Corporate-Business-Laws (From Nobbodoy)

CORPORATE & BUSINESS LAWS
According to the following syllabus

Intermediate Level-I, ICMAB
MBA, BBA, BBS in Accounting & Finance
Public, Private & National University of Bangladesh
Features
♦ As per ICMAB new syllabus
♦ Covers ICMAB full syllabus
♦ Answered ICMAB questions
♦ Answered till May 2023 exam
Author
Md. Sajjad Hossain
CMA (1800 passed), MBA, BBA, LLB, PGDCSE
Lawyer – Taxes Appellate Tribunal
Member – Dhaka Taxes Bar Association
Proprietor – S. Hossain & Co.
Tax, VAT and Company Law Advisor
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CORPORATE & BUSINESS LAWS
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Edition : October 2023
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2
স঳এভএ অনরাইন ককাসেিং ক্লাচ঳ বসতথ েরচছ!
বফস঱ষ্ট্য ঳ভূ঴ঃ
√ স঳এভএ ফযাচেয ঳কর স঱ক্ষাথথী আইস঳এভএসফ প্রসতষ্ঠাচনয;

√ স঳এভএ স঳চরফাচ঳য ঩া঱া঩াস঱ সফগত ফছচযয প্রশ্ন ঳ভাধান কযা ঴য়;
√ একাউসটিং সফলয় ঳ভূচ঴ আই.এপ.আয.এ঳ অনু঳যন কযা ঴য়;
√ গাসণসতক ঳ভ঳যা ঳ভাধাচনয ঳঴জ ককৌ঱র ক঱খাচনা ঴য়।
শুক্রফাচযয ফযাে
যচয়চছ!
নফযদয় ফ্রী ক্লা঳ কচয
বসতথয স঳দ্ধান্ত
ঢাকা, ফািংরাচদ঱। সনন!
০১৭১১১-৩৭০৩৯
ক্লাস নিবেি লেখক ল াোঃ সাজ্জাদ ল াবসি, নসএ এ ১৮০০ পাশ
3
BRIEF TABLE OF CONTENTS
Chapter Title Page No.
Part A – Corporate Laws
1. The Companies Act, 1994 14
2. The Financial Reporting Act, 2015 56
3. The Banking Companies Act, 1991 66
4. The Financial Institutions Act, 1993 78
5. The Insurance Act, 2010 83
Part B – Business Laws
6. The Contract Act, 1872 98
7. The Negotiable Instruments Act, 1881 134
8. The Partnership Act, 1932 156
9. The Bangladesh Labour Act, 2006 179
4
স঳এভএ অনরাইন ককাসেিং ক্লাচ঳ বসতথ েরচছ!
বফস঱ষ্ট্য ঳ভূ঴ঃ
√ স঳এভএ ফযাচেয ঳কর স঱ক্ষাথথী আইস঳এভএসফ প্রসতষ্ঠাচনয;

√ স঳এভএ স঳চরফাচ঳য ঩া঱া঩াস঱ সফগত ফছচযয প্রশ্ন ঳ভাধান কযা ঴য়;
√ একাউসটিং সফলয় ঳ভূচ঴ আই.এপ.আয.এ঳ অনু঳যন কযা ঴য়;
√ গাসণসতক ঳ভ঳যা ঳ভাধাচনয ঳঴জ ককৌ঱র ক঱খাচনা ঴য়।
শুক্রফাচযয ফযাে
যচয়চছ!
নফযদয় ফ্রী ক্লা঳ কচয
বসতথয স঳দ্ধান্ত
ঢাকা, ফািংরাচদ঱। সনন!
০১৭১১১-৩৭০৩৯
ক্লাস নিবেি লেখক ল াোঃ সাজ্জাদ ল াবসি, নসএ এ ১৮০০ পাশ
5
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আয়কর নরটাি নপ্রস্তুনিবি স ায়িা নিি
লসো স ূ োঃ
√ আয়কয সযটানথ প্রস্তুতকযণ;

