Introduction:

The Legal Environment of Business commences with the systems approach to management
and an analysis of the relationship between law and ethics. The first module reviews the
foundations of the legal environment of business, including agency law and the law of
fiduciaries generally.
This module also addresses the laws of contracts and torts. It introduces the elements necessary
for a binding contract and demonstrates ways managers can use contracts to strengthen business
relationships and allocate risk and reward.
A tort is a civil wrong, such as fraud or negligence. Tort law is designed to protect individuals
from physical and mental harm, and to protect property interests and certain other economic
interests and business relationships.
Every business manager should be aware of the legal environment in which their business
operates. Business law will introduce employees to the legal environment by discussing such
topics as procedure of starting business, procedure of continues business & procedure of ending
business.

Need to Know about the Legal Procedures to Starting a Business:

Entrepreneurs in Bangladesh do not need to put up any minimum capital to start a business, but
that is about all the relief they get. Bangladesh has a worldwide rank of 68 on the ease of
starting a business. The process requires 8 procedures taking 37 days at a cost of 88% of income
per capita—a decline from 94% in 2005. Within the region, only Bhutan and India make start-
up more burdensome.
The greatest obstacle is cost, which is higher in Bangladesh than in any other South Asian
country. Only Nepal (where start-up costs 79% of income per capita), Afghanistan (67%) and
India (74%) are in a comparable league. Elsewhere in the region it takes less than 22% of
income per capita to start a business .
Within Bangladesh start-up takes 30 days in both Khulna and Bogra and 37 days in Dhaka and
Chittagong. While all entrepreneurs have to complete all 8 procedures, the cost of starting a
business in Bogra, Khulna and Chittagong (62% of income per capita in each case) is lower
than in the capital city, Dhaka (88%).
1. Short title - (1) This Act may be called the Banking Companies Act, 1991. (2) It shall be
deemed to have come into force on 14th February 1991.
2. Application of other Acts. - The provisions of this Act shall be in addition to, and not, save
as hereinafter expressly provided, in derogation of, the Companies Act, 1913 (VII of 1913) ,
and any other Act for the time being in force.
3. Limited application of this Act to co-operative banks and other financial institutions. Nothing
in this Act shall apply to a co-operative bank or any other financial institution registered under

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the Cooperative Societies Ordinance, 1985 (Law of 1985) or any other Act for the time being
in force relating to co-operative banks:
Provided that the Bangladesh Bank may carry out inspections of and issue directions to co-
operative banks as prescribed for banking companies under section 44 and 45 of this Act.
4. Power to suspend operation of this Act. - (1) The Government if, on a representation made
by the Bangladesh Bank in this behalf it is satisfied that it is expedient so to do, may by
notification in the official Gazette suspend for at most 60 days the operation of all or any of the
provisions of this Act in relation to any specified banking company.

Need To Know about the Legal Procedures Legal Procedures to Continue a Business:
1. Acknowledgement of receipt of deposits - Where a financial institution receives from any
person a deposit, it shall, as a proof of having received the money, immediately make out a
receipt to such person.
2. Restrictions regarding credit facilities, etc. - No financial institution shall-
a) Accept any such deposit as is repayable on demand through cheque, draft or order of the
depositor;
b) Deal in gold or any foreign coins;
c) grant credit facilities in excess of thirty per cent or, subject to the consent of the Bangladesh
Bank, of hundred per cent of its capital to any particular person, firm, corporation or company
or any such company, person or group as controls or exerts influence on such person, ,firm,
corporation or company;
d) Grant credits in excess of 50 per cent of its credit facilities or in excess of such percentage
of its credit facilities as the Bangladesh Bank may determine from time to time;
e) Grant any unsecured advance, credit or credit facilities to any firm in which any of its
directors, individually or jointly, is interested directors unless the total amount of such facilities
does not exceed 10 per cent of its paid-up share capital and reserves;
f) Grant, in the manner mentioned in clause
e), advances, credits or credit facilities in excess of Taka 500 000 to any person or group of
persons other than those stated in the said clause.
mean any advance, credit or credit facilities granted without security or surety, and shall
include, in the case of advances, credits or credit facilities granted against securities or sureties,
that part of the credit which exceeds the market value of the securities or sureties and, in the
case that, in the opinion of the Bangladesh Bank, securities or sureties have no market value,
the amount settled by the said Bank.

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No financial institution shall grant any advance or credit allowing its own shares as securities
or grant credits or advances to any other institution for the purpose of buying and selling its
own shares.
Where there arises any loss as a result of the granting of any unsecured advance, credit or credit
facilities in contravention of the provisions of sub-section
all the directors of the financial institution shall, jointly and individually, be responsible for the
compensation.

