Corporate Laws and Practice

7/29/2019 Corporate Laws and Practice

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Summary of Corporate Laws and PracticeApplication Level

Prepared By:Amitav Deb NathArticled Student

ACNABIN


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Companies Act, 1994

1. What do you understand by certificate of incorporation of a company? What are the principal

documents to be filed for the purpose of incorporation of a company? [Nov-Dec10]

The certificate issued by the registrar after a company is registered is called the Certificate ofincorporation. Section 25 of the Act states that the Certificate about the following matters:

1. All the requirements of the Act have been complied with respect of registration and matters

precedent and incident thereto;

2. The association is a company authorized to be registered and duly registered under the Act; and

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

To obtain a certificate of incorporation the following documents need to submit:

1. Memorandum of association signed by each subscriber and dated.

2. The signature must be witnessed by a third party.

3. Articles of association signed, dated and witnessed as same subscribers.

4. A statutory declaration that all the legal formalities have been complied.

5. Notice of situation of registered office.

6. Particulars of directors, managing agent and Manager

7. A list of persons who have consented to become directors.

8. A written consent of the directors to act as such.

9. Thereafter, the proper stamp duty for registration has to be paid and the register shall enter the

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

2. What conditions are to be fulfilled before a company commences business? [Nov-Dec10]

A public company, having a share capital and issuing a prospectus, cannot commence business until the

Registrar issues a certificate known as the "Certificate of Commencement of Business". This certificate isissued after the following formalities have been complied with:

i. The minimum subscription has been raised.

ii. Every director has paid the money payable on application and an allotment for the shares taken

up by him.

iii. No money is repayable for failure to obtain stock exchange recognition for the shares, where

such recognition was promised.

iv. A duly verified declaration by a director or the secretary has been filed with the Registrar that

the above requirements have been complied with.

However, a public company having share capital but not issuing a prospectus will get the

commencement certificate if the following conditions are fulfilled:i. A statement in lieu of prospectus has been filed with the Registrar.

ii. The directors have paid the money due from them on account of shares.

iii. A declaration by a director or the secretary has been filed with the registrar stating that

condition (b) has been satisfied.


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3. How far contracts entered into by a company before the commencement of business are binding

on the company? [Nov-Dec10]

A company cannot be bound by a contract which was made on its behalf by any Person (including a

promoter) before the company itself had been formed. At the time when the contract is made, the

company is non-existent, it cannot after its formation ratify a contract to which it could not have been a

party when the contract was made [Kenner v Baxter (1866)].

In Kenner's case goods had been ordered for the company's business before the company was formed.

But the company is not bound by a contract merely because it later performs it, e. g. by accepting the

goods or services. The company will, of course be liable if it makes a fresh contract after the company is

formed; but there must be clear evidence that it intended to do so.

ln the circumstances, the simplest and safest course for a promoter is to bring the negotiations to the

point of agreement but to postpone any binding contract until the company is formed and can enter

into the contract for itself. However, if it is essential to some formula of assignment or notation to be

made after incorporation and when it does so, or if it does not do so within a specified time, he is then

to be released.

4. Discuss the power to alter the Articles of Association of a company. Mention the restrictions/

limitations, if any, on the nature and extent of the alterations that can be made. [Nov-Dec10]

Subject to the provisions of this Act and to the conditions contained in its memorandum, a company

may by special resolution alter, exclude from or add to its articles: and any alteration, exclusion or

addition so made shall be as valid as if originally contained in the articles, and be subject in like manner

to alteration, exclusion or addition by special resolution.

Notwithstanding anything in the memorandum or articles of a company, no member of the company

shall be bound by an alteration made in the memorandum or articles after the due on which he

becomes, member, if and so far as the alteration requires him to take or subscribe for more shares thanthe number held by him at the date on which the alteration is made, or in any way increases his liability

is at that date to contribute to the share capital of, or otherwise to pay money to the company.

5. Distinguish between a floating charge and a fixed charge. When does a floating charge

crystallize? [Nov-Dec10, Nov-Dec09, May-June08]

A fixed charge is one which creates legal interest of a specific property of the company or all the

properties of the company. Thus a fixed charge is equivalent to mortgage. The company can sell, lease

etc. of the property, subject to the right of the charge holder.

The floating charge does not amount to mortgage. The owner of such a property can deal with it and the

transferee gets it, free of the charge.

The floating charge crystallize on happening of the following events-

1. Inability of the company to pay interest for 3 months.

2. When the court issues warrant for confiscation properties for 7 days

3. When the receiver of the company is appointed on application of debenture holders.

4. When the liquidation process of the company commences.


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6. Define Member of a company [Nov-Dec10]

Every subscriber of the memorandum of company shall be deemed to have agreed to become a

member of the company and on its registration shall be entered as a member in its register of

members.

Every other person who agrees to become a member of a company, and whose name is entered

in its register of members shall be a member of the company.

7. "Directors are trustees as well as agents of the company". Discuss [Nov-Dec10, May- June05]

Directors are trustee and agent of the Company

Directors are trustees as well as agents of the Company. All activities, business and transactions of the

Company for its developments, promotions is done by the directors for and on behalf of the Company

like an agent. The articles of association empowered the Directors to do/run the Company. The directors

can do the followings for and on behalf of the Company as contained in the articles of association:

1. To run the business of the company;

2. To recommend dividend;

3. To enter into contract;

4. To maintain reserves;

5. To issue, forfeiture of share;

6. To issue debenture;

7. To Invest fund;

8. To take, redeem loan; and

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

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

Directors are to do all activities as trustee of the Company. All assets resources are to be kept safety and

to utilize them for the interest of the Company. Under any circumstances Directors are not allowed to

use asset of the Company for their own without the approval of the Board. Directors are to maintain

proper accounts as required by law and to do many other activities as trustee of the company, such as:

1. To run the Company efficiently;

2. To optimum utilization resources;

3. To save the Company from losses/damages;

4. To maintain proper books of accounts;

5. To call the AGM;

6. To maintain secrecy of the organization; and7. To refrain from doing such activities prohibited by the act.

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


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8. Discuss the provisions of Section 233 of the Companies Act, 1994 regarding protection of interest

of minority shareholders. [Nov-Dec10, Nov-Dec08, May-June07, Nov-Dec02]

(1) Any member or debenture holder of a company may either individually or jointly bring to the notice

of the court by application that-

(a) the affairs of the company are being conducted or the powers of the directors are being

exercised in a manner prejudicial to one or more of its members or debenture holders; or

(b) the company is acting or is likely to act in a manner which discriminated or is likely to

discriminate the interest of any member or debenture holder;

(c) a resolution of the members, debenture holders or any class of them has been passed or is

likely to be passed which discriminates or is likely to discriminate the interest of one or more of

the members or likely to debenture holder.

(2) The Court shall, on receipt of an application under sub-section (1) send a copy thereof to the Board

and fix a date for hearing the application;

(3) If after hearing the parties present on the date so fixed, the Court is of opinion that the interest of

the applicant or applicants has been or is being or is likely to be prejudicially affected for reasons

specified in the application, it may make such order as prayed for or such other order as it deems fit

including a direction-(a) to cancel or modify any resolution or transaction ; or

(b) to regulate the conduct of the company's affairs in future in such manner as is specified

therein; or

(c) to amend any provision of the memorandum and articles of the company.

