THE COMPANIES ACT 1994 AND SECRETARIAL PRACTICE

ABOUT THE COMPANIES

# What is company?
Ans:

# What is corporation?
Ans: A Corporation as which, is an artificial being, invisible intangible but existing only in terms of law. It is
then a corporate personality known by a name, seal, office and acting through its human agents. However, in
Bangladesh we have sector corporation, city corporations etc.

# What is industrial undertaking?

Ans: Undertaking is to take up a venture to do something, some deal or some kind of a task for performance.

# Classification of company
Ans:
a) Private limited company
b) Public limited company
i) Company limited by share
ii) Company limited by guarantee
iii) Unlimited company.

Other then these

a) Statutory company
b) Chartered company
c) Registered company
d) Holding company
e) Subsidiary company
f) Group company

# Private limited company

Ans: According to section 2 (q) “Private Company” means a company which by its articles-
i) restricted the right to transfer its shares, if any
ii) prohibits any invitation to the public to subscribe for its shares or debentures, if any;
iii) Limits the number of its member of its members to fifty not including persons who are
in its employment.

# Public company
Ans: Accordingly to section 2 (r) “Public Company” means a company incorporated under this Act or under any
law at any time in force before the commencement of this Act and which is not a private company.

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# Company limited by shares
Ans: The companies which incorporated by the limited liabilities of shares and each share has a fixed nominal
value which the share holder pays at a time or by installments are called company limited by shares.

# Company limited by guarantee

Ans: In these companies, each member promises to pay a fixed sum of money in the event of liquidation of the
company. This amount is called the guarantee.

# Unlimited company
Ans: In this company the liability of company is unlimited, as a partnership firm. An unlimited company may be
with or without a share capital. They must register their articles of association.

# Statutory company
Ans: A statutory company is a company incorporated by a special act of the legislature and not under the
Companies Act 1994. Public utilities companies such as Railways, Gas etc.

# Chartered company
Ans: A chartered company is a company which is incorporated by a Royal Charter for specific purpose, e,g. East
India Company. It has an unregistered corporate capacity as an ordinary person.

# Registered company
Ans: The companies which is registered by the Registered of Joint Stock Companies. Incorporation is issued
after registration.

# Holding companies
Ans: When a company acquires controlling interest in the affairs of another company or companies, it is
known as the holding company. Conditions of holding companies are:
i) Assets whole or partly to another company
ii) Shares or interest held by either directly or through a company.
iii) Fifty percent of shares or voting rights in that other company.

# Subsidiary company
Ans: It is a company 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.

# Group companies
Ans: The term group means a set of individuals, associations, firms of bodies corporate, together in plural
number which can exercise control.

# Privileges of private limited company

Ans: There are a number of privileges and exemptions of allowed to a private limited company by the
companies Act in different sections:

c) It may consists of two members only (sec-05)

d) Statutory meeting and the connected statutory report are not applicable [sec-88(12)]
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 e) Two directors will suffice [sec-92)]
f) Retirement provision not applicable [sec-91(2)]
g) No need to file a statement in line of prospectus [sec-141(3)]
h) No restriction on allotment shares [sec-148(13)]
i) No need to obtain a certificate of commencement [sec-150(6)]
j) Submission of annual accounts to members not required [sec-191(50]
k) Registrations 79 to 87 of directors are not compulsory for inclusion in the articles of
association of a private limited company.

# Distinction between private, public limited company, partnership and corporation

Ans:

Point of difference Partnership Private Company Public Company Corporation

Act 1932 1994 1994 Special Act of
Parliament
Legal entity No Yes Yes Yes
Number of 2-20 2-50 7-unlimited Selected by
members Government
Corporate No Yes Yes Yes
personality
Operation By the partners By the board By the board By the members
appointed by Govt.
Owner The partners Share holders Shareholders Govt./Public
Restrictions on Can change or Restricted Unrestricted Govt. can change
transfer of shares additions of the members
partners
Invitation to public Can anyone be a Can not invite Can invite Can not invite
partner
Restriction of No restriction Must use Pvt. No restriction Govt. select the
name name
Prospectus Not need Not need to file Need to file Govt. operate
No of directors Not need At least two At least three Govt. can appoint
one or more than
one director
Qualification Qualification shares Must file the
shares and need not filed with documents to
consent of register register
directors
Issue of right Not need to file Must offered to Not room change
shares right offer to existing share ownership
existing s holder
Commencement A private company A public company
of business can commence cannot commence
business business before
immediately after getting certificate of
incorporation commencement
Statutory meeting Need not hold the Need to hold
and statutory satisfactory statutory meeting
report meeting

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# Conversion of private to public and public to private
Ans:

Private to public company Public to private company

At least seven members Not more than fifty members
Altering their articles

# Foreign Company
Ans: When a company which is incorporated outside Bangladesh but established 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. The activities of such a foreign company shall come under the purview of Bangladesh
laws and regulations.

# What is meant by the term “ultra virus”?

Ans: Any transaction, activity or business done by the company beyond the power of the Memorandum and
Articles of association is “ultra virus’ I, e void. The company cannot do anything outside the memorandum of
association.

# What is contributory?
Ans: As per section 237 of CA 1994, any person who is liable to contribution to the fund of the company as per
the provision of the act to meet up its financial obligation at the time of its winding up. The contributory may
include:
- Any past and present directors
- Any shareholders

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COMPANY FORMATION

# What stages of company formation

Ans:
i) Promotion;
ii) Registration; and
iii) Commencement of business

# In which cases the certificate of information is a conclusive evidence?

Ans:
As per section 25 the certificate of Incorporation is conclusive evidence about the following matters:
i) All the requirements of the Act have been complied with respect of registration and matters
precedent and incident thereto;
ii) The association is a company authorized to be registered and duy registered under the Act; and
iii) The legal existence of the company beings from the date of issue of the certificates.

# What is the promoters liability for sectors profit?

Ans:

# What is the promoters position?

Ans:

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# What is Articles of Association and what is contents?
Ans:

The Articles of Association is a document which contains rule, registrations and bye-laws regarding the internal
management of the company.

Contents of Articles of Associations:

i) Share capital, rights of shareholders, payment of commissions, share certificates;

ii) Line on shares;
iii) Calls on shares;
iv) Transfer of shares;
v) Forfeiture of shares;
vi) Conversion of shares into stock;
vii) Share warrants;
viii) Alteration of capital;
ix) General meetings and voting rights of members;
x) Appointment and remuneration of directors, board of directors, managers and secretary;
xi) Dividends and reserves;
xii) Accounts and audits;
xiii) Capitalization of profits; and
xiv) Winding up.

2. State the difference between the Memorandum of Association and the Articles of Association of a
Limited Company?

Ans: The differences between the Memorandum and Articles of Association

SL Point of differences Memorandum of Association Articles of Association

01. The memorandum of association is a The Articles of Association is
document which contains the a document which contains
fundamental rules regarding the rules, regulations and by
constitution and activities of the laws regarding the internal
company management.
Memorandum is the main guideline of Any rules in the articles
the company/articles contrary to the
memorandum are invalid.
Alternation of Memorandum is difficult, Alternation of article is easy;
in some cases it require Court’s it requires a special
permission resolution only
Memorandum defines the power of the Articles define the internal
company regulation and management
process

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 Acts done by the company beyond the Acts done by the company
power of the memorandum is void beyond the articles can be
which cannot be ratified. ratified by the share holders
provided they are within the
power of the Memorandum
There are 5 clauses There are long list of clauses

# What are the form and contents of Memorandum of a Association?

Ans:

i) The name of the company, with name of “Limited”;

ii) The address of the registered office;
iii) The objects of the company;
iv) The liability of the members is limited; and
v) The amount of share capital with which the company proposes to be registered, and the divisions
thereof into shares of a fixed amount.

