Company: The Companies Act 1994

• The Company is a from of business organization in

which the funds of a large number of investors
are managed by a few persons for the purpose of
earning profits which are shared by all the
investors
• The term Company is used to describe an
association of a number of persons formed for
some common purpose and registered according
to the law relating to companies
• Section 2(d) of The Companies Act 1994 states
that a company means “a company formed and
registered under this act or an existing company” 1
 Company: The Companies Act 1994
• A company formed and registered under Companies
Act is regarded by law as a single person, having
specified rights and obligations. The law confers on a
Company a distinct legal personality with a perpetual
succession and a common seal.
• Therefore, s company is different from its members
and the individuals composing it. Suppose that A,B
and C and 50 other persons form a company called XY
& Co. the Company XY & Company is a legal person
quite separate from A,B, C and others. Therefore, A,B,
C etc., can enter into contracts with XY & Company,
illustration, Salomon & Salomon & Co, p. 555
2
 Company: essential features
• Registration: a company comes into existence only
after registration under the Companies Act. But a
Statutory Corporation is formed and commence
business as notified or stated in the Act and as
passed in the legislature. In case of partnership,
registration is not compulsory
• Voluntary association: a company is an association of
many persons on a voluntary basis. Therefore a
company is formed by the choice and consent of the
members
• Legal personality: a company is registered by law as a
single person. It has a legal personality. This rule
applies even in the case of “One man Company”.
Salomon v Salomon Co. 3
 Company: essential features
• Contractual capacity: a shareholder of a company
in its individual capacity cannot bind the company
in any way. The shareholder of a company can
enter into contract with the company and can be
an employee of the company
• Management: a company is managed by the Board
of Directors, whole time Directors, Managing
director or Manager. These persons are selected in
the manner provided by the Act and the Articles of
Association of the company. A shareholder as such
cannot participate in the management.
• Capital: a company must have a capital otherwise
it cannot work 4
 Company: essential features
• Permanent existence: a company has
perpetual succession. The death or insolvency
of shareholder does not affect its existence. A
company comes into end only when it is
liquidated according to provisions of the
Company Act.
• Registered office: a company must have a
registered office
• Common seal: a company must have a
common seal
5
 Company: essential features
• Limited liability: the liabilities of a shareholder of a
company are usually limited. The creditors of a
company are not creditors of individual
shareholders and a decree obtained against a
company cannot be executed against any
shareholders. It can only be executed against the
assets of the company
• Transferability: the shareholder of a company can
transfer its share and ordinarily the transferee
becomes a member of the company
• Statutory obligations: a company is required to
comply with various statutory obligations regarding
management, e.g., filing balance sheets, maintaining6
 Company: essential features
• Not a citizen: a company is an artificial person,
not a natural person. Therefore, a company is not
a Citizen, although it may have a Domicile.
• Residence: a company has a residence (for
taxation and other purpose). A company does not
possess any fundamental rights.
• No fundamental rights: though a company has no
fundamental rights, it can challenge a law as void
if the law happens to violate fundamental rights
of citizens. In order to succeed the company must
prove that the impugned law is expropriatory of a
citizens property 7
 Company: essential features
• Social objective: the present view as regard the legal
nature of company law is that the Company is a social
institution having duties and responsibilities towards to
community, its workers, the national economy and
progress.
• Centrally admistrated: the administration of Company
Law is managed centrally, i.e., by Registrar of Joint
Stock Companies and court having jurisdiction under
the Act is the High Court Division of the Supreme
Court of Bangladesh
• Lifting the veil of the company: to control illegal
activities and to stop using the company as a device or
as a veil for unsocial activities it is sometimes necessary
to find out the ownership of shares and the persons8
 Types of Company
• According to the Companies Act 1994, there are
there are three types of companies: (I) company
limited by shares (II) company limited by
guarantee and (III) company with unlimited
liability
• The company limited by share are divided into
two types: (I) private company and (II) public
company
• Company limited by share are those in which the
capital is of fixed amount divided into number of
shares and in which the liability of the members
do not exceed the face value of his share 9
 Types of Company
• Company Limited by Guarantee are those
companies in which the member guarantees to
contribute to the assets of the company, a sum
not exceeding a specified amount, in case the
company is wound up during its membership or
within a year after conclusion of this
membership
• Company with unlimited liability are those
companies where the liability of the members
are not limited. The members of this types of
company are not immune from personal liability
of different acts 10
 Types of Company
• The company limited by share are divided into
two types: (I) private company and (II) public
company.
• A private company is a company which by its
articles of association restricts the right of transfer
of the share, limits the number of members to
fifty and prohibits invitation to public to subscribe
to the shares or dentures of the company.
• Public company on the other hand is a company
which can be formed by at least seven persons as
members and the membership is open to the
public
11
 Types of Company
• Banking Company means a bank company as
defined in section 5(9) of Bank companies Act
1991
• Existing company means a company formed
and registered under any law relating to
companies in force at any time before the
commencement of this act
• Insurance company means a company that
carries on the business of insurance either
solely or in common with any other business
or businesses
12
 Differences between a private and a public company
• Public company means a company
incorporated under the Company Act 1994 or
under any law at the time in force before
commencement of this Act and which is not a
private company. S. 2(j)
• Private company means a company which by
its articles (I) restricts the rights to transfer its
shares, (II) prohibits any invitation to the
public to subscribe for its shares or
debentures and (III) limits the number of its
member to fifty not including persons who are
in its employment, s.2(k) 13
 Differences between a private and a public company
• A private company cannot have more than 50
members. The maximum number of members
in case of public company is not limited. It can
have any number of members
• A private company can be formed by two
person only. A public company cannot be
formed except by at least seven persons
• A private company must have in its articles
restrictions of transfer of shares. A public
company need not have in its articles such
restriction on the right of transfer of shares
14
 Differences between a private and a public company
• A private company must prohibit any
invitation to the public to subscribe for its
shares or debentures. A public company has
no obligation to prohibit invitation to the
public to subscribe for its shares or
debentures
• A private company need not to issue or file a
prospectus or statement in lieu of prospectus.
A public company is bound to issue or file a
prospectus or statement in lieu of prospectus