9. In which ground the Registrar of Joint Stock Company can present a petition for winding up a

company? [Nov-Dec10]

Petition for winding up by the Registrar:

Under the following grounds as contained in Section - 197(b) the Registrar of Joint Stock Companies and

firms can present a petition for winding up a company as per Section-204 of CA 1994:i. That the business of the company is being conducted with intent to defraud its creditors,

members, any other persons or otherwise for a fraudulent or unlawful purposes; or

ii. That the persons concerned in the formation of the company or the management of its affairs

have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the

company or towards any of its members; or

iii. That the members of the company have not been given all the information with respect to its

affairs which they might reasonably expect.

10. Define a foreign company as envisaged under Section 378 of the Companies Act, 1994. What are

the documents to be delivered to the Registrar of Joint Stock Companies by foreign companies

carrying on business in Bangladesh? [Nov-Dec10, May-June09]

When a company which is incorporated outside Bangladesh but establishes business in Bangladesh with

same name and nomenclature with or without a place of business in the country, it is regarded as a

foreign company in Bangladesh.

Documents to be delivered

According to section 379, if foreign companies establish a place of business in Bangladesh shall, within

one month of the establishment of the place of business, deliver the following to the Registrar for

registration:


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1. A certified copy of the charter or statutes or memorandum and articles of the company or other

instrument constituting or defining the Constitution of the company; and if the instrument is not

written in Bengali or English language, a certified Bengali or English translation thereof;

2. The full address of the registered or principal office of the company;

3. A list of the directors and secretary, if any, of the company;

4. The name and address or the names and addresses of one or more Persons resident in

Bangladesh, authorized to accept on behalf of the company service of process and any notice or

other document required to be served on the company

5. The full address of the office of the company in Bangladesh which is to be deemed its principal

place of business in Bangladesh.

11. Define a Company and mention its essential characteristics. [May-June10]

A company in ordinary non-technical sense however, means an association for attaining some common

objectives which may be with or without profit.

Essential characteristic:

1. A company is regarded by law and it has a legal personality;2. A company has perpetual succession;

3. The liability of the members of a company is limited;

4. A company is required to comply with various statutory obligations regarding management.

12. Distinguish between Holding Company and Subsidiary Company what are the relationships

between the two? [May-June10]

Holding Company

When a company acquires controlling interest in the affairs of another company or companies, it is

known as the holding company. The Companies Act in its definition clause at section 2 clarifies, interalia,

that the holding of such controlling interest should take all or one of the following forms:1. its assets may consist in whole or in part of shares in another company;

2. such shares or other interests may be held either directly or through a nominee.

3. such interest should be in the form of holding more than fifty percent of shares or voting rights

in that other company.

4. such voting right gives power directly or indirectly to appoint the majority of the directors in

that other company otherwise than by virtue of the provision of a trust deed.

Subsidiary Company

It is a company more than fifty percent of whose issued share capital or voting power is held by another

company or the majority of whose directors can be appointed by another company. A subsidiary

company may be a public or private company or not even be a company at all within the meaning of the

Companies Act. Where the shares of such a company are held as security by a company the ordinary

business of which is lending of money or where the majority of directors can be appointed by a

company by virtue of powers contained in a debenture trust-deed, the former company will not be

deemed to be a subsidiary company of the latter.


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13. State the rules relating to conversion of a public company into a private company. [May-June10]

According to section 232-

1. A public company, having not more than fifty members at the time of conversion, may be

converted into a private one by passing a special resolution altering its articles so as to exclude

provisions if any, in the articles of association applicable to public company and include therein

provisions applicable to a private company.

2. lf the company has secured creditors, their written consent shall have to be obtained before

passing a resolution as per provision of sub section (l) and the shares enlisted with the Stock

Exchange shall have to be de-listed.

14. What is a Memorandum of Association? State the contents of the Memorandum of Association.

[May-June10]

The memorandum of association is the charter /constitution of the company. It is the written

documents containing the object and power of the company upon which the company is incorporated

and the company cannot go beyond the limitation/contained in the M/A. It cannot change without the

consent of the court / Govt. The memorandum shall be:1. Printed

2. It shall be divided into paragraphs and numbered consecutively, and

3. It shall be signed by each subscribed (giving his address and description) in the presence of at

least one witness who shall attest his signature.

Contents of Memorandum of association:

1. Name clause: The memorandum shall state the name of the company with limited as the last word

in its name. It signature that the liability of the shareholders is limited. The liability may Limited by

shares or by guarantee.

2. Registered office situate clause: After the name the M/A usually state the name of the place where

the registered office of the company. The reasons why the place of its registered office is stated in the

M/A

It fixed the domicile of the company and determines jurisdiction of the court with regard to the

company

It provides some definite places at which notice and other processes may be served on it.

It also determines where the records of the company are to be kept

Changes the register office

3. Object clause: The third requirement of the M/A is object clause. It determines:

The power of the company and

It restricts the power of the company

4. Liability clause: The fourth particular in an M/A is a statement that the companys liability is limited.

In case of a company limited by shares is wound up the members of company will not be liable to

contribute more than the amount up paid on their shares But if the number of members is reduced in

case of Pvt. Limited co below two and in case of public limited co. below seven and the business carried


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on more than 6 months thereafter, then the member are personally liable irrespectively of limited

liability for all debts contracts during the period (U/S 222).

5. Capital clause: The amount of the nominal capital of the company and the number of the shares must

be clearly stated in M/A. There is or legal limit to the amount of the capital or of each shares. Alteration

of capital clause: may by usually. The article of association contains the power and procedure to alter

the capital clause. Otherwise a special resolution has to be passed in a general meeting to alter the A/A

in this regard. A notice in this regard shall have to be filed to the registrar within 15 days.

15. State the points of difference between the Memorandum of Association and the Articles of

Association of a Limited Company. [May-June10, May-June06]

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

Memorandum of Association Articles of Association

The memorandum is the fundamental

constitution of the Company determining itsObjectives

The Articles are rules regarding internal

management.

Memorandum is the main guideline of the

company

Any rules in the articles contrary to the

memorandum is invalid

Alteration of Memorandum is difficult, in some

cases it requires Court's permission

Alternation of article is easy; it requires a

special resolution only.

Memorandum defines the power of the Company Articles define the internal regulation and

Management process

Acts done by the company beyond the power of

the memorandum is void which cannot be

ratified

Acts done by the Company beyond the

articles can be ratified by the share holders

provided they are within the power of theMemorandum

There are 5 clauses There are long list of clauses

16. Define prospectus. State the contents of a prospectus. [May-June10]

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

words, a prospectus may be defined as any document that includes any notice, circular, advertisement

or other document inviting deposits from the public or inviting offers from the public for the

subscription or purchase of any share in, or debentures of a body corporate. Prospectus has the

following characteristics:

It is a document described or issued as a Prospectus.

It includes any notice, circular, advertisement inviting deposits from the public.

It is an invitation to the Public.

The public is invited to subscribe the shares or debentures of a company.


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Contents of the Prospectus

Every prospectus issued by or on behalf of a company shall state the matters specified in Part- I of

schedule 111 of the Companies Act 1994. According to the Part I of Schedule III, the following items are

to be included in the Prospectus:

1. The names, addresses, descriptions and occupations of the signatories to the memorandum and

the number of shares subscribed for them;

2. The number and classes of shares and the nature and extent of interest of holders in the

property and profits of the company;

3. The number of redeemable preference shares intended to be issued with the date of

redemption;

4. The rights in respect of capital and dividend attached to different classes of shares;

5. The number of shares fixed by the articles as the qualification of director;

6. Particulars regarding directors, managing agents, manager, secretaries and treasures etc;

7. Remuneration of the directors;

8. The minimum amount of subscription and amount payable on application;

9. Time of opening of subscription list;

10. Preliminary expenses incurred;11. Particulars regarding purchase of property;

12. Details of any premium or under-writing commissions paid;

13. Particulars of reserves including reserve capital;

14. Nature and extent of interest of every director and promoter;

15. Names and addresses of the auditors of the company;

16. The nature and extent of restrictions upon members at company meetings;

17. Restrictions upon Powers of the directors; and

18. Voting rights, capitalization of reserves and surplus of revaluation.

17. Explain how the share capital of a company can be increased? [May-June10]

(1) Where a company having a share capital, has increased its share capital, beyond the registered

capital, it shall file with the Registrar, in the case of an increase of share capital, within fifteen days after

the passing of the resolution authorizing the increase and the Registrar shall record the increase.