# Draw a specimen of Memorandum of Association of a company limited by shares (schedule-vi):

Ans:
a) The mane of the company:
b) The registered office of the company shall be situated in Bangladesh:
c) The object for which the company is established;
d) The liability of the members is limited;
e) The share capital of the company:

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 Short

3. How and in which meeting a special Resolution of a company is passed?

Ans: This is passed in a General Meeting by the three-forth 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 [section-87 (2)]

4. In which cases special resolution are necessary?

Ans:

a. To change the name of the company;

b. To alter the Memorandum of Association;
c. To alter the Articles of Association;
d. To reduce the share capital;
e. To convert any portion of the capital, uncalled in to reserve capital;
f. To appoint inspectors to investigate the company’s own affairs; and
g. For winding-up of a company voluntarily.

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7. What are illegal associations?

Ans: Illegal association (section-04)

No company, Association, partnership shall be formed consisting of 10 member for banking business and more
than 20 members for other business unless it is registered under this act. If any Association is formed
contravening this section it shall be an illegal association.

8. What is the effect of an “ultra virus” transaction as far as the company and its directors are concerned?
Ans: The Company and its Directors shall do all activities within the power of Memorandum and Articles of
Association any transaction beyond the power is “ultra virus” and the transaction will not bind the Company,
effect of an ultra virus transaction relating to Management and Articles of Association are as follows:

(a) Transaction beyond the memorandum;

(b) Transaction beyond the Article of Association.

Transaction beyond the memorandum:

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

Transaction beyond the Articles:

The transaction is also ultra virus and Directors are personally liable, but if the transaction is incidental or
consequential then the transaction will be valid and binding on the Company.

9. Discuss the provision of the companies act, 1994 as to the issue of shares at a discount.
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Ans: Following rules to the issuance of shares at a Discount:

(a) It should be an existing company which has issued share earlier;

(b) Court permission must be taken and to be confirmed at annual general meeting;
(c) Maximum rate would be 10% which is to be confirmed at Annual General Meeting;
(d) The Company shall not issue share at a discount within one year from the date of
commencement of business;
(e) The shares to be issued within 6 months from the date of the approval of the court
to issue share at a discount.

10. Discuss the provisions of the companies act, 1994 as to the issue of shares at a discount.
Ans:

Following rules relates to the issuances of shares at a discount (Section-153)

(a) It should be an existing company which has issued earlier;

(b) Court permission must be taken and to be confirmed at annual general meeting;
(c) Maximum rate would be taken and to be confirmed at Annual General Meeting;
(d) The company shell not issue share at a discount within one year from the date of commencement of
business; and
(e) The shares to be issued within 6 months from the date of the approval of the court to issue share at a
discount.

11. What are the pre-condition of reduction of share capital of a company?

Ans: As contained in section 59 of the company’s act 1994, any company limited by share if it is authorized by
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 alternation of memorandum;

12. Under what conditions may shares be issues at a discount?

Ans: As per section 153, issuance of shares at a discount is a follows.

(a) If should be an existing company which has already issued its share earlier;
(b) Court permission must be taken and be confirmed in the Annual General Meeting;
(c) Maximum rate would be 10% which is to be confirmed in the Annual General Meeting;
(d) The company shall not issues share at a discount within one year from the date of entitlement of
commencement of business; and

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 (e) To be issued within 6 months from the date of the approval of the court to issue share at a discount
rate.

13. Under what circumstances may a company limited by shares

(a) pay interest out of capital; and

(b) Write off preliminary expenses.

Ans:

(a) Power of company to pay interest out of capital in certain cases where any shares of a company are
issued for the purpose of rising 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 construction of the work or building or the provision of plant.
(b) 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.

14. Is it binding on a director to hold qualification shares?

Ans:

Qualification of shares of Directors

The Articles of a company usually fix a minimum number of shares which every Director must subscribe in
order to become a Director. This minimum number is known as the qualification shares of Directors. It is the
duty to every Director who is required by the articles to hold a specified number of shares for qualification and
who has not already qualified himself accordingly, to obtain his qualification within two months after his
appointment or such shorter time as may be fixed by the articles. If after the expiration of the period
mentioned above any such unqualified person acts as a Director of the company, he shall be liable to a fine
not exceeding two hundred taka for every day between the expiration of the said period and the last day on
which proved that he acted as a Director (both days inclusive), section- 97 (2).

15. What documents register and books are to be maintained in a company’s registered office?
Ans: As per section-181 following books of accounts, records are to be kept by the company:

Records relating to

1. All receipts and payments;

2. All purchase and sales;
3. All assets and liabilities;
4. Records relates to the procedures, process, distribution, wages and overheads;
5. Books and accounts and records are to be kept and retained for at least 12 years for the
company;
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 6. Penalty for non-compliance is six months imprisonment or with fine of TK- 5,000 or with
both.

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

 A register of members
 A register of minutes.

16. Who can inspect all the registers and documents and take copies thereof? What do you know about
time limit, if any, in this regard?
Ans: Inspection of books of accounts etc, of companies, section-182

The books of account, records and papers of every company shall be kept open for inspection during business
hours by the Registrar or by such other Government officer as may be authorized by the Government in this
behalf.

The inspecting person may, during the course of inspection made or course to be made copies of books of
account and other books as he deems to be required.

There is no time for such inspection other than only the inspection is to be made or the books of accounts to
be kept open during business hours.

17. Discuss about the powers of the court to rectify the Register as stated in the Companies Act, 1994.
Ans: As contained in section-194 the Registrar may make an application to the first class Magistrate may
consider the application of Registrar and order as necessary after hearing.

18. What is a prospectus? Do all the companies issue it?

Ans:

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 offers from the Securities and Exchange Commission may issue a Prospectus.

19. What could be an alternative to prospectus? Write a few lines about it.
Ans: Alternative to 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 company’s 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.
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20. Discuss the salient features of the prospectus as required by the companies’ act, 1994 while taking into
account registration of the same.
Ans: Salient features of a prospectus and its registration

Before publication of prospectus inviting people to subscribe shares or debentures of a company, a copy of
the prospectus must be delivered to the Registrar for registration on or before the date of publication. It
should be signed by the directors or proposed directors of the company or by their agent. On the face of the
prospectus delivered to the registrar for registration, it should be stated that a copy has been delivered for
registration; and must contain a list of statements include in the prospectus. The registrar shall not register a
prospectus unless the prospectus contains all the elements mentioned earlier and the prospectus is
accompanied by the consent in writing of the person if any, named therein as the auditor, legal adviser,
attorney, solicitor, banker or broker of the company or intended company, to act in that capacity. No
prospectus shall be issued more than ninety days after the date on which a copy thereof is delivered for
registration, and if a prospectus is so issued, it shall be deemed to be a prospectus a copy of which has not
been delivered under this section to the registrar. If a prospectus is issued without delivering a copy thereof to
the Registrar, the company and every person from those who have knowing been a party to the issue of the
prospectus shall be publishable with the fine which may extend to five thousand taka (section-138).