√ কয অসপচ঳য কনাসটচ঱য জফাফ কদওয়া;
√ আয়কয ভাভরায প্রসতসনসধত্ব কযা;
√ আয়কয ঳িংক্রান্ত অনযানয ক঳ফা প্রদান;
√ বযাট সযটানথ প্রস্তুতকযণ;
√ বযাট ঳িংক্রান্ত অনযানয ক঳ফা প্রদান;
√ কেড রাইচ঳ন্স সনফন্ধন ও নফায়ন;
√ আইআযস঳ এফিং ইআযস঳ সনফন্ধন ও নফায়ন;
√ আন্তজথাসতক স্ট্যান্ডাডথ অনুমায়ী স঴঳াফ প্রস্তুতকযণ;
√ ইন্টাযনার অসডট ঳িংক্রান্ত ক঳ফা প্রদান।
এ঳ ক঴াচ঳ন এন্ড ককািং

঩সযোরনায়ঃ
সফ আইনজীফী কভাঃ ঳া াদ ক঴াচ঳ন
ঢাকা, ফািংরাচদ঱।
০১৭১১১-৩৭০৩৯
7
PREFACE
The main objective of this book is to meet the basic requirements of the Corporate
and Business Laws course. This book is written by following the curriculum of The
Institute of Cost and Management Accountants of Bangladesh. It is also helpful for
other professional students and the persons who are intended to get admission into a
professional institute.
I am grateful and deserve my thanks to the publisher, printers and designers of this
book.
Any criticism, favorable or unfavorable, and any constructive suggestion in regards

of this book will be gratefully received.
Be informed that we sell all of this books at the same price. But printing quality,
binding quality, etc is not the same. Please forgive us for this unintentional mistake.
Date: October 2023 Md. Sajjad Hossain
8
Dedicated to my parents
9
DETAILED TABLE OF CONTENTS
Chapter Title and Contents Page No.
Chapter-1: The Companies Act, 1994 14

1.1. Definition of company 14
1.2. Types of company 14
1.3. Benefits of private company over public company 16
1.4. Differences between private and public companies 17
1.5. Conversion of private company into public company 18
1.6. Conversion of public company into private company 19
1.7. Books of accounts to be kept by a company 19
1.8. Company formation documents 20
1.9. Definition of memorandum of association 20
1.10. Contents of memorandum of association 21
1.11. Change of memorandum of association 22
1.12. Definition of articles of association 23
1.13. Contents of articles of association 23
1.14. Change of articles of association 25
1.15. Distinction between memorandum and articles of
association 25
1.16. Mode of winding up of a company 26
1.17. Process of winding up of a company 27
1.18. Definition of official liquidator 28
1.19. Appointment of official liquidator 28
1.20. Powers of official liquidator 29
1.21. Definition of share 30
1.22. Types of share 30
1.23. Issue of share warrants to bearer 32
1.24. Transfer of shares 32
1.25. Reduction of share capital 33
1.26. Meaning of annual general meeting 33
1.27. Proceedings of annual general meeting 33
1.28. Penalty for default in holding annual general 34
meeting
1.29. Appointment of directors 34
1.30. Duties of directors 35
1.31. Qualification of director 35
1.32. Disqualifications of directors 35
1.33. Removal of directors 36
1.34. Appointment of auditors 36
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1.35. Removal of auditors 36

1.36. Qualification and disqualification of auditors 37
CMA questions and answers 38
Chapter-2: The Financial Reporting Act, 2015 56

2.1. Background of the FRC 56
2.2. Formation of the FRC 56
2.3. Purposes of the FRC 56
2.4. Functions of the FRC 57
2.5. Functional divisions of the FRC 58
2.6. Responsibilities of the divisions 58
2.7. Offence and punishment 60
2.8. Appeal against decision of the FRC 60
2.9. Appealate authority 60
Chapter 3: The Banking Companies Act, 1991 66

3.1. Definition of banking company 66
3.2. Business of banking company 66
3.3. Minimum paid-up capital and reserves 67
3.4. Appointment of directors 67
3.5. Removal of directors 68
3.6. Restrictions on the payment of dividends 68
3.7. Provision for reserve funds 68
3.8. Restrictions on loans and advances 69
3.9. Licencing of banking companies 69
3.10. Audit of banking companies accounts 70
3.11. Suspension of banking companies 70
Chapter-4: The Financial Institutions Act, 1993 78