(2) The notice under sub section (1) shall include particulars of the classes of shares, affected and the

conditions, if any, subject to which the new shares are to be issued.

18. What are the consequences of the failure by a company to hold its Annual General Meeting?

[May-June10]

If default is made in holding annual general meeting of the company in accordance with section 81, the

company and every officer of the company who is in default, shall be punishable with fine which may

extend to ten thousand taka and in case of a continuing default, with a further fine which may extend to

two hundred fifty taka for every day after the first day during which such default continues.

19. Explain the provision of the Companies Act 1994 relating to appointment of the auditors of a

company. [May-June10]

There are the following rules as per the Companies Act 1994 dealing with the appointment of auditor:


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Every company shall appoint auditors at each AGM and the auditor will hold office until the next

AGM. Provided that, no person can be appointed as auditor unless his written consent has been

obtained prior to his appointment or re-appointment.

Every auditor will inform to the registrar in writing his acceptance or refusal within 30 (thirty)

days from the date of receipt of appointment.

A retiring auditor shall have right to be re-appointed at AGM, unless: He is not qualified for re-appointment.

He has given written notice for his unwillingness.

A resolution has been passed at that meeting appointing somebody instead of him.

20. Can a director be removed? How? [May-June10]

As per section 106 of the Companies Act 1994

(1) The company may be extraordinary resolution remove any share-holder director before the

expiration of his period of office and may by ordinary resolution appoint another person in his stead and

the person so appointed shall be subject to retirement at the same time as if he had become a director

on the day on which the director in whose place he is appointed was last elected director.

(2) A director so removed shall not be re-appointed a director by the Board of Directors.

21. State the steps involved in the formation of a company under the Companies Act 1994. [Nov-

Dec09, May-June 06]

Formation of a Company:

2 (two) or more persons (not more than 50) and 7 or more persons (unlimited) may form a Private or a

Public Limited Company respectively by subscribing their signature in the Memorandum of Association.

They may form -

a Company limited by shares;

a Company limited by guarantee;

an unlimited Company.

There are 3 stages for formation of a company -

i. Promotion;

ii. Registration;

iii. Commencement of business.

Promotion stages -

i. Promoters

ii. Clearance of name

iii. Sponsors' equity

iv. Consent of the Directorsv. Selection of objectives.

Registration:

i. Submission of Memorandum & Articles of Association.

ii. Payment of stamp duty & Registration fees.

iii. Obtaining certificate of incorporation.


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Commencement of business:

For a Private Limited Company, the business of the Company can be commenced after

getting the registration i.e. certificate of incorporation.

For a Public Limited Company, the Company shall obtain the certificate of

commencement of business from the Registrar.

22. Discuss the disqualifications of Directors as laid down in section 94 of the Companies Act, 1994.

[Nov-Dec09]

Disqualifications of directors as per section 94 of the Companies Act 1994:

(1) A person shall not be capable of being appointed director of a company, if -

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

(b) he is an undischarged insolvent; or

(c) he has applied to be adjudicated as an insolvent and his application is pending; or

(d) he has not paid any call in respect of shares of the company held by him, whether alone or

jointly with others, and six months have elapsed from the last day fixed for the payment of the

call; or

(e) he is a minor.(2) A company may in its articles provide additional grounds for disqualification of a director.

23. Discuss the procedure of calling Annual General Meeting and Extraordinary General Meeting of a

company. State what businesses are transacted in an Annual General Meeting. [Nov-Dec09]

A general meeting shall be held (within eighteen months from the date of its incorporation and

thereafter once at least in every year) at such time (not being more than fifteen months after the

holding of the last preceding general meeting) and place as may be prescribed by the company in

general meeting.

Proceedings at General Meeting

Fourteen days' notice at least (exclusive of the day on which the notice is served or deemed to

be served, but inclusive of the day for which notice is given) specifying the place, the day and

the hour of meeting.

No business shall be transacted at any general meeting unless a quorum of members is present

at the time when the meeting proceeds to business

If within half an hour from the time appointed for the meeting a quorum is not Present, the

meeting, if called upon the requisition of members, shall be dissolved.

The Chairman selected among them by the Board of Directors shall preside as chairman at every

general meeting of the company. Provided that the Chairman and the Managing Director shall

not be the same person.

lf there is no such chairman, or if at any meeting he is not present within thirty minutes after

the time appointed for holding the meeting, or is unwilling to act as chairman, the members

Present shall choose someone of their number of be chairman'

The chairman may with the consent of any meeting at which a quorum is present, adjourn the

meeting from time to time and from place.


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Extra Ordinary Meeting:

All meetings of the shareholders other than the annual meetings or those provided for in the articles are

known as extra ordinary meeting. These meetings may be called by the directors either suo moto

or the requisition of not less than one-tenth of the shareholders and where the directors fail to call such

a meetings so requisitioned within the prescribed time limit, by the requisitions themselves.

Businesses that are transacted in an Annual General Meeting:

1. To receive, consider and adopt the Directors Report and the Audited Balance Sheet and the

Profit and Loss Account with Auditors Report thereon.

2. To declare dividend.

3. To elect Director (s)

4. To appoint the auditors and fix up their remuneration.

5. To transact any other business which can be transacted by ordinary resolution, with the

permission of the chair.

24. Name the mortgages and charges required to be registered compulsorily with the Registrar of

Joint Stock Companies. What is the effect of non-registration of such mortgages and charges?

[Nov-Dec09, May-June08]

The mortgages and charges those are required to be registered compulsorily with the Registrar of Joint

Stock Companies:

a) a mortgage or charge for the purpose of securing any issue of debentures; or

b) a mortgage or charge on uncalled share capital of the company, or

c) a mortgage or charge on any immovable property wherever situated or any interest therein, or

d) a mortgage or charge on any book debts or the company, or

e) a mortgage or charge, not being a pledge on any moveable property of the company except

stock-in- trade.

Due to non-registration of above mentioned mortgages and charges to be considered void and when a

mortgage or charge becomes void, the money secured thereby shall immediately become payable.

25. State the circumstances in which a company may be wound up by the Court. [Nov-Dec09]

Section 241 states the following circumstances under which a company may be wound up by the Court:

i. lf the company has by special resolution resolved that the company be wound up by the Court;

or

ii. lf default is made in filing the statutory report or in holding the statutory meeting; or

iii. lf the company does not commence its business within a year from its incorporation, orsuspends its business for a whole year; or

iv. lf the number of members is reduced, in the case of a private company below two, or, in the

case of any other company, below seven; or

v. lf the company is unable to pay its debts; or

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


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26. What are the procedures for reduction of share capital and how the same is confirmed? [Nov-

Dec09]

Reduction of share capital

The power to reduce capital must be given by the articles. If no such power, the articles may be changed

by a special resolution. According to section 59, the share capital may be reduced by:

a) reducing or extinguishing the liability of members for uncalled share capital; or

b) writing off lost share capital; or

c) paying off share capital which is in excess of the wants of the company; or

d) All these are to be done only by way approve by the court.

