Background

 The first sub continental act, regarding companies

was the joint stock companies act of 1850.
 The act of 1850 was replaced by a new act 1857
 Before liberation the act of 1956 was popularly
used which was gazette passed by the Indians.
 After liberation Govt. of Bangladesh reform the
companies act of 1956 which is now known as The
Companies Act (Bangladesh) – 1994.
The term company is used to describe an
association of a number of persons, formed the
common purpose and they registered
according to the law relating to companies.
Therefore a company is different from it’s
members and the individuals composing it.
There are two types of company
1.Public Limited Company
2.Private Limited Company
Public Limited Company can be divided in Four
stages-
Limited by Shares
Limited by Guarantee
Unlimited Company
v
Statutory public Company
Company formation is a long and complex
procedure that includes various significant steps.
The process of company formation in Bangladesh is
subject to the Companies Act, 1994.
The process of company formation is also known as
incorporation which means, forming a new
corporation.
A company can be formed when a group of person
come together to form an organization with lawful
motive.
 The purpose of forming a company must be lawful. Before a company
can be formed the following steps must be taken:-
1. The memo and the articles must be prepared.
2. If it is proposed to have a paid-up capital or more than Rs.3 crore,
sanction of the central govt. must be obtained lender the capital
issues (control) Act, 1956
3. The company must be registered in accordance with the provision
of the companies Act, 1956 and the certificate of incorporation
must be obtained.
4. The prospectus or the statement in lieu of prospectus must be
issued and registered with the register.
5. The minimum subscription must be raised and thereafter the
allotment of shares must be made.
6. The certificate for the commencement of business must be
obtained from the register.
Private company into a public company
1. Conversion
2. By resolution
3. By Default
4. By creating a statutory public company
5. Automatic conversion
Public Company into a Private company
1. Conversion
2. Special Resolution
3. Confirmation by the court
 Definition-
The Memorandum of association is a document
which contains the fundamental rules regarding the
constitution and activities of a company.
Forms and contents of memorandum-
1.NAME Clause
2.Situation Clause
3.Objects Clause
4.Area and Operation Clause
5.Liability Clause
6.Capital Clause
7.The Association of Subscriptions Clause
LEGAL EFFECTS OF
MEMORANDUM
A. The contractual powers of a
company
1.Natural Possibility
2.Legal Possibility
B. Forms of contracts and Deeds
of a Company
1.The Doctrine of ultra vies
Definition-The articles of association is a document
which contains rules, regulation and bye-laws regarding
the internal management of a company.
Forms and contents of Ar ticles-
1.Rules
2.Forms of Ar ticles
a. Be printed
b. Be Divided into Paragraphs
c. Be Signed by each Subscribers
CONTENT S OF ARTICLES
1.Share Capital
2.Lien on Shares
3.Calls on Shares
4.Tranfers of Shares
5.Transmissions of Shares
6.Forfieture of Shares
7.Conversion of Shares into
Stock
CONTENT S OF ARTICLES
8.Alteration of Capital
9.General Meetings and voting
rights of members
10.Appointment of all the
directors
11.Dividends and reserves
12.Accounts and audits
13.Share warrants
14.Capitalization of Profits
15.Winding up
The following documents with the necessary fear must be
submitted to the registrar of companies of the state in
which the registered office of the company will be
situated.
1)The memorandum of association signed by at least 7
persons in the care of public companies and 2 persons in
the care of private companies.
2)The articles of association
3)A declaration of an advocate, an attorney, a chartered
accountant, or a person named in the articles as director,
manager or secretary of the company.
4)The registration fees with a filing fee per document.
 Member: according to section 41 of the act, the term member
of a company means the subscriber of the memorandum of
the company.
 A person can become member of a company in any one of the
following ways:-
1) Signature Allotment
2) Transfer
3) Transmission
4) Acquiescence
 The company act does not prescribe any qualification for
membership of a company but since membership created by
agreement it may be argued that person in capable of entering
into contracts can not be a member.
 Minor
 Company
 Creditor
 Factious person
 Trustee
The membership of a person in a company may terminate in
any one of the following ways:
a)By death
b)By insolvency
c)By rescission
d)By forfeiture
e)By surrender
f)By transfer
g)By sale
h)By power of lien
i)By mortgage
j)By redemption
 Effects of registration: As soon as a company is registered and a
certificate of incorporation is issued by the register, three important legal
consequences:-
 The company acquires a distinct legal entity.

 It secures a perpetual succession.