4.1. Definition of financial institutions 78
4.2. Licensing of financial institutions 78
4.3. Cancellation of licence 78
4.4. Provision of minimum capital 79
4.5. Restrictions for credit facilities 79
4.6. Qualification of managing director 80
4.7. Removal of chairman or director 80
4.8. Offences and punishments 80
Chapter-5: The Insurance Act, 2010 83

5.1. Definition of insurance 83
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5.2. Features of insurance 83

5.3. Classification of insurance 84
5.4. Insurance is not a gambling 85
5.5. Registration certificate of insurer 86
5.6. Renewal of registration certificate 87
5.7. Cancellation of registration certificate 87
5.8. Requirements as to capital and shareholdings 88
5.9. Provision relating to separate accounts 88
5.10. Restrictions on loan 88
5.11. Power and functions of insurance development and
regulatory authority 89
5.12. Duties of insurance development and regulatory
authority 89
Chapter-6: The Contract Act, 1872 98

6.1. Definition of contract 98
6.2. Essential elements of a contract 98
6.3. Classification of contract 101
6.4. Discharge of a contract 102
6.5. No consideration, no contract 103
6.6. Differences between void and voidable contract 105
6.7. Definition of offer 106
6.8. Conditions of valid offer 106
6.9. Revocation of offer 109
6.10. Methods of revocation of offer 109
6.11. Definition of acceptance 112
6.12. Essentials of a valid acceptance 112
6.13. Definition of agreement 113
6.14. All contracts are agreements but all agreements are
not contracts 113
6.15. Differences between agreement and contract 114
Chapter 7: The Negotiable Instruments Act, 1881 134

7.1. Definition of negotiable instrument 134
7.2. Characteristics of negotiable instrument 134
7.3. Dishonor of negotiable instrument 135
7.4. Notice of dishonor 136
7.5. To whom notice should be given 136
7.6. When notice of dishonor is unnecessary 137
7.7. Penalties in case of dishonor of cheque 137
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7.8. Discharge of negotiable instrument 137

7.9. Liabilities of parties to a negotiable instrument 138
7.10. Definition of holder 139
7.11. Rights of holder 139
7.12. Definition of holder in due course 140
7.13. Rights of holder in due course 141
7.14. Differences between holder and holder in due course 142
Chapter-8: The Partnership Act, 1932 156

8.1. Definition of partnership 156
8.2. Nature of partnership 156
8.3. Types of partners 157
8.4. Rights of partners 158
8.5. Duties of partners 159
8.6. Registration of partnership firm 159
8.7. Application for registration 160
8.8. Effect of non-registration 161
8.9. Retirement of partner 161
8.10. Dissolution of a firm 162
8.11. Penalty for false information 163
Chapter 9: The Bangladesh Labour Act, 2006 179

9.1. Definition of service 179
9.2. Definition of employment 179
9.3. Employment of women worker 179
9.4. Definition of maternity benefit 180
9.5. Rights of maternity benefit 180
9.6. Payment of maternity benefit 180
9.7. Amount of maternity benefit 181
9.8. Rules relating to health and hygiene at work 181
9.9. Rules relating to safety at work 182
9.10. Definition of worker 185
9.11. Classification of workerss 185
9.12. Provision related to service book 185
9.13. Working hours in an establishment 186
9.14. Leave in an establishment 187
9.15. Definition of wages 188
9.16. Responsibility for payment of wages 188
9.17. Payment of wages 189
9.18. Deductions from wages 189
13
9.19. Establishment of participation fund and welfare fund 189