Procedure for Reduction of Share Capital

Reduction of capital is possible only by passing a special resolution and confirmation by the court. The

court would inquire into the objections, if any, raised by the creditors. In this respect the court settles

the list of creditors entitled to object and issues public notices (sec. 62). On hearing the objections, the

court may confirm the reduction on such terms and conditions as it may dam fit (sec. 64).

27. Discuss the requirements of law relating to filing of accounts of companies operating in

Bangladesh but incorporated outside Bangladesh [Nov-Dec09, May-June08]

(1) Every foreign company shall, in every calendar year-

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

profit, and income and expenditure account it the company is handling company, group accounts in

such form and consigning such particulars and including such documents, and under the provision of this

Act it would, if it had been accompany within the meaning of this Act, have been required to make out

and lay before the company in general meeting; and

(b) Deliver three copies of those documents to the Registrar:

Provided that the Government may by notification in the official Gazette direct that in the case of aforaging company or class of foreign Combines the requirements of clause (a) shall not apply, or shall

apply subject to such exceptions and modification as many be specified in the notification.

(2) If any such document as is mentioned in sub-section (1) is not written in Penal or English language,

there shall be annexed to it a certified translating thereof.

28. What documents, registers and books are maintained in a companys registered office? [May-

June09, Nov-Dec07, May-June04, May-June03, Nov-Dec02]

Books:

Statutory Books: The companies Act requires every company to keep the following books:

a) Register of members:

1. Name & address & occupation

2. Respective shares,

3. Date of registration as member,

4. Date at which any person ceased to be a member


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b) Register of Directors:

1. In case of individual director- name, address, nationality, occupation & particulars of

directorship,

2. In case of a corporation- corporate name, principal office and name, address & nationality of

each of its directors,

3. In case of a firm- name, address & nationality of each partner and the date on which each

became a partner.

c) Register of qualifying share of directors,

d) Register of debenture holders,

e) Register of mortgages and enter there in specific description,

f) Minutes of meetings,

g) Register of contracts,

h) Books of accounts:

i) Statement of receipts & payments,

j) Statement of sales & purchases,

k) Statement of assets &liabilities,

l) Cost records, if applicable.

Statistical books: (Sec. 36)

1. Share application & allotment,

2. Addition of shareholder,

3. Share transfer,

4. Dividend,

5. Interest on dividend.

29. Who can inspect those documents and books and take copies thereof? [May-June09, Nov-

Dec07, May-June04, May-June03, Nov-Dec02]

The books of account and other books and papers of every company shall be open to inspection duringbusiness hours by the registrar or by such other Government officer as may be authorized by the

Government in this behalf-

It shall be the duty of every director or other officer of the company to produce to the person

making inspection.

It shall also be the duty of every director and other officer of the company to give to the

inspection person all assistance in connection with the inspection, which the company may be

reasonable, expected to give.

Where an inspection of the books of account and other books and papers of the company has

been made under this section the inspecting person shall make a report to the Government.

30. State the provisions of the Companies Act, 1994 as to appointment, terms and remuneration of

Managing Directors [May-June09, Nov-Dec05, May-June03].

The managing director is a director who is entrusted with any substantial power of Management

The appointment of managing director:

The appointment of a managing director or of a whole time director can be made by any of the

methods:


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1. An agreement with the company

2. A clause in a memorandum or articles of the company

3. A resolution passed by a company in its general meeting

4. Resolution of the board of director

No company shall, after the commencement of this Act, appoint or employ any individual as its

managing director for a term exceeding five years at a time.

Power and duties of a managing directorThe power and duties of a managing director are specified in

the agreement with the company by which he is appointed

in the memorandum or articles of the company

in a resolution passed by the company in general meeting

a resolution by its board of director

31. What remedies are available to an applicant who has been induced to buy shares of a company

by a material mis-representation of facts in a prospectus? [May-June09, Nov-Dec03, May-

June08]

Remedies available to the shareholders for untrue statement in the prospectus:

In case of untrue and misleading information furnished in the prospectus its promoters and directors

will be held liable. The shareholders may claim to refund the value of shares allotted and the

Shareholders may claim demurrage for any losses incurred for such misstatement furnished in the

prospectus. But they cannot retain the Ave and claim the demurrage simultaneously.

32. What are the liabilities of contributories as present and past members in case of winding-up of a

company [May-June09].

Section 235 states that

1. In the event of a company being wound up, every present and past member shall be liable to

contribute to the assets of the company to an amount sufficient for payment of its debts and

liabilities and the costs, charges and expenses of the winding up, and for the adjustment of the

rights of the contributories among themselves, with the qualifications following, that is to say:-

i. A past member shall not be liable to contribute if he has ceased to be a member for one year or

upwards before the commencement of the winding up;

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

contracted after he ceased to be a member;

iii. A past member shall not be liable to contribute unless it appears to the Court that the existing

members are unable to satisfy the contributions required to be made by them in pursuance of

this Act;

iv. In the case of a company limited by shares, no contribution shall be required from any member

exceeding the amount, if any, unpaid on the shares in respect to which he is liable as a present

or past member;

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

member exceeding the amount undertaken to be contributed by him to the assets of the

company in the event of its being wound up;


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vi. Nothing in this Act shall invalidate any provision contained in any policy of insurance or other

contract whereby the liability of individual members on the policy or contract is restricted or

whereby the funds of the company are alone made liable in respect of the policy or contract;

vii. A sum due to any member of a company in his character of a member, by way of dividends,

profits or otherwise, shall not be deemed to be a debt of the company payable to that member

in a case of competition between himself and any other creditor who is not a member of the

company.

2. In the winding up of a company limited by guarantee which has a share capital, every member

thereof shall be liable to pay the following amounts namely:

(a) The amount undertaken to be contributed by him to the assets of the company in the event

of its being wound up; and

(b) An amount to the extent of any sums unpaid on any shares held by him.

33. Discuss about the remedies available to a debenture holder when his/her debentures are in

jeopardy [May-June09].

If the company fails to pay interest or principal on the due date or fails to comply with any of the terms

and conditions under which the debenture was issued, the debenture holder can adopt any of thefollowing remedial measures:

1. He may file a suit for the recovery of money by sale of the assets which were charged for the

payment of the money.

2. He may file an application for the appointment of a receiver by the court.

3. He may himself appoint a receiver if the terms of the debenture entitled him to do so.

4. The trustees may sell the properties charged, if such a Power is given to them under the terms

of the debenture.

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

charged for the Payment of the money.

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

34. Distinguish between a Private Ltd. Company and a Public Ltd. Company [May-June09].

Private ltd co. Public ltd co.

Members Minimum-02, Maximum-50 Minimum- 07, Maximum ltd by

share.

Transfer of share Share can only be transferred among

person.

No restriction of transfer of share.

Invitation of

subscription

Can not invite to general meeting Can invite to general

meeting

Statutory meeting

of Report

Statutory meeting of filling statutory

report to register of JSE in not

obligation.

After start of business the company

is bound to call statutory meeting

within 1 to 6 month of submit

statutory report.

Commencement of

business

Can start business only after getting

the certificate of incorporation

Can start business after getting the

certificate of commencement from

JSE

No of Directors At least 2 directors. At least 3 directors.

Consent of

Directors

No consent and certificate is to be

Required.

Consent and certificate is to be

required.


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35. What is the purpose of stating the "object clause" of a company in its memorandum? Can it be

altered? How? [Nov-Dec08, Nov-Dec04]

Objective Clause:

Objective clause is one of the important elements of Memorandum of Association. The main objects of

the company are disclosed clearly in the objective clause. The Companies Act 1994 requires disclosingthe main ' objectives relating to form a company under his Act. The main objects and objects incidental

are identified in the objective clause to enable the members of the company, its creditors and the public

to know the range of activities of the company. Without stating objective clause no company can be

registered under this Act.