Restrictions regarding the business of financial institutions –

Restrictions on investments - No financial institution shall expend or use more than 25 per cent
of its paid-up capital and reserves for the acquisition or holding of any kind of shares of
financial, commercial, agricultural or industrial institutions or of any similar institution and
shall, as fast as possible, sell to the institutions concerned the shares acquired in the interest of
realizing the credits granted by it:
Provided that any financial institution may, subject to its application and on consent of the
Bank, expend or use up to 50 per cent of its paid-up capital and reserves for the acquisition and
holding of the abovementioned kind of shares.
Restriction on the possession of immovable property - No financial institution may acquire or
possess immovable properties exceeding in value 25 per cent of its paid-up capital and reserves:
Provided that nothing contained in this section shall be applicable in the case of immovable
property required for the granting of facilities to employees of the financial institution and in
the case of property acquired in the interest of realizing unrealized credits granted by it.
Power of the Bangladesh Bank to regulate certain matters.- The Bangladesh Bank may by order
regulate the following matters, namely:-
a) The highest rate of interest to be paid by financial institutions on various kinds of deposits,
b) The highest amount of credit to be taken by financial institutions from any person,
c) The last date for repayment of credits granted by financial institutions,
d) The highest rate of interest to be paid on various kinds of credit granted by financial
institutions and the manner in which to calculate such rate,
e) The upper limit of credits granted by financial institutions in favor of any person,
f) The reserves to be maintained by financial institutions at the Bangladesh Bank,
g) Other matters to be regulated in the public interest or for the development of monetary
policy.

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For Trading across borders:
Bangladesh ranks 134th on the ease of trading across borders, well below the regional average.
It takes 16 documents and 57 days to import, the second longest time among the South Asian
countries after Afghanistan with 88 days. Exporters are relatively better off, requiring 7
documents and 35 days, comparable to Nepal (44 days) and Bhutan (39 days). The key export
sector—garments, which account

for nearly three-fourths of exports can clear exports much faster. Even imports meant for the
garments sectors clear much faster than average. In Bangladesh the total cost to import totals
$1,287 per container, cheaper than Afghanistan ($2,100), Nepal ($1,800) and Bhutan ($1,950),
but more expensive than Sri Lanka ($789) and Pakistan ($1,005), and comparable to India
($1,244). The cheapest port at which to

import is Dhaka, at $829 per container, while the most expensive is Bogra ($979). It is cheapest
to export from Chittagong ($553) due to its proximity to a seaport, and the costliest to export
from Dhaka ($607).

Bangladesh made business start-up easier by eliminating the requirement to buy adhesive
stamps and further enhancing the online registration system. Bangladesh reduced the property
transfer tax to 6.7% of the property value. If every company should maintain the legal
procedure to starting, continue & ending business, then it would be better for our nations and
also for the general public. The administrator should be able to sell the business as a going
concern so that the new owners keep the intrinsic value of the operating business and not just
the assets.

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Change of Law depends upon the change of society:

The term ‘society’ is used to mean a community or a group of persons, living in any region,
who are united together by some common bond.

A ‘common bond’ is formed when some uniformity of factors like nearness, nature of the
people, habit, custom, inhibition, beliefs, culture, tradition etc. appears. The ‘common bond’
leads to forming social rules or rules of social behavior. The rules are made by members of the
society. Disobedience of the rules is followed by punishment in the form of social disapproval.
There is no positive penalty associated with the violation of social rules except
excommunication or ostracism. But ‘law’ unlike social rules, I enforced by the State, Law,
according to Holland is “a rule of external human action enforced by the sovereign political
authority”. The objective of law is to bring order in the society with a view to enable its
members to progress and develop with some sort of security regarding the future.

From the above discussion it follows that although custom, usages and traditions indicate a
particular social conduct, law or definitive rules are made to ensure the peace and progress of
a society.

The State makes laws. Disobedience of State laws involves a penalty which is enforced by the
government through the sovereign power of the State. Whatever is not enforceable is not Law.
Laws of the State are applicable to all without exception in identical circumstances.

Law and Social Objectives:

Many jurists and social scientists in 19th century interpret the nature of Law with social
perspectives ‘Ancient Law’ by Henry Maine, is the pioneering work in this respect.
According to him, with social advance, law must be framed and changed on the basis social
needs. Social scientists like Emile durkheim, L.T. Hobhouse, Max Weber, etc. observed that
moral values rather than the settlement of disputes of interests should be the objective of
Law. According to Rosco Pound, Law is profoundly related to the following three elements:

(a) the legal structure of the society

(b) constitutional ideals and principles and

(c) legal procedure.

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The nature and the principle of Law of a democratic society must be different from that of an
autocratic system. It has been accepted on all hands that Law is today one of the imperative
tools for performing social purposes

Change of Law and Change of Social Rules

The legal system of a country reflects the rules of society. If there is a change of social rules
usually there occurs a change of law. For example, in the middle Ages in Europe, the landlord
and the feudal system prevailed. At that time the rights of the peasant was very restricted. In
modern times when the feudal system was abolished the rights o the peasant and the citizens
were enlarged. Therefore change of social rules leads to change of law.

The converse of the above also applies, i.e. change of law leads to change of the rules of society.
Legislation has enlarged the rights of Hindu women regarding inheritance, property rights and
marital rights. In these cases the change of law has been accepted by the society. We can
conclude that there is a dependence between law and social rules and vice versa.

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