Company Law Of

Bangladesh
 Background
 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.
 The first sub continental act, regarding companies was the joint stock
companies act of 1850.
 The act of 1850 was replaced by a new act 1857
 Before liberation the act of 1956 was popularly used which was gazette
passed by the Indians.
 After liberation Govt. of Bangladesh reform the companies act of 1956
which is now known as The Companies Act, 1994.
 Meaning of Company
The term company is used to describe an association of a number
of persons, formed the common purpose and they registered
according to the law relating to companies. Therefore a company
is different from it’s 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.”
 Types of Companies
Mainly there are three kinds of companies as per the Companies Act.
(i) Company limited by shares.
(ii) Company limited by guarantee and
(iii) Company with unlimited liability.
Of the aforesaid kinds of companies, the company limited by shares again
may be divided into two classes viz.,
(I) Private Companies and
(II) Public Companies.
Types of Companies
 Types of Companies

Company limited by shares are those in which the capital is fixed

amount divided into number of shares and in which the liability of the
members do not exceed the face value of his share.
Companies limited by shares are of two types viz.. (i) Private company
and (ii) Public company.
A Private company is a company which by its articles of association
restricts the right of transfer of the share, limits the number of members
to fifty and prohibits invitation to the public to subscribe to the shares or
debentures of the company. Public Company on the other hand is a
company which can be formed by at least seven persons as members
and the membership is open to the public.
 Types of Companies

Company limited by Guarantee are those companies in

which each member guarantees to contribute to the
assets of the company. a sum not exceeding a specified
amount, in case the company is wound up during his
membership or within a year after conclusion of this
membership.
Company with unlimited liability are those companies
where the liability of the members are unlimited. The
members of this type of company are not immune from
personal liability of different acts.
Public and private companies-
distinguished
 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.
 Characteristics of a company
 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.
 The Memorandum of Association
The Memorandum of Association is a document which contains the
fundamental rules regarding the constitution and activities of a company.
The memorandum contains:
1. NAME Clause
2. Situation Clause
3. Objects Clause
4. Area and Operation Clause
5. Liability Clause
6. Capital Clause
7. Consent Clause
The Memorandum of Association
 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.
 Contents of Memorandum of
Association
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.
 Articles of Association
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
 Difference between MOA and AOA
BASIS FOR
MEMORANDUM OF ASSOCIATION ARTICLES OF ASSOCIATION
COMPARISON
Memorandum of Association (MOA) is a
Articles of Association (AOA) is a
document that contains all the
Definition document containing all the rules and
fundamental data which are required
regulations that govern the company
for the company incorporation.
MOA must be registered at the time of The articles may or may not be
Registration
incorporation. registered.

Status Supreme document. It is subordinate to the memorandum.

A memorandum must contain seven The articles can be drafted according

Contents
clauses. to the decision of the Company.

The memorandum is the dominant Any provision, as opposed to a

Validity
instrument and controls articles. memorandum of association, is invalid.
 Procedure of Registration and
Incorporation
The following documents with the necessary fear must be submitted to
the registrar of companies of the state in which the registered office
of the company will be situated.
1)The memorandum of association signed by at least 7 persons in the
care of public companies and 2 persons in the care of private
companies.
2)The articles of association
3)A declaration of an advocate, an attorney, a chartered accountant,
or a person named in the articles as director, manager or secretary of
the company.
4)The registration fees with a filing fee per document.
Procedure of Registration and
Incorporation
 Who can be a member in a Company

The company act does not prescribe any qualification for

membership of a company but since membership created by
agreement it may be argued that person in capable of entering
into contracts can not be a member.
Minor
Company
Creditor
Factious person
Trustee
 How membership ceases?
The membership of a person in a company may terminate in any one of
the following ways:
a)By death
b)By insolvency
c)By rescission
d)By forfeiture
e)By surrender
f)By transfer
g)By sale
h)By power of lien
i)By mortgage
j)By redemption
 The Certificate of Incorporation

Effects of registration: As soon as a company is registered and a

certificate of incorporation is issued by the register, three
important legal consequences:-
The company acquires a distinct legal entity.
It secures a perpetual succession.
Its property is not the property of its shareholders. [sec-34]
The Certificate of Incorporation
 Winding Up