 Its property is not the property of its shareholders. [sec-34]

 Promoters: According to Palmer, company president, “A person who

originates a share for the formation of the company, has the memo and the
articles prepared executed and registered and finds the first directors,
settles the terms of the preliminary contracts and prospectus (if any) and
make arrangements for advertising and circulating the prospectus and
placing the capital is a promoter.”
The usual methods of taking remuneration are
follows:-
A.Selling to the company at a profit some
property purchased by the promoter before he
became one;
B.Taking a commission on the shares sold;

C.Taking a front of some shares of the company;

D.Lump sum from the company.

Definition:
has been defined in the act as any document
described or issued as a prospectus and
includes any notice, circular, advertisement, or
other document inviting deposits from the
public or inviting offers from the public for the
subscriptions or purchase of any share in, or
debentures of a body corporate.
Characteristics-
1.Described or issued as a prospectus.
2.Includes Notice, circular, advertisement.
3.Invitation to the members of the public.
4.Invitation to the subscribers of shares or
debentures.
5.The company secures capital through this
documents.
Forms and contents-
1.Particular object, signatories of the memorandum and
share subscriptions of a company.
2.Numbers and classes of shares
3.Capital and dividends attached to different classes of
shares.
4.Particulars regarding the whole management body of the
company.
5.Minimum amount of subscriptions and amount payable
on application
6.Time of opening of subscription list
Forms and contents-
7.Preliminary expenses incurred.
8.Details of any premium or under-writing commissions paid.
9.Particulars of reserves including reserves capitalized.
10.Name and extent of interest of every director and promoter.
11.Restrictions upon the powers of the directors
12.Voting rights, capitalization of reserves and surplus of
revaluation.
13.Inspection of Balance sheet and Profit and loss account .
14.Two reports are annexed with the prospectus.
LEGAL REQUIREMENTS OF PROSPECTUS
1.Time
2.Par ticulars
3.Date
4.Signature
5.Copy of Prospectus
6.Statement by Exper ts
7.Deposits
8.Registration
9.Terms of Contracts
10. Prospectus by a foreign company.
11.Penalty for non-compliance
12.Defence
 After issuing “Certificate of Commencement “ a public ltd
co. can commence business.

Requirements
a) The minimum subscription,
b) Every director has paid money payable by him,
c) A statement in lieu of prospectus,
d) Copy of memorandum,
e) Copy of articles of association signed by the director
f) A declaration by directors “Above requirement have
been complied with”
 The winding up of a company means the
termination of the legal existence of a company
by stopping it’s business, collecting it’s assets
and distributing the assets among the creditors
and shareholder's as the Act.

Winding Up
 Grounds of compulsor y winding
up:
A. Special Resolution of the Company
B. Default
C. Not Commencing or Suspending the Company
D. Reduction of Member
E. Inability to pay Debts
F. The just and equitable clause
 Declaration of solvency
 Statutory Declaration to the Register
 A Resolution in a general meeting of the
Company within 5 weeks of Declaration of
Solvency
 Appointment of Liquidators
 Collecting the company’s asset, pay the
liabilities of the company and pay the balance
of the proceeds to the contributories
 A Resolution for the winding up of the company in
a general meeting of the Company
 In the meeting of creditors the Directors must
state the position of company and the list of
creditors
 A liquidator/s are appointed by the both meeting,
the nominees of the creditors are preferred
 A committee of Inspection
 The work of winding up according to Statute
 Power to order winding up subject to supervision
 Effect of petition for winding up subject to supervision
 Court may have regard to wishes of creditors and
contributories
 Power of Court to appoint and remove liquidators
 Effect of supervision order
 Appointment of liquidators subject to supervision to the
office of official liquidators
 Factor y acts that are followed in
Bangladesh established in 1965(No
of4.1965)
 There are three main segments of
factor y acts focused :

1.health and hygiene

2.safety
3.welfare
Cleanliness:
(1)It helps to know how to keep the factory health and
hygiene. Particularly in-
 Dispose of it in a suitable manner.
 Accumulation of dirt and refuge.
 Using proper manufacturing process.
 Washing, coloring room& staircase, using disinfectant
where necessary or by some other effective method
Disposal of wastes and ef fluent :
(1)Effective arrangements shall be made in every factory at
the time of manufacturing.
(2)Making rules regarding the arrangements:
 Ventilation and temperature :
 (1) Ventilation system keeps the factory temperature balanced
.such as-
 (a)Adequate ventilation by the circulation of fresh air.
 (b) Temperatures will secure to workers & prevent injury to health.
 ©Designed factory with ventilating condition.
 Dust and fume:
 (1)Dust and fume emerged from manufacturing process are
injurious and offensive to workers health.
 (2)Effective measures should be taken for reducing dust &fume.
 (3) Combustion engine shall be operated unless the exhaust is
conducted.
Ar tificial humidification:

 (1 The humidity of the air is artificially increased by the Government making rules –

(a) Prescribing standards of humidification.

