MST 315 Company Laws & Secretarial Practices In Bangladesh Company Laws & Secretarial Practices In...

MST 315Company Laws & Secretarial Practices In Bangladesh

Company Laws & Secretarial Practices In Bangladesh

Bangladeshi some company name?Finance sector?

Insurance sector?

Agro based?

Hospital?

Cement?

Pharmaceuticals?

Textile?

Shipbuilding Industry?

Others?


Reference books:

1.Muqtadir’s Handbook for company secretary

2.The companies act,1994- Mr.Md. Mahbubur Rahman

3.Office Management –R.k. sharma,shashik.gupta


Company + LawsAbout Company:

A company, formed and registered under the Companies Act (1994), is regarded by law as a single person, having specified rights and obligations (Duties/Responsibilities). The law confers on a company a distinct legal personality, with perpetual succession and a common seal. Therefore a company is different from its members and the individuals composing it.


As Under Sec 2 (1) (d) The Company Act, 1994: “Company means a company formed and registered under this Act or an existing company.”


About laws:A rule enacted or customary in a community and recognized as commanding or forbidding (hostile) certain actions. Laws collectively as a social system or subject of study.


The companies act

There are two immediate objectives for the enactment of this Companies Act. They are:

a) To inject discipline in the management

b) To protect the interest of the investors.


History of Company Laws1. In 1653 First time East India Start it’s journey by Joint fund & Joint

capital.2. In 1720 British Parliament take “ The Bubble Act”

“Bubble Act 1720 (6 Geo I, c 18) was an Act of the Parliament of Great Britain that forbade (banned) all joint-stock companies not authorized by royal charter. It was passed on 9 June 1720, and was also known as the Royal Exchange and London Assurance Corporation Act 1719, because those companies were incorporated under it.”

1. In 1825 “The Bubble Act” rejected by Parliament.2. In 1834 trading company law introduced.3. Basically in 1844 The Joint Stock Companies Act, 1844 passed by British

Parliament.( First Company Law)


1. First Indian Company Act, regarding companies, was the Joint Stock Companies Act of 1850.

2. The act of 1850 was replaced by a new Act bearing the same name in 1857. ( Limited liability was introduced)

8. Acts relating to companies were passed in 1860,1866,1882,1895,1910, and 1913.

9. The act 1913 remained in force up to 195610. The Act of 1956 has been amended

in1960,1963,1965,1969,1971,1984,1988.11. In 1994 the new company law introduced by our

government.(Indian companies act 1956 and Pakistan Companies

ordinance 1984Company Laws & Secretarial Practices

In Bangladesh

Types of Companies :Private Company

i. Companies limited by shares

ii. Companies limited by guarantee ( guarantee for liquidation)

Public Company

i. Companies limited by shares

ii. Companies limited by guarantee ( guarantee for liquidation)

iii. Unlimited companies

Classification on the Basis of Control:i. Holding Company

ii. Subsidiary Company

Classification of others:i. Foreign company

ii. Joint venture company


Company Limited Liability by Shares: In these companies there is a share capital, and each share has a fixed nominal value which the shareholder pays at a time or by the installments. The member is not to pay anything more than the fixed value of the share, whatever may be the liabilities of the company.

Company Limited by Guarantee: In these companies, each member promises to pay fixed sum of money in the event of liquidation of the company. This amount is called the Guarantee.


Private Limited Company

As defined in Section 2(q) of the act, a private company means a company which by its articles:

a) restricts the right to transfer the share, if any; and,

b) prohibits any invitation to the public to subscribe for the shares , if any, or debentures of the company; and,

c) limits the number of its members to fifty (50) not including persons who are in the employment of the company.

“A Company incorporates with more than two person and it is limited to fifty members . In this case it is only a huge partnership and the liability is unlimited”


Public Limited Company

In public limited company,

-public can acquire,

-own, and

-sell the share of such type of company at their wishes.

-The company can issue prospectus to the public to subscribe the share and debentures of the company and, thus, can collect capital for the company.

“A companies which is constituted with a minimum of seven members and maximum is unlimited, and members called share

holders. Here the liability is limited up to level of what he is invested”


Classification on the basis of control: In accordance with the basis of control, Companies may be classified into-

1.Holding Company: If a company can control the policies of another company

(a) through the ownership of its shares or

(b) through control over the composition of its Board of Directors, the former i.e.

the controlling company is called a Holding Company.

2. Subsidiary Company: The controlled company is called subsidiary company of holding company.


Classification of others:

Foreign company:When a company which is incorporated outside Bangladesh but establishes

business in Bangladesh with same name and nomenclature (arrangement) with or without a place of business in the country, it is registered as a foreign company in Bangladesh. Sec378 to 392

Joint venture company: An association of two or more individuals or companies engaged in a solitary

business enterprise for profit without actual partnership or incorporation; also called a joint adventure.