9.20. Management of funds 190
9.21. Utilizatioin of participation fund 190
9.22. Provident fund for workers 190
14
CHAPTER - 1
THE COMPANIES ACT, 1994
1.1. DEFINITION OFCOMPANY
A company is a legal entity formed by the association and group of people to work
together towards achieving a common objective. It allows them to buy and sell
goods and services. Just like humans, companies can hire and fire workers.
Additionally, companies can borrow and lend money and own property.
A company has different definitions based on the country it is situated in.
The Companies Act, 1994 of Bangladesh defines "company" as a company formed

and registered under this act or an existing company. 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, and is in operation after commencement
of this act.
The Companies Act, 2013 of India stated that a company is a registered association
which is an artificial legal person, having an independent legal, entity with a
perpetual succession, a common seal for its signatures, a common capital comprised
of transferable shares and carrying limited liability.
In the UK, a company is a body corporate or an incorporated business organization

registered under the companies act. It can be a limited or an unlimited company,
private or a public company, company limited by guarantee or a company having a
share capital, or a community interest company.
According to the law in the USA, a company can be a ―corporation, partnership,

association, joint-stock company, trust, fund, or organized group of persons, whether
incorporated or not, and (in an official capacity) any receiver, trustee in bankruptcy,
or similar official, or liquidating agent, for any of the foregoing‖
A more precise, global and modern definition could be, a company is a business
entity which acts as an artificial legal person, formed by a legal person or a group of
legal persons to engage in or carry on a business or industrial enterprise.
1.2. TYPES OF COMPANY
Company forms of businesses have become immensely popular over the years.
Their development has led to the creation of so many new types of companies.
Companies are to be classified on the basis of members, liabilities, and control.
15
(a) On the basis of members:
(i) One person company: One person company is a new category of company
introduced to encourage startups and young entrepreneurs wherein a single person
can incorporate the entity. It also promotes the concept of corporatization of the
business. It should be noted that it is not the same as a sole proprietorship firm, in a
way that one person company has separate legal existence with limited liability.
(ii) Private company: A private company is one in which two or more persons get
the company registered under the Companies Act. The securities of such a company
are not listed on a recognised stock exchange, and they cannot invite the public to
subscribe for the shares/debentures. The members of a private company are
restricted from transferring the shares. The maximum number of members in a
private company is 50.
(iii) Public company: A company which is formed by a minimum number of seven

members with a lawful object is termed as a public company. Its securities are listed
on a recognized stock exchange, and its shares are freely transferable. Further, there
is no limit on the maximum number of members in such a company. The subsidiary
of the public company is also considered as a public company.
(b) On the basis of liabilities:
(i) Company limited by shares: Company limited by shares is one in

which memorandum of association of the company specifies that the liabilities of the
shareholders are limited to the amount unpaid on shares which they own. Hence, the
shareholders are liable only to the extent of the amount that is not paid on their
holdings.
(ii) Company limited by guarantee: A company in which the liability of members

is limited to a definite sum stated in the memorandum of association of the
company. Meaning that the liability of the members is confined by the memorandum
of association to a stipulated sum, as they have guaranteed to contribute to the
company‘s assets, in the event of winding up of the company.
(iii) Unlimited Company: An unlimited company is a company whose liability

does not have any limit. Hence, the company can use all personal assets of
shareholders to meet its debts while winding up. Their liabilities will extend to the
company‘s entire debt. In this type of company, the liability of the member ends
when he/she ceases to be a member of that company.
(c) On the basis of control:
(i) Holding Company: A parent company that owns and controls the management
and composition of the Board of Directors of another company (i.e. subsidiary
company) is termed as a holding company.
16
(ii) Subsidiary Company: A company whose more than 51% of its total share
capital is owned by another company, i.e. a holding company either itself or together
with its subsidiaries, as well as the holding company also governs the composition
of Board of Directors is called the subsidiary company.
(iii) Associate company: A company in which another company possess

a significant influence over the company, then the latter is called as an associate
company. This ―significant influence‖ amounts to ownership of at least 20% shares
of the associate company. The other company‘s control can exist in terms of the
associate company‘s business decisions under an agreement. Associate companies
can also exist under joint venture agreements.
(d) Special companies:
(i) Government company: The company whose at least 51% paid up share capital
is owned by the Government. Further, it also covers a company whose holding
company is a government company.
(ii) Foreign company: Any company registered outside the country that has a
business place in Bangladesh or by way of an agent traditionally or electronically
and undertakes business operations in the country in any manner.
(iii) Charitable company:

A company formed for charitable purposes is known as charitable company. They
encourage the promotion of arts, science, culture, religion, education, sports, trade,
commerce, etc. as their objectives. These companies are given special license by the
government. Further, they use the money earned as profit for the promotion of the
object and thus, dividend to members is not paid.
(iv) Public Financial Institution: The companies, which are engaged in financial
and investment business and whose 51% or more paid up share capital is held by the
government and are established under any act are termed as public financial
institutions.
Apart from the list given above, there are many other companies such as listed
company, unlisted company, dormant company and Nidhi company.
1.3. BENEFITS OF PRIVATE COMPANY OVER PUBLIC COMPANY
A private company is the most popular form of business entity in Bangladesh and
that is for a good reason. This reason lies in its benefits. Following discussion
throws light upon the benefits of a private company over a public company.
(a) A private company is simpler to form than a public company. It needs two
directors while a public company needs three.
17
(b) It can start business immediately after incorporation, no certificate to commence
is required but in a public company it is necessary to have a certificate to commence
business.
(c) Since a private company collects the requisite capital by private arrangement and
does not invite the general public to buy its shares by the issue of a prospectus, it
may allot shares without following the formalities of a public company.
(d) As no outsiders are its shareholders it is not required, unlike a public company,
to hold a statutory meeting.
(e) A private company, unlike a public company, may pay remuneration to directors
and managerial staff or appoint any one to an office of profit.
(f) It may grant loans to directors without the consent or approval of the central govt.
(g) A private company need not file a prospectus or a statement in lieu of prospec-
tus.
(h) Restrictions on the transfer of shares: In a private company there must be
regulations restricting the transfer of shares. In a public company there need not be
any. By restricting transfer a private company can prevent the membership of
persons considered undesirable.
(i) When a public company proposes to increase its subscribed capital by the issue of
new shares, it must be offered first to the existing shareholders unless the members
in a general meeting decide otherwise. This provision does not apply to private
company.
(j) A private company need not hold the statutory meeting or file the statutory report.
(k) The control and management is generally in the hands of the owners of capital
which is not so in a public company.
1.4. DIFFERENCES BETWEEN PRIVATE AND PUBLIC COMPANIES
Private companies and public companies both can be huge. It‘s just the way they
source funds are different. The private company takes the help of private investors
and the public company takes the help of general public. There are many differences
between private company and public company. Let‘s have a look at them one by
one:
Basis of Private company Public company

comparison
(a) Definition (a) According to the (a) According to the
Companies Act, 1994, Companies Act, 1994, ―public
"private company" means a company" means a company
company which by its articles incorporated under this act or
restricts the right to transfer under any law at any time in
its shares, if any; prohibits force before the
any invitation to the public to commencement of this act and
subscribe for its shares or which is not a private
debenture, if any. company.
(b) Defined in Section 2(1)(q) of the Section 2(1)(r) of the
Companies Act, 1994. Companies Act, 1994.
18
(c) Start of A private company can A public company cannot start
business commence its business its business until a certificate to
immediately after its commencement of business is
incorporation. issued to it.
(d) Members Maximum number of There is no restriction of
members in a private maximum number of members
company is restricted to fifty. in a public company.
(e) Number of A private company may have A public company must have at
directors 2 directors to manage the least 3 directors.
affairs of the company.
(f) Transfer of There is complete restriction There is no restriction on the
share on the transferability of the transferability of the shares of a
shares of a private company public company.
through its Articles of
Association.
(g) Issue of A private company is A public company is free to
prospectus prohibited from inviting the invite public for subscription
public for subscription of its i.e., a public company can
shares, i.e. a private company issue a prospectus.
cannot issue prospectus.
(h) Share A private company cannot A public company can issue
warrants issue Share Warrants against share warrants against its fully
its fully paid shares. paid up shares.
(i) Statutory A private company has no A public company must call its
meeting obligation to call the statutory statutory meeting and file
meeting of the member. statutory report with the
register of companies.
1.5. CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY
A private company can be converted into a public company. At first board of