A company can change the objective clause under the following circumstances (Section 12):

1. To carry on its business more economically and efficiently;

2. To attain its business operation by new and improved way;

3. To enlarge the area of operation;

4. To carry on some operation which will be more advantageous for the interest of the company;

5. To restrict, abandon any of its objects; and

6. To amalgamate with any other company or body.

Objective clause can be changed by passing a special resolution and having permission of the court.

36. What is the effect of carrying on business by a Company with less than the legal minimum

number of members? [Nov-Dec08]

If at any time the number of members of a company is reduced, in the case of a private company, below

two or, in the case of any other company, below seven and it carries on business for more than six

months, while the number is so reduced every person who is a member of the company during the time

that it so carries or business during that periods and is cognizant of the fact that it is carrying on

business with fewer than two members or seven members, as the case may be, shall be individuallyliable for the payment of the whole debts of the company contracted during that time and may be used

for the same without joinder in the suit of any other member.

37. What are the effects of irregular allotment of shares? [Nov-Dec08]

(1) An allotment made by a company to an applicant shall be voidable at the instance of the applicant

within one month after the holding of the statutory meeting of the company and not later or, in any

case where the company is not required to hold a statutory meeting or where the allotment is made

after the holding of the statutory meeting, within one month after the date of the allotment and not

later, and shall be so voidable notwithstanding that the company is in the course of being wound up.

(2) If any director of a company knowingly contravenes or permits or authorizes with respect to

allotment, he shall be liable to compensate the company and the allottee for any loss, damages or costs

which the company or the allottee may have sustained or incurred thereby:

Provided that Proceedings to recover any such loss, damages or costs shall not be commenced after the

expiration of two years from the date of the allotment.


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38. What is meant by the term "ultra Vires"? [Nov-Dec08, Nov-Dec07, May-June05]

Meaning of the term "ultra Vires":

Any transaction, activity or business done by the Company beyond the power of the Memorandum and

Articles of Association is "ultra vires" i.e. void. The Company cannot do anything outside the

memorandum of association.

39. Distinguish between member's voluntary winding up and creditor's voluntary winding up. [Nov-

Dec08]

Members' voluntary winding up: When the company is solvent and is able to pay its debts in full, in

which case it is not necessary to consult the creditors or call their meeting, then the company in general

meeting must appoint one or more liquidators for winding up the affairs of the company and fix his or

other remuneration. On such appointment, all the powers of the directors of the company come to an

end except in so far as the company in general meeting, or the liquidator, sanctions the continuance

thereof (Section 292).

Creditors' voluntary winding up: In the case of the creditors' voluntary winding up, the company is

obliged to convene a meeting of the creditors on the day on which the meeting for passing the

resolution for winding up is to be held. The company must send the notices of such meeting to the

creditors simultaneously with the notice of the company's meeting. The duty of the creditors of the

company is to cause a full statement of the position of the company's affairs, together with a list of the

creditors of the company and the estimated amount of their claims, to be laid before the creditors'

meeting to be held as aforesaid. They must also appoint one of their members to preside at the

meeting. At the same meeting, the creditors and the company may respectively nominate a person to

be a liquidator or the purpose of the winding up. lf they each nominate a different person, the one

nominated by the creditors shall be the liquidator unless, on an application of any director, member or

creditor of the company made within seven days after the date of the nomination by the creditors, theCourt orders that the person nominated by the company shall be the liquidator instead of or jointly with

the one nominated by the creditors (Section - 299).

40. Under what circumstances may a company limited by shares

(i) pay interest out of capital;

(ii) write off preliminary expenses? [Nov-Dec08, Nov-Dec04, May-June03]

Power of company to pay interest out of capital

i. Power of company to pay interest out of capital in certain cases where any shares of a company

are issued for the purpose of raising money to defray the expenses of the construction of any

works or building or the provision of any plant which cannot be made profitable for a

lengthened period, the company may pay interest on so much of that share capital as is for the

time being paid up for the period and subject to the conditions and restrictions in this and may

charge the same to capital as part of the cost of construction of the work or building or the

provision of plant.

ii. The writing off of preliminary expenses is the discretion of the company. The company may

amortize the preliminary expenses over several according periods as may be determined in the

Article of association or as per the decision of the Board of Directors meeting.


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41. Discuss the provisions of the Companies Act, 1994 as to the issue of shares at a discount [Nov-

Dec08, May-June05, Nov-Dec04]

Following rules relates to the issuance of shares at a Discount:

1.It should be an existing company which has issued share earlier;

2.Court permission must be taken and to be confirmed at Annual General Meeting;

3.Maximum rate would be 107, which is to be confirmed at Annual General Meeting;

4.The Company shall not issue share at a discount within one year from the date of commencement

of business;

5.The shares to be issued within 6 months from the date of the approval of the Court to issue share

at a discount.

42. What are the pre-conditions of reduction of share capital of a Company? [Nov-Dec08, May-

June03, Nov-Dec04]

Reduction of share capital:

As contained in section 59 of the companies Act 1994, any company limited by share if it is authorizedby its articles, by passing a special resolution, having approval from the Court can reduce the share

capital as follows:

By reducing or extinguishing the liability on any shares not paid-up;

Cancel any paid-up share capital which is lost or not represented on the assets;

Repay the capital, which is in excess of the wants of the company;

Reduce the share capital and shares as required by alteration of memorandum.

43. What do you understand by the pre-emptive rights of shareholders in respect of further issue of

shares? [Nov-Dec08]

Where the directors decided to increase the subscribed capital of the company by issue of further

shares within the limit of the authorized capital, such further shares shall be offered to the members in

proportion, to the capital paid up on the existing share held by such member, irrespective of class, at the

date of the offer. This is the pre-emptive rights of shareholders to get such offer.

44. What is the tenure of an auditor duly approved in an AGM of a limited company? [Nov-Dec08]

Every company shall appoint an auditor or auditors to hold office from the conclusion of annual general

meeting until the next annual general meeting and shall within seven days of the appointment, give

intimation thereof to every auditor so appointed.

45. Describe the provisions of the section 211 of the Companies Act concerning appointment and

termination of auditors. [Nov-Dec08]

Special notice shall be required for a resolution at an annual general meeting appointing as auditor a

person other than a retiring auditor, or providing expressly that a retiring auditor shall not be re-

appointed.

On receipt of such notice the company shall forthwith send a copy thereof to the retiring auditor.


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46. Discuss the provisions of section 150 of the Act about the Restriction on Commencement of

Business. [Nov-Dec08, Nov-Dec04]

Certificate of commencement of business: (Section 150)

A company (Public Limited) shall not commence any business or exercise any borrowing powers unless:

a) Shares held subject to the payment of whole amount thereof in cash have been allotted to an

amount not less than the minimum subscription;

b) Every Director of the company paid in cash each of the share held;

c) A certificate of compliance by the Company Secretary or a Director that above formalities have

been complied;

d) A statement in lieu of prospectus has been submitted where no prospectus is issued for

invitation to subscribe the share to the public.

47. Describe the legal positions of pre-incorporation contracts. What are the exceptions to those

contracts? [May-June08, May-June02]

Pre-incorporation contract

A company cannot be bound by a contract which was made on its behalf by any person and excluding apromoter before the company itself had been formed. The company cannot ratify any pre-incorporation

contract and the promoters will be personally liable.