The winding up of a company means the termination of the legal existence of

a company by stopping it’s business, collecting it’s assets and distributing the
assets among the creditors and shareholder's as the Act.
In Bangladesh, the winding up of a company may be either –
 Voluntary; or
 By the court; or
 Subject to the supervision of the court.
Voluntary winding up is usually undertaken by solvent companies, except in
the case of creditor’s voluntary winding up.
 Procedure for voluntary winding up
First Step: preparing documents
Declaration of solvency
A declaration of solvency has to be prepared and signed by the directors. The
declaration will contain statement of the company’s assets and liabilities as at the
latest predictable date before making of the declaration. The declaration will also
state that the company has no debts or that it will be able to pay its debt in full within
such period not exceeding there years from the commencement of the winding up.
The declaration must be verified by an affidavit to the effect that the directors have
made a full inquiry into the affairs of the company. The declaration will be signed by
all the directors of the company or, in the case of a company having more than two
directors, the majority of the directors.
Accounts and audit
Profit and Loss Account and audited Balance Sheet will be prepared up to the latest
predictable date as mentioned above and audited. Auditor’s report should be
obtained.
 Procedure for voluntary winding up
Second Step: board meeting and extra
Board Meeting ordinary general meeting
A Board meeting will be convened pursuant to the rules of Companies
Act and Articles of the company. Majority of the directors should be
present at the meeting. In the meeting, the directors will approve:
a. Audited accounts;
b. The declaration of the Directors;
The directors will also call an extra ordinary general meeting for passing
the special resolution to wound up the company. After the meeting, the
declaration and the affidavit (prepared in the first step) should be
notarized.
 Procedure for voluntary winding up
Second Step: board meeting and extra
ordinary general meeting
Filling of the declaration with the RJSC
The declaration should be filed with the Registrar of Joint Stock Companies and Firms within 5
weeks from the date of the declaration.
Extraordinary General Meeting
The extraordinary general meeting will be held and the special resolution will be passed. The
special resolution will approve the – i) winding up; ii) appointment of the liquidator and fix the
liquidator’s remuneration.
Filling with RJSC
The content of the extraordinary general meeting (along with Form VIII) and the appointment
of the liquidator will be filed with the RJSC.
 Procedure for voluntary winding up
Third Step: Appointment of liquidator
Liquidator
Immediately after the special resolution is passed, the liquidator will accept the appointment and will assume
office and ensure that RJSC is notified about his/her appointment. Within thirty days after liquidator is
appointed, the liquidator will give notice of his appointment as such to the Deputy Commissioner of Taxes
having jurisdiction to assess the company.
Gazette publication:
Notice of any special resolution or extraordinary resolution for winding up a company voluntarily shall be given
by the company within ten days of the passing of the same by advertisement in the official Gazette, and also
in a newspaper, if any circulating in the district where the registered office of the company is situate. The
appointment of the liquidator should also be mentioned in the advertisement.
AGM (if required)
In the event of the winding up continuing for more than one year, the liquidator shall arrange an Annual
General Meeting of the company at the end of the first year from the commencement of the winding up and
of each succeeding year, or as soon thereafter as may be convenient within ninety days, of the close of the
year, and shall lay before the meeting an account of his acts and dealings and of the conduct of the winding
up during the proceeding year and a statement in the prescribed form containing the prescribed particulars
with respect to the position of the liquidation.
 Procedure for voluntary winding up
Forth Step: Final Meeting and filling with
Final Account the RJSC
The liquidator will prepare a final account of the winding up showing how the winding up has been
conducted and the assets of the company has been disposed of. Then s/he will call an extra ordinary
general meeting.
Extra ordinary General Meeting
Notice of the meeting will be given by advertisement specifying the time, place and object of the
meeting not less than one month before the meeting in the official gazette and also in a newspaper
circulating in the district where the registered office of the company is situated. In the extra ordinary
general meeting, a special resolution will be passed relating to the disposal of the books and papers of
the company.
Filling
A return of the winding up meeting will be filed with the Registrar of Joint Stock Companies and Firms
within one week of the meeting. After holding of the final meeting and the submission of the documents
to the Registrar, the legal entity of the company will be dissolved.
THANK YOU!