(b) Regulating the methods of humidification.
(c)Test determining the humidity of the air to be correctly carried out and recorded.
(d) Prescribing methods to be adopted
Overcrowded

 (1) Proper workers shall be employed.

 (2) Prejudice for employment in a work-room-
 (a) at least three hundred and fifty cubic feet of space in the case of a factory in existence on the date
of the commencement of this Act, and
 (b) At least five hundred cubic feet of space in the case of a factory built after the commencement of
this Act.
Lighting:

 (1) Providing sufficient and suitable lighting.

 (2) Effective provision shall be made for the prevention of -
 (a) Excess lighting.
 (b)Shadows that cause eye strain or risk of accident to any worker

Drinking water:
(1) In every factory effective arrangements shall be made for all workers & a sufficient supply of wholesome drinking water
Latrines and urinals:

 (1) In every factory -

 (a) Sufficient latrines and urinals.
 (b) Latrines and urinals shall be separate for male and female.
 (c) Adequately lighted and ventilated
Spittoons
 (1) Provide sufficient number of spittoons for hygienic condition.
 (2) The Government may make rules prescribing the type and the number of spittoons to be provided and their
location in any factory.
. Precautions in case of fire:
 provided with such means of escape in case of fire
 Effective and clearly audible means of giving warning.

 A free passage-way giving access to each means of escape.

 Inflammable materials are used or stored specifying measures

. Precautions in case of fire:
 provided with such means of escape in case of fire
 Effective and clearly audible means of giving warning.

 A free passage-way giving access to each means of escape.

 Inflammable materials are used or stored specifying measures

 Fencing of machiner y: Use of safeguards to kept
machinery safe. .
 Employment of young persons on dangerous
machines:
 (1) No young person shall work at any machine unless he has
been fully instructed -
 (a) has received sufficient training, or
 (b) is under adequate supervision by a person who has
thorough knowledge and experience .
Striking gear and devices for cutting of f power. :
 (1) In every factory –
Suitable striking gear or other efficient
mechanical appliances shall be provided and
maintained and used.
Self-acting machines: Machines shall fix in a
safe place where any person does not pass or
employed & remain within a distance fixed .
Casing of new machiner y:
(a)In all machinery every set screw, belt or key or
any revolving shaft, spindle, wheel or pinion shall
be so sunk, encased or otherwise effectively
guarded as to prevent danger; and
(b) all spur, worm
and other toothed or friction gearing which does
not require frequent adjustment while in motion,
shall be completely encased unless it is so
situated
Prohibition of employment of women and children near cotton-openers: No woman or child
shall be employed in any part of a factory for pressing cotton in which a cotton-opener is at work.
Cranes and other lifting machiner y :
(1) The following provisions shall apply in respect of cranes and all other lifting machinery, in any factory
 Every part of machinery shall be of good construction.
 Properly maintained
 examined by a competent person at least once

