registered; and on the basis of such number the Registrar shall determine the fees payable on registration.

Company Act

17

Formation of a Company:General guidelines for formation of a company in

Bangladesh:The regulatory authority

The Registrar of Joint Stock Companies and Firms (RJSC) is the regulatory authority which facilitates formation of companies and firms. The body is also responsible for keeping track of all ownership related issues as prescribed by the laws in Bangladesh. The Registrar is the head of the office of the Registrar of Joint Stock Companies and Firms, Bangladesh.

Company Act

18

Formation of a Company:Types of companies:

There are many types of business entities. So, before you start the process of registering your firm/company or business entity, you need to make sure what kind of a company you are going to open. RJSC deals with the following types of entities: Private companies Public companies Foreign companies Trade organizations Societies, and Partnership firms

Company Act

19

Formation of a Company:

The laws involvedRJSC accords registration and ensures lawful administration of the entities under the provisions of applicable act as under:

Companies and trade organizations: Companies Act, 1994 (Amendment of Companies Act, 1913)

Societies: Societies Registration Act, 1860 Partnership Firms: Partnership Act, 1932

Company Act

20

Formation of a Company:Name ClearanceThis is a pre-requisite for registration of a new company (other than Foreign Company) or a society or a trade organization. The search for the availability of a company name was computerized in 2003. After checking that the proposed company name is available for registration, the entrepreneur has to apply for name clearance through RJSC website. RJSC provides name clearance for one of the proposed names upon satisfaction that it does not closely match or resembles with any of the names that have already been taken. The status of the application can be checked online and is usually accepted or rejected within one working day. If accepted, the company name is reserved for six months. A print out of the name clearance certificate must be submitted to the RJSC, along with the other required documents for incorporation.

Company Act

21

Formation of a Company:Name ClearanceThis is a pre-requisite for registration of a new company (other than Foreign Company) or a society or a trade organization. The search for the availability of a company name was computerized in 2003. After checking that the proposed company name is available for registration, the entrepreneur has to apply for name clearance through RJSC website. RJSC provides name clearance for one of the proposed names upon satisfaction that it does not closely match or resembles with any of the names that have already been taken. The status of the application can be checked online and is usually accepted or rejected within one working day. If accepted, the company name is reserved for six months. A print out of the name clearance certificate must be submitted to the RJSC, along with the other required documents for incorporation.

Company Act

22


Payment of stamp fees

One has to pay adhesive stamp fees at a designated bank. Payment can be made to the designated bank accounts of the Treasury. Previously all the fees were supposed to be deposited only in selected branches of Sonali Bank. RJSC has now allowed one of the leading private sector banks with extensive national coverage ie BRAC Bank to collect fees.The duty or fees are available to calculate through the fees calculator set on RJSC web site.

Company Act

23

Formation of a Company:Submission of necessary documentsTo register a company, the following documents must be submitted to the

registrar: Name clearance certificate Memorandum and Articles of Association

Form I (Declaration on the registration of the company) Form VI (Notice of the registered office) Form IX (Consent to act as directors) Form X (The list of persons consenting to act as directors) Form XII (Particulars of the directors, managers, and managing agents)

Proof of payment (ie receipt from the designated bank) for Treasury Stamps

The registration fees payable at a designated banks For filing six documents (five filled in forms and the Memorandum and

Articles of Association, the fee is Tk200 per document): Tk1,200 For an authorized share capital of up to Tk20,000, the fee is Tk360. An additional fee of Tk180 is applicable for every Tk10,000 or part from

the first Tk20,000 up until Tk50,000 An additional fee of Tk45 is applicable for every Tk10,000 or part from the

first Tk50,000 up until Tk1,000,000

Company Act

24


Obtain a tax identification number (TIN)In order to start business operations, every company must register for taxes at the appropriate taxation authority (Deputy Commission of Taxes of Company Circle, Zonal Taxation Department) under the National Board of Revenue (NBR) and obtain a tax identification number.

Company Act

25


Register for VATFor VAT purposes, companies register with the Customs, Excise, and VAT Commission under the National Board of Revenue. The company’s VAT is regulated by the Customs, VAT and Excise Department of the region in which it operates.

Company Act

26


Obtain a Trade LicenseCompanies have to obtain a Trade license from the city corporation. Recently, Dhaka City Corporation has been divided into two zones: the North Zone and the South Zone. The proposed company will have to file its application at the nearest city corporation office.