21. What are the different type of resolution laid down in the companies act, 1994. Please write down the
purposes of the resolution.
Ans: Kind of resolutions

There are three kinds of resolutions. These are:

1. Ordinary resolution;
2. Special resolution; and
3. Extra-ordinary resolution.

1. Ordinary resolution
 Passing of accounts
 Appointment of Directors; and
 Declaration Dividend.
2. Special resolution
 Changing the name of the company;
 Alternation of M/A, A/A;
 Reduction of capital; and
 Winding-up of company voluntarily.
3.Extra-ordinary resolution
 Winding up a company voluntarily.

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22. Discuss the provisions of section 150 of the act about the registration on commencement of business
Ans:

Certificate of commencement of business (section-150)

A company (public limited) shall not commence any business or exercise any borrowing powers unless:

Share held subject to the payment of whole amount thereof in cash have been allotted to an amount not
less than the minimum subscription;
Every Director of the company paid in cash each of the share held
A certificate of compliance by the company security or a Director that above formalities have been
complied;
A statement in lieu of prospectus has been submitted where no prospectus is issued for invitation to
subscribe the share to the public,

23. State the requirements for “Return of Allotment” u/s 151 of the
Companies Act, 1994.
Ans: As contained in the section-151 of CA 1994, a company having share capital makes any allotment of
shares, the company shall within 60 days thereof, file with the Registrar the following documents:

(a) A return of allotment, stating the member, nominal value of shares, names, address, nationality,
amount paid-up in cash;
(b) Amount paid-up other than in cash, any contract, vendor’s agreement.
(c) Number of shares allotment and its nominal value; and
(d) Share allotted against any immovable property.

24 “All listed companies are public companies but not the vice-versa” Discuss about these views.
Ans: “All listed companies are public companies but not vice-versa”

As per listing regulations clause 7(1) only the public limited company can b listed with the stock exchange. So,
no private limited company is eligible for listing with any stock exchange but a public limited company which is
registered as per companies act, 1994 is not mandatory to be listed. It is the decision of the company whether
their company will be placed to the stock exchange (s) for listing or not. That is why it can be said “All listed
companies are public companies but not vice-versa.”

25. How shares of a company are transferred?

Ans: As per clause 12 (2) of listing regulations the company shall complete share transfer and have ready for
delivery the share certificate lodged for registration of transfer within 45 days of the application such transfer
and its registration. The transfer instrument is to be filled up by the transferor and the transferee and to be
submitted to the company for necessary action. The transfer of shares requires Board’s appointment.

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But at present, the electronics shares (demat) require no form of 117 for transfer. Just a valid intimation of
sales and buy is to submit to Board house for sales, buy, and transfer of shares. It transfers automatically and
instantly.

26. What are the restrictions for transfer of shares?

Ans:

The main restriction for transfer of share is that any shares when it is pledged to any body against any loan or
the company has a lien on the share.

In case of shares of a Pvt. Limited Company is restricted. The share is not transferable without the consent of
all the members as well as complying with as complying with all regulation contained in the Articles of
Association of the company.

27. Can a Board of Directors express refusal to any transfer of shares? If so, how?
Ans: Transfer of shares clause 20 (1) of schedule-1

The Directors may decline to register any transfer of shares not being fully paid up shares, to a person of
whom they do not approve, and may also decline to register any transfer of shares on which the company has
lien.

The Director may suspend the registration of transfer during the fourteen days immediately preceding the
ordering general meeting in each year.

The Director may decline to recognize any instrument of transfer or issue to register such transfer, unless-

 The instrument of transfer is accompanied by the certificate of share to which it relates; and
 Such evidence as the Directors may reasonably require showing the right of the transferor to make the
transfer has been furnished.
 Form 117 is duly filled up.

28. Section 103 lays down about “Directors Loan”- Rewrite the contents in your way.
Ans: Section 103 (1) of CA 1994 states that no company, other than a lending company mentioned below shall
make any loan or give any guaranty or any security in connection with a loan made by third party to-

(a) Any Director of the lending company;

(b) Any firm in which any Director of the lending company is a person;
(c) Any private company of which any Director of the lending company is a Director or Member;
(d) Any public company, the Managing agent, Manager or Director where of this accustomed to act in
accordance with the directions of any Director of the lending company.

However the loan may be given in case of banking company or the loan is approved by the Board and AGM.

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 BROAD QUESTIONS

1. Lay out an opinion regarding opening business in the form of liaison office, branch, or forming a
subsidiary company terms of: (a) Legal steps (b) taxation and (iii) remittance and employment.

Ans:

Regulations relating to legal steps, taxation, remittances and employment of a foreign company:

As per section 378 (a) of the companies Act 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 at a short

Related Sections of Companies Act 1994

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 378-Application of sections 379 to 387 to foreign companies;
379-Documents, etc, to be delivered to register by foreign companies carrying on business in
Bangladesh;
380-Accounts of foreign company;
381-Obligation to state name, etc of foreign company;
382-Service on foreign company;
383-Notice of ceasing place of business of a company;
384-Penalties;
385-Company’s failure to comply with this part not to affect its liability under contracts;
386-Fees for registration of documents under this part;
387-Interpretation;
388-Restriction on sale and offer for sale of shares;
389-Requirements as to prospectus;
390-Restriction on canvassing for sale of shares
391-Provisions regarding charges;
392-Notice of appointment of receiver.

Registration of Foreign Companies

As per section 378 (a) of the Companies Act 1994 a foreign company can be registered in Bangladesh. The
foreign companies, 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 register for registration.

b) A certified copy of the charter status or memorandum and articles of the company or other
instrument constructing or defining the constitution of the company; and if the instrument is
not written in Bengali or English language, a certificate Bengal or English translation thereof;
c) The full address of the registered or principal office of the company;
d) A list of the directors and secretary, if any, of the company;
e) 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 documents required to be served on the company;
f) The full address of the office of the company in Bangladesh which is to be deemed its principal
place of business in Bangladesh.

Accounts of the Foreign Companies

Every foreign company shall, in every calendar year

(a) Make statement of financial position (Balance Sheet), statement of comprehensive income (Profit &
loss account) Group Accounts (if it is holding company);
(b) Such other documents and information as required by the Act and deliver 3 copies of the same to the
Register (section-380)

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 381-Obligation to state name, etc of foreign company

According to this section every foreign company shall-

(a) In every prospective inviting subscription in Bangladesh for its shares or debentures, state the country
in which the company is incorporated;
(b) Conspicuously exhibit on the outside of every office or place where it carries on business in
Bangladesh, the name of the company and the country in which it is incorporated, in the letters easily
legible in Bengali or English character,
(c) Cause the name of the company and of the country in which the company is incorporated, to be
stated in legible Bengali or English characters in all bill heads and letter paper, and in all notices and
other official publications of the company;
(d) If the liability of the members of the company is limited, cause a notice of that fact-

i) to be stated in every such prospectus as aforesaid and in all bill heads, letter paper,
notices, advertisements and other official publications of the company, in legible Bengali
or English characters;
ii) to be conspicuously exhibited on the outside of every office or place where it carries on
business in Bangladesh, in legible or English characters.
As per section 388 (restriction on sale and offer for sale of shares) the company shall submit a certified copy
of the prospectus to the Register if the company wants to issue prospectus offering to the public for
subscription of shares/debentures.

Other related regulations

BOI permission

The company shall get permission from 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 environment

A clearance letter from the office of the Environment is to e obtained by paying adequate fees along with
complying with other formalities to the Government.

Clearance from the office of Home Affairs

A clearance letter from the office of the Affairs is to e obtained complying with other formalities to the
Government.