Government company.A company which are incorporated holly or jointly with state and central government or 51% & 49% with other joint ventures or with other public limited companies. Here also liabilities are limited by shares


Characteristics of a company:Legal formation: the company is to be formed according to the producer prescribed in companies Act in Bangladesh.Artificial entity: a company possesses independent and separate entity.Capital: the capital of company is collected through joint contribution in the form of share capital.Perpetual existence: company has a perpetual (unending) existence.Number of shareholders: if the company is a private company then its maximum number of shareholders is fifty (50) and minimum two (2), and if the company is public company then the minimum number of shareholders are seven and maximum number is the number of shareholder.


Limited liability Company: the liability of shareholder of a company is limited by the share value.

Public subscription and transferability of share: if the company is a public company, then it can call the public to subscribe the share capital and also its shares are freely transferable from one hand to another. The share capital of private listed company is transferable among the shareholders.

Separation of ownership from management: in a company, the ownership is separated from management.

Democratic management: the management of company is done in a democratic way.

Profit distribution: the earnings of a company are partly distributed as dividend among shareholder and a portion is kept for future needs as reserves.


Differences between private limited company and public limited company.

=== Private company limited by shares - this is the most common type of company. The important difference from a public limited company is that a private company may not offer its shares for sale to the general public. ===

=== Private company limited by guarantee - members of this type of company do not make any contribution to the capital during its lifetime as they do not purchase shares. The members' liability is limited to the amount that they each agree to contribute to the company's assets if it is wound up. ===

=== Private unlimited company - this type of company may or may not have a share capital and there is no limit to the members' liability. Because there is no limitation on members' liability, far less of the company's affairs have to be disclosed publicly than is the case with the other types of company. ===

=== Public limited company - this type of company has a share capital and, the liability of each member is limited to the amount unpaid on shares that a member holds. The important difference from a private is that a public limited company may offer its shares for sale to the general public. It may also be quoted on the stock exchange. ===


The Memorandum of Association (MA) :

The Memorandum of Association is a document which contains the fundamental rules regarding the constitution and activities of a company.

The memorandum contains:

- Name of the company;

- Registered office and agent;

- Rules regarding the capital structure

- The liability of the members

- The objectives of the company

- All other important matters


Contents of Memorandum of Association

Contents of Memorandum of Association According to the Companies Act 1994, the Memorandum of Association must include the following Clauses:1. Name Clause

Every company name must end with Limited (Ltd.). No name of the company should be the name of the existing company, king, queen, president, prime minister, Father of Nation or anything that signifies government sponsorship.2. Situation and Address Clause

This clause should include the address and situation of the company, which is mention in the registration.3. Area of Business

It should include the current and potential area of the business. It should be written carefully, because it made the boundary around the business operations.


4. Objective Clause

This clause is the most important clause of MA. This clause identifies the scope of the business. Beyond these identified scopes, the business can’t move. For example, If a company says its objective to do only Shoe business, it cannot do another business.

5. Liability Clause

This clause tells about the duties and responsibilities of the Owners; i.e., whether the share holders are liable for their share capital or promise.

6. Capital Clause

This clause includes the amount of capital, its type, each share price, etc. 7. Consent Clause

Here the directors declare in a written statement that they are agreeing to be the director of the proposed company by buying certain amount of a share. Generally, the promoters become the directors. This statement should include a witness and the directors’ signature with their name, address and occupation.


The Articles of Association (AA) :

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

regarding the internal management of the company. The Articles can cover a medley of topics,

the issuing of shares (also called stock), different voting rights attached to different classes of shares

the appointments of directors - which shows whether a shareholder dominates or shares equality with all contributors

directors meetings - the quorum and percentage of vote management decisions - whether the board manages or a founder transferability of shares - assignment rights of the founders or other members of the

company do special voting rights of a Chairman, and his/her mode of election the dividend policy - a percentage of profits to be declared when there is profit or

otherwise winding up - the conditions, notice to members confidentiality of know-how and the founders' agreement and penalties for disclosure first right of refusal - purchase rights and counter-bid by a founder.


Articles of Association

Registration of articles Application of Schedule I Form and signature of articles

Registration of articles

Application of Schedule I

In the case of a company limited by shares and registered after the commencement of this Act, if articles not registered, or, if articles are registered, in so far as the articles do not exclude or modify the regulations in Schedule I, those regulations shall, so far as applicable be the regulations of the company in the same manner and to the same extent as if they were contained in the duly registered articles.

Form and signature of articles Articles shall

(a) be printed;

(b) be divided into paragraphs numbered consecutively;

(c) be signed by each subscriber of the memorandum, who shall add his address and description in the presence of at least two witness who shall attest the signature.