Contact RJSC officesNow RJSC has four offices in Bangladesh. The head office is situated in Dhaka and three divisional offices are located in Chittagong, Khulna and Rajshahi.

Company Act

27

Management & Administration of Company:Chapter XIII of the Companies Act dealt with the management

and administration of the Company:

Office and NameSection 77 provides that, A company shall as from the day on which it begins to carry on business or as from the twenty-eight day after the date of its incorporation, whichever is earlier, have a registered office to which all communications and notices may be addressed.

Company Act

28

Management & Administration of Company:Office and NameSection 78 further provides that, every limited company- (a) Shall paint or affix, and keep painted or affixed, in letters

easily legible and in Bengali or English characters, its name in a conspicuous position on the front side of every office or place in which its business is carried on:

(b) shall have its name engrave in legible characters on its seal;

(c) shall have its name mentioned in legible Bengali or English characters in all bill-heads, letter papers and in notices, advertisements and other official publications of the company, and in all bills of exchange, hundis, promissory notes, endorsements, cheques and orders for money or goods purporting to be singed by or on behalf of the company, and in all bills of parcels; invoices, receipts and letters credit of the company.

Company Act

29

Management & Administration of Company:Directors Section 90 provides that, Every public company and a

private company which is a subsidiary of a public company shall have at least three directors.

(2) Every private company other than a private company mentioned in sub-section (1) shall have at least two directors;

(3) Only a natural person may be appointed a director. Section 94 provides regarding disqualifications of

directors as, A person shall not be capable of being appointed director of a company, if -

(a) he has been found to be of unsound mind by a competent court and the finding is in force; or ------------

Company Act

30

Management & Administration of Company:Directors (b) he is an undischarged insolvent; or (c) he has applied to be adjudicated as an insolvent

and his application is pending; or (d) he has not paid any call in respect of shares of the

company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; or

(e) he is a minor.(2) A company may in its articles provide additional

grounds for disqualification of a director.

Company Act

31

Management & Administration of Company:MeetingMeeting and Proceeding

Section 81 provides that, Every company shall in each year of the Gregorian calendar hold in addition to any other meetings a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it; and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next: Section 83 further provides that, Every company limited by shares and every company limited by guarantee and having a share capital shall, within a period of not less than one month and not more than six months from the date at which the company is entitled to commence business, hold a general meeting of the members of the company; in this Act such meeting is referred to as "the statuary meeting".

Company Act

32

Winding up of CompanySection 234 provides the modes of winding up as, the

winding up of a company may be either. by the Court; or voluntary; or Subject to the supervision of the Court. The provisions of this Act with respect to winding up

shall apply, to the winding up of a company in any of these modes, unless anything contrary appears.

Section 241 provides regarding the circumstances in which company may be wound up by Court as, a company may be wound up by the Court; if--

(i) if the company has by special resolution resolved that the company be wound up by the Court; or ………………..

Company Act

33

Winding up(ii) if default is made in filing the statutory report or in

holding the statutory meeting; or; (iii) if the company does not commence its business

within a year from its incorporation, or suspends its business for a whole year; or

(iv) if the number of members is reduced, in the case of a private company below two, or, in the case of any other company, below seven; or

(v) if the company is unable to pay its debts; or (vi) if the Court is of opinion that it is just and equitable

that the company should be wound up. Section 286 provides the rules regarding circumstances

in which company may be wound up voluntarily as, A company may be wound up voluntarily--

Company Act

34

Winding up(a) when the period, if any, fixed for the duration of the

company by the articles expires, or the even, if any occurs, on the occurrence of which articles provide that the company is to be dissolved and the company in general meeting has passed a resolution requiring the company to be wound up voluntarily;

(b) if the company resolves by special resolution that the company be wound up voluntarily;

(c) if the company resolves by extraordinary resolution to the effect hat it cannot by reason of its liabilities continue its business, and that it is advisable to wind up.

(2) The expression "resolution for voluntarily winding up" when used hereafter in this Part means a resolution passed under clause (a), clause (b), or clause (c) of this section.

Company Act

10th Week Lecture Company Act Full 28.09.14

Documents

Transcript of 10th Week Lecture Company Act Full 28.09.14