Obtaining trade license

A trade license is also to be obtained by paying prescribed fees from City Corporation or Union Perished
concerned as the case may be run its business in any City Corporation, Pouroshabha or Union Paris had area.

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TIN number

The company would be required TIN number from the income tax office concerned as per ITO 1984 & recent
finance bill.

VAT registration

The company will be registered with the divisional officer, VAT and collect a certificate of VAT registration, i e,
VAT-8 as per VAT act 1991.

Taxation of foreign companies

Income tax

The foreign company may get special tax benefit if it is located in export processing zone (EPZ). In this case,
the company will get tax exemption period for ten 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 zoro. 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 register, 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 on investment. For Bangladesh employees
on such permission i.e. required to work in foreign companies.

3. State the procedure of calling Annual General meeting and Extraordinary General Meeting of a Company.
State what businesses are transacted in Annual General Meeting.

Ans:

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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 regulation the AGM is to be held within 6 months from the end of its Accounting year.

For calling AGM notice to the shareholders is to be given at least 14 days before the AGM, mentioning the
date, time, agenda and venue of the meeting therein. The annual report of the company is to be accompanied.

Extra ordinary General Meeting

As per section-84, the above meeting can be called on requisition from holders of 1/10 th members or 1/10
holders of paid-up-capital. If the directors do not cause a meeting to be called within twenty-one days from
the date of requisition being so deposited, the requisition’s 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 holding meeting is to be given at least 21 days before the date of the
meeting. The agenda of the meeting is to mention in the notice.

Following businesses are generally transferred 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; and
5. Any other matter with the permission of chair.

4. Discuss the qualification and disqualification of a director of a company. How directors are appointed?

Ans:

Qualification of Directors:

Articles of association of a company usually fix the minimum number of shares which every director must
subscribed 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.

Section 97 (1): every director to hold qualification share to be specified in the articles and, if he is not already
qualified, he shall obtain his qualification within sixty days after his appointment, or such shorter time as may
be fixed by the articles.

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Section 97 (2): If, after the expiration of the period mentioned in sub-section (1) any unqualified person acts as
a director of the company, he shall be liable to a fine not exceeding two hundred taka for every day between
the expiration of the said period and the last day on which it is proved that he acted as a director (both days
inclusive).

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

- signed and filed with the register 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: Section-94:

- 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 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 Directors may appoint a person as Directors to fill up any casual vacancy;

6. What are the different types of resolution envisaged in the companies Act 1994? What are the
processes of passing a special resolution?

Ans:

Different types of resolutions:

i) Ordinary resolution
ii) Special resolution
iii) Extra-ordinary resolution

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The special resolution 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 are necessary for the following purposes:

- To change the name of the company;

- To alter the Memorandum of Association;
- To alter the Articles of Association;
- To reduce the share capital;
- To convert any portion of the capital, uncalled in to reserve capital;
- To appoint inspectors to investigate the company’s own affairs;
- For winding-up of a company voluntarily.

7. State the steps involved in the formation of a company under the Companies Act 1994?

Ans:

Formation of a company:

2 (two) or more person (not more then 50 0 and 7 or more persons (unlimited) may from a private or a public
limited company respectively b subscribing their signature in the Memorandum of Association.

They may from-

- 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) Sponsor’ equity;
iv) Consent of the Directors;
v) Selection of objectives.

Registration:
i) Submission of Memorandum & Articles of Association;
ii) Payment of stamp duty & registration fees; and
iii) Obtaining certificate of incorporation.

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 Commencement of business:
i) For a private limited company, the business of the company can be commenced after getting the
registration I,e. certificate of incorporation.
ii) For a public company, the company shall obtain the certificate of commencement of business
from the register.

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

Ans: Application to the court for winding-up:

According to section 239, the winding-up of a company may be done in any one of the following three ways:

i) Compulsory winding up by court,

ii) Voluntary winding up by the members or by creditors;
iii) 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 filling the statutory meeting, report, etc;
iv) Any creditors/members if the company is unable to pay its debts.

9. 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 be convened. Following
items are 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.

Ans: 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
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 for approval in the AGM.

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As per section 95 of the companies Act 1994, the notice of the Board of directors meeting is to be served to
the Bangladesh address, but notice of such meeting can be served out side 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. 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
outside 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 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 article of Association provides any guideline in this respect.

10. Discuss the provision of companies act 1994 regarding appointment of MD and compare that with
relevant provisions of Bank Companies Act and Financial Institutions Act.

Ans:

Appointment of the Managing Director:

The managing Director is normally appointed by the shareholders in the general meeting of the company from
amongst the members of the Board of Directors. The first Managing Director is appointed by the signatories of
Memorandum of Association.

As per section 109 of the CA 1994 no public company, no private company is a subsidiary of a public company
shall after the commencement of the act, appoint any person as a managing Director, if he is a managing
Director of Manager of any other company.

Provided that no appointment shall be made to any person as the Managing Director of the company without
the consent of the shareholders in the General Meeting.

As per section 110 no company shall be made to any person as the Managing Director for a term not
exceeding five years at a time.

As per banking Companies Act 1991 and Financial Institution Act, 1993 Managing Director is appointed as
contractual employee. Any person who has at least 10 years of experiences in the line of Bank and Financial
institutions with well conversant for Managing the Bank or Financial Institutions is eligible for appointment as
the Managing Director. Following rules are to be complied with.

(c) Terms of appointment will be three years and will be eligible for re-appointment;
(d) The Managing Director shall not be a sponsor shareholder of the bank;
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 (e) Prior approval of Bangladesh Bank should be taken for the appointment of the
managing Director;
(f) Terms and condition of appointment including salary and allowances and other
benefits to be specified and to be informed to the Bangladesh Bank for approval;
(g) The managing Director will not be eligible for any special bonus;
(h) A person aged over 65 years will not be appointed as the Managing Director.

11. What is prospectus? What do you know about registration of prospectus?

Ans: 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:

(f) It is a document described or issued as a prospectus;

(g) It includes any notice, circular, advertisement to the public for sale
of securities;
(h) It is an invitation to the public; and
(i) 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 of a company, a copy of the prospectus
must be delivered to the registrar for registration on or before the date of publication. It should be signed by
the Directors or proposed Directors of the company or by their agent. On the face of the prospectus delivered
to the registrar for registration, it should be stated that a copy has been delivered for registration; and must
contain a list of statements included in the prospectus. The registrar shall not register a prospectus unless the
prospectus contains all the required elements as per companies act, 1994, public issue rules 1998, and other
SEC regulations and the prospectus is accompanied by the consent in writing of the person if any, named
therein as the auditor, legal advisor, attorney, solicitor, banker or broker of the company to act in that
capacity. No prospectus shall be issued more than ninety days after the date on which a copy thereof is
delivered for registration. If a prospectus is issued without delivering a copy thereof to the register, the
company and every person from those who have knowingly been a party to the prospectus shall be punishable
with a fine which may extended to five thousand taka (Section-138).

12. A company was incorporated in December 2004. Due to an error, regulations relating to the conduct of
meetings of members were not included in the Articles of Association submitted by the company to the
Register of Joint Stock companies for registration. How could the members’ meeting would be included now
in the Articles of Association and, if so, how and what will be the status of such addition?

Ans:

Regulations relating to the absence of the Articles

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As per section-18 of companies act 1994 the company will conduct the meeting of its member which shall be
governed as per the regulation contained in the “schedule-I”

The company can change the Article of Association by passing a special resolution as contained in section-20
subject to the limitations as specified in section-85 and Memorandum of Association.