In these circumstances, the simplest and safest course for promoter is to bring the negotiation to the

point of agreement but to postpone any binding contract until the company is formed and can enter

into the contract for itself. In this regard a fresh contract can be accorded by the company after the

incorporation.

48. What contracts are required to be made under the Seal of a company? [May-June08, May-

June03]

Use of common seal

The common seal of the company shall not be affixed to any instrument except by the authority of

resolution of the Board of Directors, and in the presence of at least two Directors and of the secretary or

such other person as the directors may appoint for the purpose, and those two directors and secretary

or other person as aforesaid shall sign every instrument to which the seal of the company is so affixed in

the their presence.

49. What is a prospectus? Do all the companies issue it? What could be an alternative to prospectus?

Write a few lines about it. [May-June08, May-June04, Nov-Dec-03]

Prospectus

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

a prospectus may be defined as any document that includes any notice, circular, advertisement or other

document inviting offers from the public for the subscription or purchase of any share or debentures of

a body corporate.

No, all the companies do not issue a prospectus. Only the Public Limited Companies having permission

from the Securities and Exchange Commission may issue a prospectus.


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Alternative to a prospectus

As per Section-141 a Public Limited Company having a share capital and not issuing prospectus must at

least 31 days before the first allotment of shares or debentures, file with the Registrar for registration a

statement in lieu of prospectus. The statement must be in the form prescribed in schedule - IV of the

Companies Act-1994. Every private limited company which is converted to a public limited company

shall also a statement in lieu of Prospectus as per Schedule-V.

50. Who are authorized to make an application to the court for the winding up of a company?

Tabulate the difference between the winding up of a company and the dissolution of a

partnership. How does the winding up affect the position of servants and the Directors of the

company? [May-June08, Nov-Dec-02]

Application to the Court for winding-up:

According to Section 239, the winding-up of a Company may be done in any one of the following three

ways:

1. Compulsory winding up by court;

2. Voluntary winding up by the members or by creditors;

3. Voluntary winding up under the supervision of the court.

In above all cases winding up may be made by the application of:

i. Any member of the Company with the special resolution;

ii. Any member of the Company with the Extra-ordinary resolution;

iii. The regulatory authority in case of default in filing the statutory meeting, report, etc.

iv. Any creditors/members if the Company is unable to pay its debts.

Winding up and dissolution or a partnership firm

Point of difference Winding up of a company Dissolution of

partnership Firm

Meaning of winding

up/ dissolution

The activities of the

company is ended

Dissolution of

partnership among all

the partners

Related laws Companies act 1994 Partnership Act 1932

Liability of the owner Liability is limited Liability is unlimited

Distribution of assets As per companies Act As per partnership deed

Cause of winding up/

dissolution

By the death of a member

it is not wound up. Because

it has perpetual subsection.

Partnership will

dissolved by the death

of a partner

Winding up affecting the position of officers

As per Section - 252(3), a winding-up order by the court executed as a dismissal or discharge of the

servant of the Company. Such discharge relieves the servant from all obligations under his contract of

service. The power of the directors is also usually cease on the winding-up of a Company.

a) Misfeasance: Under section 331, if any promoter, director, liquidator or officer of the Company

has misapplied or retained money or property of the Company or has been guilty of misfeasance


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or breach of trust, the court may, on the application of the liquidator or of any creditor or

contributory, examine into his conduct and order him to repay or restore money or property or

to pay compensation.

b) Criminal Liability: Section-332 provides punishment for falsification, or fraudulent secretion of

any of the books, papers of securities of the Company which is being wound-up.

51. What is the effect of an "ultra vires" transaction as far as the company and its directors are

concerned? [Nov-Dec07, May-June05]

Effect of an ultra vires transaction:

The company and its Director's shall do all activities within the power of Memorandum and Article of

Association any transaction beyond the power is "ultra vires" and the transaction will not bind the

Company, effect of an ultra vires transaction relating to the Memorandum and Article of Association are

as follows:

1. Transaction beyond the memorandum.

2. Transaction beyond the article of association.

Transaction beyond the memorandum:

The transaction is ultra vires and void. It will not bind the Company and the Directors will be personally

liable. Transaction beyond the Articles:

The transaction is also ultra vires and Directors are personally liable, but if the transaction is incidental

or non-sequential then the transaction will be valid and binding on the Company.

52. Statutory Meeting is a must within a specified time for a new company. State the specified time.

What matters can be transacted in such meeting? [Nov-Dec07]

Every public company limited by shares and every company limited by guarantee and having a share

capital, must within a period of not less than one month and not more than six months from the date atwhich the company is entitled to commence business, hold a general meeting of members which is to be

called, the Statutory Meeting. In this meeting the members are discuss a report by directors, known as

the Statutory Report, which contains particulars relating to the formation of the Company.

53. State the modes of winding up of a company as per Company Act, 1994 [May-June07].

According to section 234, the winding up of a company, may be done in any one of the following three

ways:

1. Compulsory winding up by the Court

2. Voluntary winding up b), the members or by creditors


54. State the circumstances in which a company may be wound up by the court. [May-June07, May-

June04]

As per section 241, a Company shall be wound up if the Company:

i. Passed a special resolution for winding up of the company by court.

ii. Fails to furnish statutory report or fails to hold statutory meeting.

iii. Suspend its business operation for one year or fails to commence business within one year of its

incorporation.


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iv. Members reduced to less than 2 or 7 for Private & Public Limited Company respectively.

v. Unable to pay its debt.

vi. Court is satisfied that it is just and equitable to wind-up the Company.

55. Can a contributory present a petition for winding up of a company? When? [May-June07]

A contributory shall not be entitled to present a petition for winding up a company, unless

(i) either the number of members is reduced in the case of a private company, below two, or, in

the case of any other company, below seven; or

(ii) the shares in respect of which he is a contributory or some of them either were originally

allotted to him or have been held by him, and registered in his name for at least six months

during the eighteen months before the commencement of the winding up, or have devolved on

him through the death of a former holder;

56. What are the conditions that a contingent or prospective creditor has to fulfill for hearing of his

petition for winding up before the court? [May-June07]

The Court shall not give a hearing to a petition for winding up of a company by a contingent or

prospective creditors until such security for costs has been given as the Court thinks reasonable anduntil a prima facie case for winding up has been established to the satisfaction of the Court.

57. How many copies of Balance Sheet and Profit & Loss A/C and within how many days from the

date of AGM are to be filed with the registrar? Who can sign these? What are the consequences

of default? [May-June07]

As per section 190 of the Companies Act, three copies of the balance-sheet and the profit and loss

account or the income and expenditure account shall be filed with the Registrar, within thirty days after

Annual General Meeting.

The balance-sheet and the profit and loss account or the income and expenditure account signed by the

managing director, managing agent, a manger or secretary of the company or if there be none of these,by a director of the company.

If a company makes default in complying with the requirements of this section, it shall be liable to a fine

not exceeding one hundred taka for every day during which the default continues, and every office of

the company who knowingly and willfully authorizes or permits the default shall be liable to the like

penalty.

58. Are Balance Sheet and Profit & Loss A/C required to be filed with registrar - (1) If there is no AGM

held? When? (2) If the shareholders do not adopt the Balance Sheet laid before the AGM?

Explain why? [May-June07]

Where the annual general meeting of a company for any year has not been held, there shall be filed

with the Registrar within thirty days from the last day on which that meeting should have been held.

If the shareholders do not adopt the Balance Sheet laid before the AGM, a statement of that fact and of

the reasons therefore shall be annexed to the balance-sheet and to the copies thereof required to be

file with the Registrar.