15
 Differences between a private and a public company
• The minimum number of Directors of a private
company is two. The minimum number of
Directors of a public company is seven
• A private company can commence business as
soon as it is registered. A public company can
commence business only after obtaining
certificate for commencement of business
from the Registrar of Joint Stock Companies.

16
 Memorandum and Articles of Association:
definition and distinction

• The memorandum of association is a document

which contains the fundamental rules regarding
the constitution and activities of a company, s. 2(v).
It is the basic document which lays down how the
company is to constituted and what work it shall
undertake.
• The purpose of the memorandum is to unable the
members of the company, its creditors, and the
public to know what its powers are and what is the
range of its activities. The memorandum contains
rules regarding the capital structure, the liability of
the members, the object of the company, and all17
 Memorandum and Articles of Association:
definition and distinction

• The Articles of Association is a document

which contains rules, regulations and bye-laws
regarding the internal management of the
company, s. 2(u).
• Articles must not violate any provisions of the
memorandum or any provisions of the
Companies Act. The rules laid down in the
Articles must always be read subject to the
rules contained in the memorandum

18
 Memorandum and Articles of Association:
definition and distinction
• The Memorandum is the fundamental charter
of the company determining its constitution
and objectives. The Articles are rules regarding
internal management
• Any rules in the Articles contrary to the
Memorandum is invalid
• Articles can be altered easily, the
memorandum can be altered only after the
adoption of certain formalities

19
 Memorandum and Articles of Association:
definition and distinction
• Certain clause of memo cannot be altered
except so far as is provided by the section 12
of the Companies Act. Articles of Association
can be altered as many times as the
shareholders may choose by special resolution
• The company must provide itself with its
Memorandum of Association which are
usually framed in s statutory way. A company
may provide itself with its Articles of
Association by fully adopting Schedule-1 of
the Act 20
 Memorandum and Articles of Association:
definition and distinction
• The memo defines the powers of the company and
the relationship between the company and the
members and also non-members. Articles defines
and regulate the relationship between the company
and the members and the relationship between the
members inter se.
• Acts beyond the powers of memo (ultra vires) are
void. Such acts cannot be ratified by the members
even by a unanimous resolution. But acts done by a
company beyond the Articles can be ratified by the
shareholders provided they are within (inter vires)
the powers of memo 21
 Memorandum and Articles of Association:
definition and distinction

• If an act is within the power given by the

memo (intra vires the memo) but contrary to
some provision of the Articles ( ultra vires the
Articles) the members can change the Articles
and ratifies the act

22