13. What are the three possible positions of pre-incorporation contracts of a company?

Ans:

Pre-incorporation contract:

A company cannot be bound by a contract which was made o its behalf by any person and including a
promoter before the company itself had been formed.

The company cannot even ratify any pre-incorporation contract and the promoters will be personally liable. In
this regard, a fresh contract can be accorded by the company after the incorporation.

14. State the provisions of companies act, 1994 as to appointment of managing Director.

Ans:

Appointment of Managing Director

The managing Director is normally appointed by the Board of Directors amongst the members of the Board
and consent of the shareholders is to taken in the general meeting of the company. The first Managing
Director is appointed by the signatories of Memorandum of Association.

As per section 109 of the CA 1994 no public company, no private company which is a subsidiary of a public
company shall after the commencement of this act, appoint any person as a Managing Director, if he is a
managing Director or manager of any other company.

Provided that no appointment shall be made to any person as the Managing Director of the company without
the consent of the shareholders in the general meeting.

As per section 110 no company shall appoint or employ any individual as its managing Director for a term not
exceeding five years at a time.

15. How dose the winding up affect the position of officers of the company?

Ans:

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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 or service. The
powers of the directors are also usually ceased 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 or
contribution, 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.

16. “Directors are trustees as well as agents of the company”. Discuss

Ans: Directors are trustees and agents 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
following for and on behalf of the company as contained in the articles of association:

(a) To run the business of the company;

(b) To recommended dividend;
(c) To enter into contract;
(d) To maintain reserves;
(e) To issue, forfeiture of shares;
(f) To issue debenture;
(g) To invest fund;
(h) To take reduce loan; and
(i) 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 assets 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:

(a) To run Company efficiently;

(b) To optimum utilization resources;
(c) To save the company from losses/damages;
(d) To maintain proper books of accounts;
(e) To call the AGM;
(f) To maintain secrecy of the organization; and
(g) To reform from doing such activities prohibited by the act.

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

17. Discuss the position, powers and liabilities of Directors.

Ans:

Legal position of Directors:

There are different views about the legal position of directors. They have been described sometimes as
trustees of the company and sometimes as its agents. Neither view is wholly correct but both contain
elements of truth.

Fiduciary position:

It is generally agreed that the Directors occupy a fiduciary position in relation to the company. They must
make full disclosure of all material facts of the company.

Officers:

The section 2 (i) (o) of the companies act provides that a director is an officer of the company.

Power of Directors:

Directors drive their power and authority from two sources (i) the Articles of Association of the company and
(ii) the companies act.

The articles of association generally contain a list of powers, which may be exercised by directors and the
limitation on those powers.

All acts and things done by the Board of Directors, within the powers given to it by the articles, are valid and
binding on the company.

It may be noted that a director individually has no authority over the affairs of the company except as regards
matters, which have been specifically delegated to him by the Board.

Liabilities of Directors

The liabilities of Directors may be analyzed with reference to liability of Directors to third parties, liability to
the company, and liability for breach of statutory duties for acts of his Co-Directors. Directors’ liability may be
civil liability, criminal liability and unlimited liability.

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Civil liability:

The directors may, under certain circumstances, be liable to pay compensation to the company and to outside.

Such as:

(a) Untrue statements in the prospectus;

(b) Ultra virus acts.

Criminal liability:

For certain breaches of duty the companies act impose criminal liabilities upon Directors such as:
Ultra statements in prospectus, failing to keep certain register falsification of books and reports etc.

18. Discuss the provisions of the companies act, 1994 relating to auditors as to:-

(a) appointment;
(b) qualification;
(c) rights; and
(d) duties.

Ans:

Appointment and remuneration of Auditor, Section-210.

 Auditors are appointed in the Annual General Meeting by the shareholders;

 First Auditors of the Company is appointed by Directors;
 The Directors may appoint Auditors in case of casual vacancy;
 The Govt. may appoint an auditor if the above authorities fail to appoint an auditor;
 Auditor’s remuneration is to be fixed by the authority of appointing the Auditor.

Qualification of Authorities, section-212:

The auditor shall be a chartered accountant as per P.O 2 of 1973.

Following persons are not eligible for appointments as auditor of the company:

 Officers and staff of the company;

 Any partner, staff or officers of the company;
 Any person indebted to the company for more than TK-1,000 or indebted by any Guarantee for the
above amount.
 Any Director, partner, member of managing agent firm.

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

Rights and duties of Auditors, section-213

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  The auditors have right to access any books of accounts, information, voucher, statement as required
to perform the audit work.
 The auditors may require any information explanation from any officers, staff of the company for the
audit.

They should investigate the followings:

 The auditors have right to access any books of accounts, information, voucher, statement as required
to perform the audit work.
 The auditors may require any information explanation from any officers, staff of the company for the
audit.

They should investigate the followings:

 Security given against loan and advances whether it is secured or not and whether the terms are
detrimental to the interest of the company;
 The transactions, which have been shown in the books of accounts, whether they are detrimental to
the interest of the company;
 Whether or not any assets, shares, debenture or any other securities have been sold lower than the
purchase price 9other than banking);
 Any loan and advances have duly been shown or not by the company;
 Whether or not any personal expenditure has been shown in the revenue account.
 Any share issued in cash whether the cash actually received or not and whether the presentation in
the Balance Sheet for the same is misleading or not.

If any answer is in the negative the auditor should disclose the fact and report to the shareholders.

19. Difference between ordinary resolution, special resolution and extra ordinary resolution.

Ans:

Ordinary resolution:

This is passed by the majority vote of members present at a general meeting. Such a resolution is passed in the
ordinary way and deals with ordinary business, such as passing of accounts, appointing directors, auditors, and
declaration of dividends and so on.

Special resolution:

This is passed in a general meeting by the three-fourths majority of the members present in person or by
proxy, provided notice for such meeting specifying the intention to propose the resolution is given at least
twenty-one days before the date of the meeting.

Special resolutions are required:

(a) to change the name of the company with consent of the registrar;
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 (b) to alter the memorandum;
(c) to alter the articles;
(d) etc

Extra Ordinary resolution:

This is passed by such majority vote at a meeting of which 14 days notice has been given. The notice must
specify the intention to propose the resolution as an extra-ordinary resolution section- 87(i). Such resolution is
necessary when a company is sought to be wound-up voluntary on the ground of that it cannot continue its
business on account of its liabilities and also for a number of other reasons.

20. In what circumstances can the directors decline a transfer of shares?

Ans:

Clause 20 (1) of schedule-I:

The directors may decline to register any transfer of shares not being fully paid up shares, to a person of
whom they do not approve, and may also decline to register any transfer of shares on which the company has
lien.

The directors may suspend the registration of transfer during the fourteen days immediately preceding the
ordinary general meetings in each year.

The directors may decline to recognize any instrument of transfer or refuse to register such transfer, unless-

(a) the instrument of transfer is accompanied by the certificate of share to which it relates; and
(b) Such evidence as the Directors may reasonably require to show the right of the transferor to make
the transfer has been furnished; and
(c) Form 117 is duly filled up.

21. Draft a specimen notice of refusal to register transfer of shares.

Ans:

Notice

I do hereby beg to draw your kind self that the Board of Directors in the meeting held on…………declined to
recognize the transfer of enclosed number of shares as applied by you on……….due to the non-submission of
form117 from your end.

By order of the board

Company secretary

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22. Draft a hypothetic resolution of transfer of shares to be adopted by a board of directors.