Registration of memorandum and articles (1) The memorandum and articles if any shall be field with the

Registrar who if satisfied that the requirements of this Act have been complied with shall retain and register them within thirty days from the date of their receipt and in the event of refusal he shall communicate the grounds within ten days after that period to the company.

(2) A person on being aggrieved by a refusal of the Registrar under sub-section (1) may make an appeal to the Government within thirty days of the receipt of the refusal order.

(3) The petition of appeal shall be accompanied by a treasury challan showing of a fee of two hundred fifty taka to be credited under the head of account specified in this behalf.

(4) The decision of the Government in an appeal under this section shall be final.

Prospectus

Dating of prospectus Matters to be stated and reports to be

set out in prospectus Registration of prospectus

Dating of prospectus

A prospectus issued by or on behalf of a company or in relation to an intended company shall be dated, and that date shall, unless the contrary is proved, be taken as the date of publication of the prospectus.

Matters to be stated and reports to be set out in prospectus

Section134-135, Companies act (Bangladesh)1994

Registration of prospectus

Section139, Companies act (Bangladesh)1994

Promoters

A corporate promoter (also "projector") is a person who solicits people to invest money into a corporation, usually when it is being formed.

An investment banker, an underwriter, or a stock promoter may, wholly or in part, perform the role of a promoter.

Promoters general owe a duty of utmost good faith, so as to not mislead any potential investors, and disclose all material facts about the company's business

Types of PromotersPromoters may be classified into the following types.Professional Promoters

They are experts who specialize in company promotion. They float the company and hand it over to the shareholders or their representatives. Promotion is their main profession or occupation.Occasional Promoters

There promoters take interest in floating some companies. They are not engaged in promotion work on a regular basis. They take up the promotion of some company and once it is over they go to their original profession. For instance, engineers, lawyers etc. may float some companies.Entrepreneur Promoters

They are both promoters and entrepreneurs. They conceive idea of a new business unit, do the groundwork to establish it and subsequently become a part of the management.Financier Promoters

Some financial institutions, like investment banks or industrial banks, may take up the promotion of a company with a view to finding opportunities for investment.

Functions of Promoters Discovery of a business idea

The first stage in company promotion is the conception of a new idea. It is the promoter who conceives the idea of setting up a business. If makes an assessment of the viability of a particular business.

Detailed investigation

Promoters undertakes a detailed investigation of the viability, profitability and future prospects of the growth of the proposed activity. To assist then in this venture, they seek the help of specialists such as chartered Accountants, Cost Accountants, Company Secretary, Engineers. Organizations engaged in market research and other specialized agencies. Specialists are in a position to make an objective analysis of their own areas which may help the promoters. Decisions have to be taken regarding the size, location, layout, man power etc.

Assembling the factors of production

If the proposed endeavor gives promise of success and the promoter is willing to undertake the risk of forming the business, steps must be taken to assemble various factors of production viz, land, labor, capital and managerial personnel. Assembly of resources involves making contracts for the purchase of material, land, machinery, etc.

Entering into preliminary contracts

The promoter enters into contracts with different parties before the registration of the company. After registration, the company approves these contracts.

RJSCThe Registrar of Joint Stock Companies and Firms (RJSC) is the sole authority which facilitates formation of companies etc.; and keeps track of all ownership related issues as prescribed by the laws in Bangladesh.

The Registrar is the authority of the Office of the Registrar of Joint Stock Companies and Firms, Bangladesh.


Historical Background After the partition of India, the Office of the Registrar of

Joint Stock Companies & Firms under the Ministry of Commerce was first set up in Chittagong, the port and 2nd biggest city of Bangladesh with some files and records of Companies, Associations (Trade Organizations) and partnership firms received from Kolkata, India. The office was transferred to Dhaka, the capital of Bangladesh in 1962. Currently there are around 110,000 entities registered under RJSC.


RJSC deals with the following types of entities:

i.Private companies

ii.Public companies

iii.Foreign companies

iv.Trade organizations

v.Societies, and

vi.Partnership firms


RJSC accords registration and ensures lawful administration of the entities under the provisions of applicable act as under: i.Companies and Trade Organizations: Companies Act, 1994

(Amendment of Companies Act 1913)

ii.Societies: Societies Registration Act, 1860

iii.Partnership Firms: Partnership Act, 1932


The major functions and activities of RJSC are To incorporate Companies (including Trade Organization), Societies and Partnership Firms under the respective Companies Act 1994, Societies Registration Act 1860 and Partnership Act 1932, and

To administer and enforce the relevant statutory provisions of these acts in relation to the incorporated companies (including Trade Organization), societies and partnership firms.


MST 315 Company Laws & Secretarial Practices In Bangladesh Company Laws & Secretarial Practices In...

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