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59. Who can authenticate the proceeding or a document of a company? Is the authentication of

document needed under company seal? [May-June07]

A document or proceeding requiring authentication by a company may be signed by a director, secretary

or other authorized officer of the company, and need not be under its common seal.

60. One of your prospective clients from USA is contemplating to start their business in Bangladesh.

The client requests your opinion over the legal position of opening their business in the form of

Liaison Office, Branch Office and forming a subsidiary in terms of: (i) legal steps; (ii) taxation and

(iii) remittances and employment. [Nov-Dec06]

Regulations relating to legal steps, taxation, remittances and employment of a Foreign Company:

As per section 378(a) of the Companies Act (CA) 1994, any Company incorporated outside Bangladesh

which, establish a place of business within Bangladesh shall be treated as a Foreign Company. The

following regulations are related to Foreign Companies:

Legal Steps as required by the CA 1994: Registration of foreign Companies:

As contained in Section- 379 a Foreign Company can be registered in Bangladesh. The ForeignCompanies, which after the commencement of this Act establish a place of business within Bangladesh

shall, within one month of the establishment of the place of business, deliver the following documents

to the Registrar for registration.

1. A certified copy of the charter or statutes or memorandum and articles of the Company or other

instrument constituting or defining the constitution of the Company; and if the instrument is not

written in Bengali or English languages a certified Bengali or English translation thereof;

2. The full address of the registered or principal office of the Company;

3. A list of the Directors and Secretary if any, of the Company;

4. The name and address or the names and addresses of one or more persons resident in

Bangladesh, authorized to accept on behalf of the Company service of process and any notice or

other document required to be served on the company;5. The full address of the office of the Company in Bangladesh, which is to be deemed to be its

principal place of business in Bangladesh.

Accounts of Foreign Companies

Every Foreign Company shall, in every calendar year make out a Balance Sheet, Profit and Loss Account,

Group Account (if it is a holding company) and such other documents and information as required by

the Act and deliver 3 copies of the same to the Registrar (section-380).

Obligation to state name, etc. of Foreign Company

Every foreign company shall,

a) in every prospectus inviting subscription in Bangladesh for its shares or debenture, state the

country in which the company is incorporated;

b) exhibit on the outside of every office or place where it carries on business, the name of the

company and the country of incorporation in legible English or Bengali Character;

c) Disclose the name of the company, country of incorporation in English and Bengali in all bills,

letter head, notices and other official publications (section 381).

As per section 388 the company shall submit a certified copy of the prospectus to the Registrar if the

company wants to issue prospectus offering to the public for subscription of shares/debentures.


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Other related regulations

The Company shall be registered with the Board of Investments (BOI) as a foreign company or a joint

venture company by paying prescribed fees to Government.

Clearance from the Office of the Environment

A clearance letter from the office of the Environment is to be obtained by paying adequate fees along

with complying with other formalities to the Government.

Obtaining a trade licenseA trade license is also to be obtained by paying prescribed fees from the City Corporation or Union

Porishad concerned as the case may be to run its business in any City corporation, Pouroshabha or

Union Parishad area.

TIN Number

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

1984 & recurrent finance bill.

VAT registrationThe Company will be registered with the Divisional Officer, VAT and collect a certificate of VAT

registration, i.e., 'VAT-8' as per VAT Act 1991.

Taxation of Foreign Companies

Income Tax:

The Foreign Company may get special Tax benefit if it is located in Export Processing Zone (EPZ). In this

case, the Company will get lax exemption period for 10 years. No Income Tax will be deducted at source

from the income of the Company as well as from the import value of the Company. In case the company

is an export oriented one it will pay no Duties, Tax, VAT, etc. on import of raw materials. After the Tax

holiday period the Company will also enjoy 50% Income tax relief on its export earnings.

VAT:

The VAT rate for export of items of any company is Zero. But if the company sells its products locally it

will pay VAT as per VAT Act 1991 and amendments thereto.

Remittance and Employment

After registration of the Company by the Registrar, it will take permission from the Bangladesh Bank

through the Board of Investment for remittance from the overseas by way of loan, equity, etc. and for

remittance from Bangladesh for payment of dividend, interest etc. For recruitment of any foreigners in

the company, the company will take work permit of the employees from the Board of Investment. For

Bangladeshi employees no such permission is required to work in foreign companies.


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61. Your client is a listed company in both Dhaka and Chittagong Stock Exchanges. Board of Directors

of your client company decided to merge with another company. You are asked to advise your

client on the legal steps to follow in line with the regulatory requirements of relevant corporate

and regulatory authorities of Bangladesh. [Nov-Dec06]

Regulations relating to compromise for amalgamation/ Merger of Companies

A Company if it is authorized by its Articles may decide to merge with other Company by passing a

special resolution having permission from the Court.

Where a compromise or arrangement is proposed between two Companies the process of such

compromise or arrangement is to be conducted in a manner as the Court directs.

As per section 228(2) if a majority in number representing three-fourths in value of creditors or of

members as the case may be, present either in person or by proxy at the meeting, agree to any

compromise or arrangement, the compromise or arrangement shall if sanctioned by the court be

binding on all the creditors, members and the company.

As per section 228(4) a certified copy of the order of the Court is to be filed with Registrar. Where anapplication is placed before the Court for the sanctioning of a compromise arrangement purpose

between the companies in connection with a scheme for reconstruction of any company or companies

for the amalgamation of any two or more companies, and that under the scheme the whole or any part

of under taking and the property of the company concerned in the scheme (transferor company) is to be

transferred to another company (transferee company). In this regard the court may order that:

a) the transfer to the transferee company of the whole or any part of the undertaking and of the

property or liabilities of any transferor company;

b) the allotting or apportioning by the transferee company of any shares, debentures, policies, or

other like interests in that company to or for any person;

c) the continuation by or against the transferee company of any legal proceeding pending by or

against any transferor company ;d) the dissolution, without winding up, of any transferor company;

e) such incidental, consequential and supplemental matters as are necessary to secure that the

reconstruction or amalgamation shall be fully and effectively carried out.

A scheme or contract involves the transfer of shares or any class of shares in a company (Transferor

Company) to another company (Transferee Company). Within 120 days after making of the offer on that

behalf by the transferee company, the offers is to be approved by the holders of not less than 3/4th

in

value of the shared affected.

62. State the procedures of calling Annual General Meeting and Extraordinary General Meeting of a

Company State what businesses are transacted in Annual General Meeting. [Nov-Dec06]

Annual General Meeting

As per section 81(1) of the Companies Act 1994 every Company shall hold one Annual General Meeting

(AGM) of the Company in every Gregorian calendar year. But the period from one AGM to next AGM

shall not exceed 15 months. Every company shall hold its first AGM after incorporation within 18

months from the date of incorporation. But as per SEC regulations the AGM is to be held within 6

months from the end of its Accounting year.


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For calling AGM notice to the shareholders is to be given at least 14 days before the AGM, mentioning

the date, time, agenda and venue of the meeting therein. The annual report of the company is to be

accompanied.

Extra ordinary general meeting

As per Section-84, the above meeting can be called on requisition from holders of 1/10lh

members or1/10 holders of paid-up capital. If the Directors do not cause a meeting to be called within twenty-one

days from the date of the requisition being so deposited, the requisionist or a majority of them in value

may themselves call the meeting, but in either case any meeting so called shall be held within three

months from the date from the deposit of the requisition. Notice for holing the meeting is to be given at

least 21 days before the date of the meeting. The Agenda of the meeting is to be mentioned in the

notice.