Ans: Minutes of 120th Board meeting held on 4th march 2007 of ABC Co. Ltd. at its registered office house no.5,
road no 16, Hammond, Dhaka.

Following members of the Board were present:

i. Mr. X
ii. Mr. Y
iii. Mr. Z

Mr. X, chairman of the Board presided over meeting.

Following business was transacted in the meeting:

Agenda:1 Proposal of transfer of shares of shareholder Mr. T

The board was informed that Mr. T applied for transfer of 100 shares from his name to Mr. K and from 117
and related share certificates were submitted duly for necessary action. After discussion the Board decided as
follows:

“The proposal for transfer of shares is approved”.

As there being no other issues to discuss the meeting ended with vote of thanks to and the chair.

Mr. L Mr. X
Company Secretary Chairman of the Board of Directors

23. Discuss the duties and functions of promoters, Directors, and Auditors of a company-

Ans: The main duties and functions of a promoter are to undertake to form a company with reference to
agreement for the project. He has to handle all legal formalities for function of a company.

Promoters may have three possible positions:

(a) He may be a promoter to acquire the property for the company in which case, all the rules of agency
would apply. Accordingly, any profit he may make will belong to the company;
(b) He may acquire the property himself and then decide to form a company and sell the property to it in
which case no question of agency or trusteeship arises. He can make what bargain he chooses without
being under any obligation to disclose the profits;
(c) He may acquire the property with a view to result it to the company, which he intends to promote, in
which case no question of agency or trusteeship arises. He can make what bargain he chooses without
being under any obligation to disclose the profits; and
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 (d) He may acquire the property with a view to resell it to the company which he intends to promote, in
which case he becomes bound by the fiduciary obligation and if he makes a profit he must disclose it
to the company.

Duties and functions of Directors:

(a) Distribution of work; among the staff;

(b) Every director must act honestly and in the interest of the company;
(c) A Director must exercise such degree of skill and diligence as would amount to the reasonable care;
(d) A Director should perform his duties at a greater degree of skill;
(e) A Director should attend the Board or other meeting and should act according to the decision of the
meeting;
(f) To hold the AGM;
(g) To maintain proper books of accounts;
(h) Recommendation of dividends; and
(i) Disclosure of information as required by the Act and as required by others Act, rules regulations and
regulatory authorities.

Duties and functions of Auditors:

The main duty of an auditor of a company is to express an independent opinion on the financial statements
prepared by the company. The auditor should conduct the audit in accordance with BSA to obtain a
reasonable assurance about whether the financial statements are free from all material misstatements. The
auditor shall inquire into the following.

(a) Whether loans and advances made by the company on the basis of security which have been properly
secured and whether the terms on which they have been made are not prejudicial to the interests of
the company or its members;
(b) Whether transactions of the company which are requested merely as book-entries are prejudicial to
the interest of the company;
(c) Where the company is not investment company or a banking company, whether so much of the assets
of the company as consist of shares, debentures and other securities, have been sold at a price less
than its purchase price by the company.
(d) Whether personal expenses have been charged to revenue account;
(e) Whether it is stated in the books and paper of the company that any shares have been allotted for
cash, whether cash has actually been received in respect of such allotment and if no cash has actually
been so received, whether the position as stated in the accounts, books and the balance sheet is
correct, regular and not misleading.

24. Discuss the circumstances on which the court orders for writing up of a Company on “Just and
Equitable” ground.

Ans: If the court is of opinion that it is just and equitable if the company should be wound up, the company
would be wound up compulsorily. The interpretation of just and equitable clause depends on the facts of each
case, the court may order winding up of a company in case of just and equitable ground:
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 (a) When the object for which it was incorporated has substantially failed or it is impossible to carry on
the business of the company except at a loss or the existing and probable assets are inadequate to
meet the liabilities;
(b) When the majority of the shareholders are using their powers unfairly; or
(c) Where there is a deadlock in the management of the company; or
(d) Where the public interest is likely to be prejudiced;
(e) When the company was formed to carry out fraudulent or illegible business; and
(f) When the company is a mere bubble and does not carry on any business.

25. When a company is deemed to be unable to pay its debts and what consequences may follow for such
inability of payment of debts by a company.

Ans: As per section-242, under the following circumstances a company may be treated as unable to pay its
debt:

(a) Any creditors issue demand notice for his receivable amount for more than TK-5,000 and
company does not make any action neglected for 3 weeks;
(b) Any order passed by the court for payment but no action is taken by the company;
(c) If the court is satisfied that the company is unable to pay the company.

As per section 241 a company shall be wound-up compulsorily if it is unable to pay its debt. As per section 286
a Company may be wound-up voluntarily if the company is unable to pay its debt and any extra ordinary
resolution is passed for winding up of the company.

26. What is the purpose of stating the “objective clause” of a company in its memorandum? Can it be
altered? How?

Ans:

Objective clause

Objective clause is one of the important elements of Memorandum of Association. The main objectives of the
company are disclosed clearly in the objective clause. The companies Act 1994 requires disclosing the main
objectives relating to form a company under his Act. The main objectives and objects incidental are identified
in the objectives 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):

(a) To carry on its business more economically and efficiently;

(b) To attain its operation by new and improved way;
(c) To enlarge the area of operation;
(d) To carry on some operation which will be more advantageous for the interest of the company;
(e) To restrict, abandon any of its objectives; and
(f) To amalgamate with any other company or body.

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27. What are the procedures of reduction of share capital and how the same is confirmed?

Ans: A special resolution is to be passed for reduction of share capital. As per section 60 where a company has
passed a resolution for reducing its share capital it shall furnish petition to the court for an order confirming
the reduction.
As per section 64 order of the court confirming reduction will be required. The court if satisfied with respect to
every creditor of the company who under this act is entitled to object to the reduction, that either consent to
the reduction has been obtained or his debt or claim has been discharged or has been determined or has been
secured, may make an order confirming the reduction or such terms and conditions as it thinks fit.

As per section 65 the registrar shall on production to him register the following documents, namely:

(a) the certified copy of the order of the court confirming the reduction of the share capital of a company;
(b) a copy of the minutes approved by the court showing the following;
i) the amount of the reduced share capital;
ii) the number of shares into which it is to be divided;
iii) the nominal value of each such share; and
iv) the amount if any at the date of registration, deemed to be paid up on each such share.

On the registration under sub-section (i) and not before, the resolution for reducing share capital as confirmed
by the order so registered shall take effects.

(c ) Notice of the registration shall be published in such manner as the court may direct; and
(d) The registrar shall certify under his hand the registration of the order and minutes, and his certificate shall
be conclusive evidence that all the requirements of this act with respect to reduction of share capital have
been complied with and that the share capital of the company is such as is stated in the minute.

28. When office of a Director stands vacated?

Ans:

Vacation of the office of the Director

As per section 108 of the company’s act 1994, the office of a Director shall become vacant under the following
circumstances:

(a) If he fails to obtain within the due time or at any time thereafter ceases to hold the qualifications
shares, if any, necessary for his appointment; or
(b) If he is found to be unsound mind by a competent court; or
(c) If he is adjusted an insolvent; or
(d) If he fails to pay calls money made on him in respect of shares held by him within six months from the
date of such calls being made; or

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 (e) If he or any firm of which he is a partner or any private company of which he is a director, without the
sanction of the in general meeting accepts or holds any office of profit under the company other than
that of a managing director or manager or a legal or technical adviser or a banker; or
(f) If he absents himself from three consecutive meeting of the Director or from all meeting of the
Directors for a continuous period of three months, whichever is the longer, without leave of absent
from the Board of Directors; or
(g) If he or any firm of which he is a partner or any private company of which he is a Director accepts a
loan or guarantee from the company in contravention of section 103; or
(h) If he acts in contravention of section-105.