;
Hoists and lif ts:
(1) In every factory-
(a) every hoist and lift shall be –
(i) of good mechanical construction, sound material and
adequate strength,
(ii) Properly maintained, and shall be thoroughly examined by a
competent person.
Revolving machiner y :
 (1) Effective measures shall be taken
 (2)such as every revolving vessel, cage, basket, flywheel, pulley disc
or similar appliance driven by power. .
Pressure plant:
Need pressure plant at the time of manufacturing process.
 Powers to require specifications of defective par ts
or tests of stability.
 Power to make rules to supplement
 Precautions against dangerous fumes.
 Explosive or inflammable dust, gas: (1) any
manufacturing process produces dust, gas, fume or vapor of
such character and to such extent as to be likely to explode on
ignition to remove -
 (a) effective enclosure of the plant or machinery used in the
process;
 (b) removal or prevention of the accumulation of such dust,
gas, fume
 Washing facilities :
 (1) In every factory -
(a) adequate and suitable facilities for
washing and bathing
(b) separate and adequately screened
facilities shall be provided for the use of male and
female
(c) Such facilities shall be kept clean.
 (2) The Government may prescribe standards of
adequate and suitable facilities for washing
 First-aid appliances:
 (1) There shall be provided and maintained readily
accessible first aid boxes and cupboards equipped .
 (2) Such boxes should be kept in charge of responsible
person.
Canteens:
providing good canteen facilities.
Shelters:
 adequate and suitable shelters or rest rooms, and a
suitable lunch room with provision for drinking water
where workers can eat meals brought by them.
 Rooms for children
 Welfare of ficers
(1) In every factory wherein five hundred or
more workers are employed, the occupier shall
employ in the factory such number of welfare
officers as may be prescribed.
(2) The Government may prescribe the duties,
qualifications and conditions of service of officers
employed under sub-section (1).
 Power to make rules to supplement this
Chapter.
 The government may takes rules-
 The welfare of workers as may be specified,
compliance with any of the provisions .
 Requiring in any factory or class or description of
factories that representatives of the workers
employed in the factory shall be associated with
the management of the welfare arrangements for
the workers.
 e Government may make rules
Industrial Relation’s
Or dinance
• Trade union mean’s an association of worker’s
• Trade union reefer's the relation between workman and
employees
• Trade union impose restrictive conditions on the
conduct or any trade or business
• Trade union may be temporary or permanent
• Trade union may be formed for the relationship among
a. Workman and employer's
b. Workman and workman
c. Employer and employer
 Any agreement between partner’s as to their
own business
 An agreement between an employer and those
employed by him
 Any agreement in consideration of the sale of
the goodwill of the business
 Collective Bargaining mean’s the relation to an
establishment or industry in the trade union of
workmen which is the agent in establishment
 As the case maybe industry in the matter of
Collective Bargaining
 Where there is only one registered trade union in
an establishment or a group of establishments
and the total number of workmen employed be
dreamed o be Collective Bargaining agent for
such establishment or group
 Conciliation mean’s that the government shall
by notification in he official Gazette, appoint as
many person’s as it considers necessary to be
conciliator's
 The purposes of this ordinance and shall
specify in the notification
 The area within which or the class of
establishment or industries in relation to which
is one of them
Certain class of workers are allowed to be
compensated and they are-
1.Depandant-
a. Widow, Minor, Legitimate son , unmarried
legitimate daughter , a widowed mother.
b. If wholly dependant on the earnings of the
workman at the time of his death a son or a
daughter who has attained the age of 18 years
and who is infirm;
2.Minor
3.Employer-
a. Anybody of persons, whether incorporated or not.
b. Any managing agent of an employer.
c. The legal representatives of deceased employer.
d. Any person to whom the services of a workman are
temporarily lent or lent out, while the workman is working for him.
4. Disablement-
a. Partial disablement
b. Total disablement
5. Wages
6. Monthly Wages
7. Workman
An employer is liable to pay compensation to a workman:
1) For personal injur y caused to him by accident,
and
2) For any occupational disease contracted by
him.
1) Personal Injur y: Personal injury includes:
i) Must have been caused during the course
of his employment; and
ii) Must have been caused by accident arising
out of his employment.
 The injur y should not have been caused by
accident which is directly attributable to:
i) The workman having been under the influence of
drink or drugs at the time of the accident;
ii) Willful disregard of instruction relating to safety
precautions given by the employer; and/or
iii) The willful disregard of the usage of the safety
device or safety guard provided for the purpose of
securing safety of the workman by the employer.
 2) Occupational Disease: The Act also recognizes that the
workman employed in certain types of industries of occupation risk
exposure to certain occupational disease peculiar to that
employment. This section states that the contracting of any of these
occupational diseases shall be deemed to be:
 i) An injury by accident within the meaning of the Act and
compensation is payable to the workman who contracts such
disease;
 ii) The types of employment which exposes the workman to
occupational disease as well as the list of occupational diseases are
contained in Schedule III of the Act. Schedule III is divided into three
parts, viz., A, B and C.
 No specific period of employment is necessary for a claim for
compensation with respect to occupational diseases mentioned in
Part A.
 For diseases specified in Part B the workman must be in continuous
service of the same employer for a period of six months in the
employment specified in that part.
 For diseases in Part C the period of employment would be such as is
specified by the Central Government for each of such employment