Following businesses are generally transacted in the AGM

1. Adoption of annual financial statements and auditors' report thereon;

2. Declaration of Dividend;

3. Appointment of Auditors and fix their remuneration; ,

4. Appointment of Director(s) after requirements thereof:

5. Any other matter with the permission of chair.

63. How and in which meeting a special Resolution of a Company is passed? [Nov-Dec06]

Special resolution:

This is passed in a General Meeting by the three-fourth majority of the members present in person or by

proxy where proxy is allowed. Notice for which 21 days specifying the-intention to propose the

resolution is to be given before the date of the meeting. Special resolutions are necessary for the

following purposes:

i. To change the name of the Company;

ii. To alter the Memorandum of Association;iii. To alter the Articles of Association;

iv. To reduce the share capital;

v. To convert any portion of the capital, uncalled in to reserve capital;

vi. To appoint inspectors to investigate the company's own affairs;

vii. For winding-up of a Company voluntarily.

viii. To pay interest out of capital for raising money to meet expenses of construction

work;

ix. To convert public limited company to private limited company

64. Discuss the qualification and disqualification of a director of a company. How directors are

appointed? [Nov-Dec06]

Qualification of Directors:

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

must subscribe in order to become a Director. The minimum number which is determined by the Articles

is known as qualification number of shares as contained in Section 97(1) of CA 1994. Every Director shall

hold that minimum qualification shares within 60 days or within the lime as may be specified in the

Articles whichever is earlier.


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As per Section 97(2), if after the expiration of the period mentioned in sub-section (1) any such

unqualified person acts as a Director of the Company he shall be liable to pay fine not exceeding Tk.200

per day for the period of holding as an unqualified Director under this section.

As per section 92 every person shall not act as a Director unless he has -

signed and filed with the Registrar to consent in writing to act as such Director and;

signed the Memorandum for a number of shares not less than his qualification shares, or taken

from the Company and paid or agreed to pay for his qualification shares.

Disqualification of Directors:

Following persons shall not be eligible for appointment as director: (Sec-94j:

An unsound mind, declared by a competent court;

An insolvent or an un-discharged insolvent;

A person applied to be adjudicated as an insolvent and his application is pending;

Any person fails to pay his shares money after it is called up and 180 days have elapsed from the

last day fixed by the call;

A minor;

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

As per Section 91 of CA 1994 directors are appointed as follows:

Subscriber of Memorandum shall be treated as the first Directors;

Generally Directors are appointed at the AGM by the shareholders among themselves;

One-third of Directors shall retire by rotation in each year;

Existing Director may appoint a person as Directors to fill up any casual vacancy.

65. What are the difference types of resolutions envisaged in the Companies Act 1994? What are the

processes of passing a special resolution? [May-June06, May-June04]

Different type of resolutions:

i. Ordinary resolution

ii. Special resolution

iii. Extra-ordinary resolution.

Special resolution:

This is passed in a General meeting by the three-fourth majority of the members present in person or by

proxy if proxy is allowed, Notice for which specifying the intention to propose the resolution is to be

given before 21 days the date of the meeting.

Special resolutions arc necessary for the following purposes:i. To change the name of the Company;

ii. To alter the Memorandum of Association;

iii. To alter the Articles of Association;

iv. To reduce the share capital;

v. To convert any portion of the capital, uncalled in to reserve capital;

vi. To appoint inspectors to investigate the company's own affairs;

vii. For winding-up of a Company voluntarily.


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66. Who are authorized to make an application to the court for the winding up of a company? [May-

June06, Nov-Dec02, Nov-Dec01]

Application to the Court for winding-up:

According to Section 239, the winding-up of a Company may be done in any one of the following three

ways:

1. Compulsory winding up by court;

2. Voluntary winding up by the members or by creditors.


In above all cases winding up may be made by the application of:

i. Any member of the Company with the special resolution;

ii. Any member of the Company with the Extra-ordinary resolution;

iii. The regulatory authority in case of default in filing the statutory meeting, report, etc.;

iv. Any creditors/members if the Company is unable to pay its debts.

67. You are Company Secretary of a public limited company. In the coming month the company's

annual general meeting has to be held, for which the Board of Directors meeting needs to beconvened. Following items arc included on the agenda:-

Investment in an associated company;

Approval of the annual financial statements;

Issue of shares to new foreign shareholders;

Approval of new company logo;

Remuneration of the recently appointed Chief Financial Officer & Chief Executive

Officer; and

Recommendation of final dividend.

Some of the directors representing the foreign shareholders with 30% shareholding/representation on

the Board may not be able to attend the meeting. You have been asked by these non-resident

directors to get their approval on the decisions through circular resolution or by any other means.

Discuss on this suggestion in the light of the corporate laws and practices. [May-June06]

A Board of Directors meeting is required after end of the financial year of a Company and before the

Annual General Meeting is held. The main cause of the requirements of the Board of Directors meeting

is for the Approval of annual accounts, Recommendation of dividend, Proposal for appointment of

Auditors and to fix their remuneration, retirement & appointment of Directors, etc. which are to be

placed before the shareholders for approval in the AGM.

As per section 95 of the Companies Act 1994, the notice of the Board of Directors meeting is to be

served to the Bangladeshi address. But notice of such meeting can be served outside Bangladesh by Fax,

e-mail or otherwise as may determined by the Articles of Association of the Company.

The decision of the Board meeting of the Company is taken by the majority vote of the members of the

Board present which requires quorum. The quorum of the Board meeting is determined by the Articles.


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The absence of any members of the Board will not hamper the decision of the Board meeting, if quorum

exists.

In this case, the member(s) of the Board are living outside Bangladesh which represents 30% voting

power of the Board but not majority. It may be opined that the notice of the Board meeting is to be

served to their Bangladeshi address by Fax to the address of the Members of the Board. But prior

approval or any other kinds of approval is not required to hold the meeting or to take decision in the

Board meeting.

However, the Directors may send their opinion to the Board by fax, e-mail, phone or otherwise relating

to the agenda mentioned in the notice that may be placed before the Board for decision. Any other

procedure may be followed if the Articles of Association provides any guideline in this respect.

68. "All listed companies are public companies but not vice-versa" - Discuss the statement. [Nov-

Dec05, Nov-Dec03, Nov-Dec01]

Listing CompaniesAs per listing regulations clause 7(1), only the public limited Company can be listed with the Stock

Exchanges. As per Companies Act 1994, Securities of a private limited Company are prohibited for

transfer and it cannot be sold publicly. So, the Stock exchanges deal with those securities which are

transferable. So, no private limited Company is eligible for listing with any stock exchange but a public

limited Company is not mandatory to be listed. It is the discretion of the shareholder/sponsors public

limited company as to whether their Company will be placed to the Stock Exchanges for listing. So it can

be said that "All listed companies are public companies but not vice-versa."

69. What is prospectus? What do you know about registration of prospectus? [Nov-Dec05]

Prospectus:

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

words, a prospectus may be defined as any document that includes any notice, circular, advertisement

or other document inviting offers from the public for the subscription or purchase of any share or

debentures of a body corporate. Prospectus has the following characteristics:

1. It is a document described or issued as a prospectus;

2. It includes any notice, circular, advertisement to the public for sale of securities;

3. It is an invitation to the public;

4. The public is invited to subscribe the shares or debentures of a Company.

Registration of Prospectus:

Before publication of a prospectus inviting people to subscribe shares or debentures of a Company, a

copy of the prospectus must be delivered to the Registrar for registration on or before the date ofpublication. It should be signed by the Directors or proposed Directors of the Company or by their agent.

On the face of the prospectus delivered to the Registrar for registration, it should be stated that a copy

has been delivered for registration; and must contain a list of statements includ

Corporate Laws and Practice

Documents

Transcript of Corporate Laws and Practice