29. Explain briefly the procedure of rotation of director.

Ans:

Rotation of Directors

(a) At the first general meeting of the company the whole of the directors shall retire from office, and at
the general meeting in every subsequent year one-third of the directors for the time being or, if their
number is not three or a multiple of three then the number nearest to one-third shall retire from
office.
(b) The Directors to retire in every year shall be those have been longest in office science their last
election, but as between persons who become directors on the same day those to retire shall (unless
they otherwise agree among themselves) be determined by lottery.
(c) A retiring director shall be eligible for re-election;
(d) The company at the general meeting at which a director retires in manner aforesaid may fill up the
vacated office by electing a person thereto;
(e) The directors shall have power at any time and from time to time, to appoint a person as an additional
director who shall retire from office at the next following ordinary general meeting but shall be eligible
for election by the company at that meeting as an additional director.

30. State the circumstances in which a company may be wound up by the court.

Ans:

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

(a) Passed a special resolution for winding up of the company by court;

(b) Fails to furnish statutory report or fails to hold statutory meeting;
(c) Suspend its business operation for one year or fails to commence business within one year of its
incorporation;
(d) Members reduced to less than 2 or 7 for private & public limited company respectively;
(e) Unable to pay it’s debt; and
(f) Court is satisfied that it is just and equitable to wind-up the company.

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31. In which ground the registrar of Joint Stock Company can presented a petition for winding up a
company?

Ans:

Petition for winding up by the Registrar

Under the following grounds as contained in section-197 (b) the registrar of Joint Stock Companies and firms
can present a petition for winding up a company as per section-204 of CA 1994:

(a) 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
(b) That the person concerned in the formation of the company or the management of its affairs have in
connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or
towards any of its members; or
(c) That the members of the company have not been given all the information with respect to its affairs
which they might reasonably except;

32. In what ways may a promoter of a company be remunerated for his services?

Ans: A promoter may have three possible positions;

(a) He may be a promoter to acquire the property for the company, which case, all the rules of agency
would apply. Any profit he makes will belong to the company;
(b) He may acquire the property himself and then decide to form a company and sell the property to it, in
which case no question of agency or trusteeship arises. He can make what bargain he chooses without
being under any obligation to disclose the profit;
(c) He may acquire the property with a view to re sell it to the company which he intends to promote, in
which case he becomes bound by the fiduciary obligation and if he make a profit he must disclose it to
the company; and
(d) A promoter may be issued shares for his remuneration or as founder share.

33. What are the financial contents of a prospectus?

Ans: Financial contents are incorporated in the prospectus:

(a) If the company had no revenues from operations in each of the last two years, the company’s plan of
operations for the next twelve months shall be described in the prospectus which shall, among others,
include:

 A discussion of its cash requirements;

 A summery of any product research and developments;
 Any expected purchase or sale of hand; and
 Any expected change in the number of employees.

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(a) If the company had revenue from operations in above period shall include the following:
Resources of cash;
Expected capital expenditure;
Cause of changes of income, cost, operating expenses and net profit;
Seasonal aspects of business;
Loan taken by the company;
Taxation yet to be paid;
Operating and finance lease; and
Payment to management to the issue, underwriter.

34. What remedies are available to an applicable who has been induced to by shares of a company by a
material miss-representation of facts in a prospectus?

Ans:

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 claim the demurrage simultaneously.

35. Can a shareholder become director without qualification shares? Can share warrant form the share
qualification for directorship?

Ans: Article of association of a company usually fixes 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 qualified number of shares as contained in section 97 (1) of CA 1994, every Director shall hold
minimum qualified number of shares within 60 days or within the time as may be specified in the Articles
whichever is earlier.

As per section 97 (2), if after the expiration of the period mentioned in sub-section (10 such unqualified person
acts as a Director of the company he shall be liable to pay a 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 qualified shares, or taken from the
company and paid or agreed to pay for his qualified shares.

Share warrant is not taken into considered for qualification of shares of a Director.

36. Prepare a hypothetical company’s report from the chairmen of the Board of Directors to the
shareholders for the ensuring Annual General Meeting.
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Ans:

Hypothetical report of the Chairman of the Board

It is indeed a great honor and privileges for me to greet you all, once again, to this 10 th Annual General
Meeting of your company ABC Ltd.. It also gives me immense pleasure to place before you the Annual report
along with the audited accounts of your company and auditors and auditors report thereon for the year 2006.

Business Condition:

2006 experienced yet another successful year both in terms of sales and profitably despite the volatile political
situation and economy of the country. Your share price has gone up by 100%. We were able to overcome all
odds situation prevailed during the year.

Expansion program:

Some new products were added in the last financial year including introduction of 10 show rooms for enhance
the distribution net work of our product to the customers.

Financial aspects:

 Sales revenue was gone up by 50% compared to last year;

 Net profit before tax has been increased by 25% compared to last year;
 Shareholders equity has gone up to TK-400 per share; and
 Fixed assets and investments rose up to TK-5000 million.

Human resources:

The achievement would not have been possible without the dedication and commitment of our employees
who are the foundation of our company.

Conclusion:

Here I would like to take this opportunity on behalf of the Board of Directors and express my deepest
appreciation to all our valued customers for their confidence in our product, to the employees for tireless
efforts, to the suppliers for their quality goods, to the fellow shareholders and most honored shareholders for
their continuous support and interest for the welfare of the company. We shall however contain to seek this
last support & confidence upon us.

THANK YOU ALL

CHAIRMANOF THE BOARD

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37. Do the Articles constitute a contract between:-

(a) a company and its director;

(b) a company and its members;
(c) a company and its non-members; and
(d) a company and its auditors/solicitors?

Ans:

(a) A company and its Director

Yes, the signatories of the members of the company are the first directors and thereafter all the directors are
liable to comply all the rules regulation contained in the articles. After submission of the form consent of the
director to act constitute a contract with the companies Articles of Association (A/A)

(b) A company and its members:

Yes, the members of the company and the company as per rules regulation contained in the A/A.

(c ) A company and its non-members

No, but if any contract is made with any non-members then it binds him to act as a contract, as per company’s
A/A.

(d) A company and its Auditors

The contract of the auditor is as per companies act and other relevant regulations but not with the A/A

38. To what extent are the different types of contributories liable on the winding up of a company?

Ans:

(a) A past member shall not be liable to contribute if he ceased to be a member for one year before the
commencement of the winding up;
(b) A past member shall not be liable to contribute in respect of any debt or liability created after he
ceased to be a member;
(c) 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;
(d) In case of a company limited by shares, no contributions shall be required from any member
exceeding the amount of unpaid share capital; and
(e) In case of a company limited by guarantee, no contribution shall be required from any member
exceeding the amount of undertaking to be contributed by him in the event of winding up.

39. How does the winding up affect the position of officers of the company?

Ans:

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Winding up effect the position of officers

The power of the officers usually gets ceased on the winding up of a company. Other provisions are as under:

(a) Misfeasance:

Under section 331, if any promoter, liquidator or officer of the company has misapplied or retained money or
property of the company or has been guilty of misfeasance or beach of trust, the court may examine into this
conduct and order him to repay or restore money or property or to pay compensation;

(b) Criminal liability:

Section 332 provides punishment of 7 years imprisonment or with fine for falsification, destruction,
alternation or any fraudulent activities in the books/ papers of the company.