whether in the service of one or more employers. If a workman
employed in any employment mentioned in Part C of the Schedule II
contracts any occupational disease peculiar to that employment, the
contracting whereof is deemed to be an injury by accident within the
meaning of Section 3 and such employment was under more than
one employer then all the employers shall be liable for the payment of
compensation in such proportion as the commissioner in the
circumstances may deem just.
 Section 4 of the Act prescribes the amount of
compensation payable under the provisions of the Act.
The amount of compensation payable to a workman
depends on:
 1) The nature of the injury caused by accident.
 2) The monthly wages of the workman concerned, and
 3) The relevant factor for working out lump-sum
equivalent of compensation amount as specified in
Schedule IV.
 There is no distinction between an adult and a minor
worker with respect to the amount of compensation.
 New Section 4 provides for compensation for:
1) Death;
2) Permanent total disablement;
3) Permanent partial disablement; and
4) Temporary disablement – total or partial.
 1) Compensation for Death: Where death results
from an injury, the amount of compensation shall be
equal to 50 percent of the monthly wages of the
deceased workman multiplied by the relevant factor, or
Rs. 85,000 whichever is more.
2) Compensation for Permanent Total
Disablement: Where permanent total disablement
results form an injury, the amount of compensation
payable shall be equal to 60 percent of the monthly
wages of the injured workman multiplied by the
relevant factor, or Rs. 90,000, whichever is more.
 3) Compensation for Permanent Par tial Disablement:
 i) In the case of an injury specified in Part II of Schedule I, such percentage
of the compensation which would have been payable in the case of
permanent total disablement as is specified therein as being the
percentage of the loss of earning capacity caused by the injury; and in other
words, the percentage of compensation payable is proportionate to the loss
of earning capacity permanently caused by the scheduled injury. Thus, if the
loss of earning capacity caused by an injury specified in Part II of Schedule I
is 30 percent, the amount of compensation shall be 30 percent of
compensation payable in case of permanent total disablement.
 ii) In the case of an injury not specified in Schedule I such percentage of
the compensation payable in the case of permanent total disablement as is
proportionate to the loss of earning capacity (as assessed by the qualified
medical practitioner) permanently caused by the injury.
 4) Compensation for Temporar y Disablement: A
half monthly payment of the sum whether total or partial
results equivalent to 25% of monthly .wages of the from
the injury workman to be paid in the manner prescribed.
 5) Compensation to be Paid when due and
Penalty for Default: Section 4A provides for the
payment of compensation and the penalty for default. It
provides that compensation shall be paid as soon as it
falls due. Section 4 mandates employer to pay
compensation amount as soon as it falls due to victim or
his or her legal heirs. workman to be paid in the manner
prescribed.
 Section 8 of the Act provides for the deposit of the compensation
before the Commissioner, as also to the distribution of compensation
by the Commissioner. Section 8 lays down following rules with regard
to distribution of compensation:
 1) No payment of compensation in respect of workman whose injury
has resulted in death, and no payment of lump sum as compensation
to a woman or a person under a legal disability, shall be made
otherwise then by deposit with the Commissioner, and no such
payment made directly by an employer shall be deemed to be
payment of compensation.
 2) Any other sum amounting to not less than ten rupees which is
payable as compensation may be deposited with the Commissioner
on behalf of the person entitled thereto.
 3) The receipt of the Commissioner shall be a sufficient discharge in
respect of any compensation deposited with him.
4) On the deposit of any money as compensation in
respect of a deceased workman the Commissioner
shall, if he thinks necessary, cause notice to be
published or to be served on each dependant in
such manner as he thinks fit, calling upon the
dependents to appear before him on such date as
he may fix for determining the distribution of the
compensation. If the Commissioner is satisfied,
after any inquiry which he may deem necessary,
that no dependant exists, he shall repay the
balance of the money to the employer by whom it
was paid.
 5) Compensation deposited in respect of a deceased workman shall,
subject to any deduction made, be apportioned among the dependants of
the deceased workman or any of them in such proportion as the
Commissioner thinks fit or may, in the discretion of the Commissioner, be
allotted to any one dependant.
 6) Where any compensation deposited with the Commissioner is payable to
any person, the Commissioner shall pay the money to the person entitled
thereto.
 7) i) Where any lumpsum deposited with the Commissioner is payable to a
woman or a person under a legal disability, such sum may be invested,
applied or otherwise dealt with for the benefit of the woman, or of such
person during his disability, in such manner as the Commissioner may
direct.
 ii) Where a half-monthly payment is payable to a person under legal
disability, the Commissioner may pay it to any dependant of the workman or
to any other person whom the Commissioner thinks best fitted to provide for
the welfare of the workman.
8) The Commissioner may, on account of neglect of children on
the part of a parent or on account of the variation of the
circumstances of any dependant, or for any other sufficient
cause, vary his earlier orders regarding distribution or
investment of compensation. But no such order prejudicial to
any person shall be made unless such person has been given
an opportunity of showing because why the order should not be
made.
9) Where the Commissioner varies any order under sub-section
(8) by reason of the fact that payment of compensation to any
person has been obtained by fraud, impersonation or other
improper means any amount so paid to or on behalf of such
person may be recovered as an arrear of land revenue