40. Discuss the propositions (i) that dividends must not paid out of capital; and (ii0 that dividends may only
be paid out of profits.

Ans: Payment of dividend out of profit

Dividend is paid out of profit of the company. But the companies act has not mentioned anything about the
composition of profit, I, e capital profit or revenue profit. The dividend can be paid out of capital profit if the
profit is realized. But the dividend must not be paid out of capital which reduces the capital and the company
will not be able to maintain its financial strength for company.

But dividend may be paid out of profit acquired by the company after making all adequate provision as
required by the policy, regulations etc. Generally dividend is paid from the revenue profit for the year. But in
some cases dividend can be paid out of capital profit if it is realized in full.

41. “ Auditor verify the books & records after expenses have been incurred”-In such situation should they be
held responsible for non-business expenditure shown in the business?

Ans:

Responsibility of Auditors

Rights and duties of auditors, section-213.

 The auditor have right to access any books of accounts, information, vouchers, statement as required
to perform the audit work.
 The auditors may require any information explanation from any officers, staff of the company for the
audit;
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They should investigate the followings:

 Security given against loan and advances whether it is secured or not and whether the terms are
detrimental to the interest of the company;
 The transactions, which have been shown in the books of accounts, whether they are detrimental to
the interest of the company;
 Whether or not any assets, shares, debenture or any other securities have been at a price sold lower
than the purchase price (other than banking);
 Any loan and advances have duly been or not shown by the company.

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

 Any share issued in cash whether the cash actually received or not and whether the presentation in
the balance Sheet of the same is misleading or not;
 The main duties of auditors are to Report to the shareholders that the financial statements are free
from all material miss statements;
 Whether or not they have obtained all information and explanations as required by them;
 Whether or not the balance Sheet and profit & loss account exhibits a true and fair review of the state
of affairs to the company;
 Whether or not proper books of accounts have been maintained;
 Whether or not the balance Sheet and profit and loss account are in agreement with the books of
accounts kept by the company.

If nay answer is in the negative the Auditor should disclose the fact and qualified.

The auditor shall have exercised such competence and skill as required and as may be desirable from them as
auditor or detect any non business expenditure are included in the business/ if they fails to detect and if it is
material, the auditors will definitely be held liable.

42. Critically discuss about-the appointment & termination of Auditors-in the Act

Ans: Appointment and Remuneration of Auditors, Section-210.

 Auditors are appointed in the annual General Meeting by the Shareholders;

 First Auditor of the Company is appointed by Directors;
 The Directors may appoint Auditors in case of casual vacancy;
 The Govt. may appoint an Auditor if the above authorities fail to appoint an auditor;

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

Termination of Auditor

As per companies act auditors are not easily changeable. For changing auditors a special notice is to given U/s
211 of the companies Act but as per section 210 (Ga) no such decision for changes of auditors can be taken
unless their death, incapability, dishonesty, disqualification etc.

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43. “The act has given a perpetual right of office of Auditors often against the common shareholders but not
the stake owners in management”- what are your views?

Ans:

As per Companies Act auditors are not easily changeable. For changing auditors a special notice is to be given
u/s 211 of the companies act but as per section 210 (Ga) no such decision for changes of auditors can be taken
other than their death, incapability, dishonesty, disqualification etc.

This section provides the auditor their perpetual rights of the auditors. The management has no right to
terminate auditors intentionally for their personal ground. The SEC regulations over ruled the section. As per
Sec regulations the Auditor should be changed after 3 consecutive years.

However it is convention for the auditor to hold their office for at least 3 years. But this right is absent for the
stake holders on the management in the companies act. But I think this right also reestablished by the SEC
regulation under many ways by adopting the main aspects of corporate governance.

44. “The act seems not reasonably vocal about the interest of the minority shareholders”- Comment in your
way.

Ans:

Interest on minority shareholders:

The companies Act under section 233 the minority shareholders can either individually or jointly apply to the
court:

 The affairs of the company are being conducted or power of Directors are being exercised in a manner
prejudicial to the minority share holders;
 The company is acting to discriminate the interest of them; and
 A reasonable of the members, debenture holders has been passed to the effect that there are
discriminating of the interest of them.

The minority can pray for such order of the court for safe guard of their interest.

They shall fix a date of hearing on that and after hearing can pass order for:

(a) cancellation of or modification of such resolution/transaction;

(b) conducting the company’s affairs such a manner as may be specified in the order; and
(c) for amending any provision of the M/A, A/A.

This simple section has been interested in the Companies Act 1994. But absence of matters relating to holding
of Board meeting, AGM or major decision of the company can also be noted. This is why it can be observed
that the Act is not as vocal as it was required.

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45. Explain floating charges and fixed charges. When does a floating charge crystallize? What is a
debenture? Point out the differences between shareholders and debenture holders. Enumerate the
remedies available to debenture holders.

Ans:

A charge on property is created when it is made liable for the payment of the money. A charge may be fixed or
floating.

A fixed charge in one which creates legal interest of a specific property of the company or all property of the
company. Thus a fixed charge is equivalent to a 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 charge.

Debenture is a security instrument. When the capital of the company is not sufficient to meet the needs of
business of the company, it can raise fund form of issuing Debenture. Actually Debenture represents loan of
the company. Debenture is usually issued in Boards by a company and is offered means of prospectus like
issuance of shares.

Sl No. Shareholders Debenture holders

1 Owner Yes No
2 Right to Dividend/loss Interest
3 Creditor No Yes
4 Rights Equity Lendor
5 Fixed No fixed dividend Interest is fixed
6 Profit Dividend is part of profit Interest charged in P & L accounts
after tax

Remedies available to the debenture holder when his debenture is in “Jeopardy”

Any of the following measures can be taken by the Debenture holder:

 He may file a suit for the recovery of the money by sale of the assets which were charged for the
payment of the money;
 He may file an application for appointment of a receiver to the court;
 He may present petition to the court for winding up of the company; and
 He may sale the charged properties as per the terms of the debenture.

46. Who are authorized to make an application to the court for the winding up a company? Tabulated the
difference between the winding up of a company and the dissolution of a partnership. How does the
winding up affect the position of services and the Directors of the company?

Ans:
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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:

(a) Compulsory winding up by court;

(b) Voluntary winding up by the members or by creditors; and
(c) Voluntary winding up under the supervision of the court.

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

(a) Any member of the company with the special resolution;

(b) Any member of the company with the Extra-ordinary resolution;
(c) The regulatory authority in case of default in filing the statutory meeting, report, etc; and
(d) Any creditors/members if the company is unable to pay its debts.

Sl No. Point of difference Winding up of a company Dissolution of partnership firm

1. Meaning of winding The activities of the company Dissolution of partnership among
up/dissolution is ended all the partners
2. Related laws Companies act 1994 Partnership act 1932
3. Liability of the owner Liability is limited Liability is unlimited
4. Distribution of assets As per companies act As per partnership deed
5. Cause of winding By the death of a member it is Partnership will dissolved by the
up/dissolution not wound up. Because death of a partner
subsection.

Winding up affecting the position of officers

As per section-252 (3), a winding-up order by the court executed as a dismissed or discharged of the servant of
the company. Such discharge relieves the servant from all obligations under his contract of service. The
powers of the directors are 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 guilty of misfeasance 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 providing punishment for falsification, or fraudulent securities of any of
the books, papers of securities of the company which is being wind-up.

47.

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