directors make special resolution to convert public company from existing private
company. For converting public company needs to add few conditions, such as:
(a) At least seven shareholders and maximum shareholders limited by shares
(b) Must be seven entrepreneurs set up the company
(c) Have to circulate company prospectus or Statement in lieu of prospectus
(d) No restriction to transfer of Share or Debenture of the company
(e) Company can invite people to purchase company‘s Share & Debenture
(f) Have to arrange statutory meeting
(g) Company annual profit & loss A/C, Annual Return and others must be submitted
to register of joint stock company ( RJSC)
(h) Have to at least three Directors of the company
(i) End of the company name only add the word Limited
(j) After completing company registration needs permission to start business from
the register of Joint Stock Company and doing few activities for taking starting
business order. /RJSC
19
(k) To be signed of Memorandum of Association or Director‘s acceptance to submit
to the Register of RJSC
(l) If Managing Agent is appointed to be steeled salary on percentage of net profit,
without profit or minimum profit there will be given minimum salary.
1.6. CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY
A public company can be converted a privet company. At first board of directors

make special resolution to convert private company from existing public company.
If a company, having not more than fifty members at the time of conversion, may be
converted into a private one by passing special resolution altering its articles so as to
exclude therein provisions applicable to public company. If the company has
secured creditors, there written consent shall have to be obtained before passing a
resolution and the shares enlisted with the stock exchange shall have to be enlisted.
For converting private company needs to add few conditions, such as:
(a) At least two members and highest fifty members
(b) Minimum two entrepreneurs can setup private company
(c) No needs to circulate Prospectus or Statement in lieu of Prospectus
(d) To be restricted Share and Debenture transfer
(e) There have no right to invite people to receive Share and Debenture
(f) No needs to arrange statutory meeting
(g) Have to be two Directors into the company
(h) To add private at the company name
(i) To start business after completing company registration
(j) There is no restriction to appoint Director of the company
(k) There are no specific rules to fixed Managing Agent salary
1.7. BOOKS OF ACCOUNTS TO BE KEPT BY A COMPANY
(1) Every company shall keep proper books of account with respect to-
(a) all sums of money received and expended by the company and the matters in
respect of which the receipt and expenditure take place;
(b) all sales and purchases of goods by the company;
(c) the assets and liabilities of the company; and
(d) in the case of a company engaged in production, distribution, marketing,
transportation, processing, manufacturing, milling extraction and mining activities,
such particulars relating to utilisation of material, labour and other items of overhead
cost.
(2) The books of account shall be kept at the registered office of the company and
shall at all times be open to inspection by directors during business hours.
(3) The books of account of every company relating to a period of not less than
twelve years immediately preceeding the current year together with vouchers
relevant to any entry in such books of account shall be preserved in good order.
(4) If a company does not maintain proper books of account, the person responsible,
shall be punishable with imprisonment for a term which may extend to six months or
or with which may extend to five thousand taka or with both.
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1.8. COMPANY FORMATION DOCUMENTS
Company formation documents are the key pieces of documentation issued after the
successful registration of a new limited company. You must retain these important
documents, ideally at your registered office address, because you will need to refer
to them throughout the lifetime of your company. There are three company
formation documents in total: the certificate of incorporation, the memorandum of
association, and the articles of association.
Certificate of incorporation:
When a company is incorporated, it becomes a separate legal entity that is distinct
from its members (shareholders/guarantors). Certificate of incorporation shows basic
information about the company, including its registered name, date of incorporation,
and company registration number. This certificate proves that the company exists
and has been incorporated in accordance with the Companies Act, 1994. You will
need to refer to it on a number of occasions and provide a copy when setting up a
business bank account, applying for business loans or grants, and creating trade
accounts.
Articles of association:
All limited companies must have a set of articles of association, which is the
constitutional ‗rule book‘ on how the company should be run. Most companies use
‗model articles‘. This is the default version prescribed by the Companies Act, 1994.
It is possible, however, to amend the standard model articles to suit your company‘s
needs. Alternatively, you can create a unique set of articles.
If you use a company formation agent to set-up your limited company, you will
likely be given the choice of using ‗model articles‘, which the agent will supply, or
uploading your own custom articles to include with your application to register a
new company.
Memorandum of association:
The memorandum of association is created during the company registration process
and attached to the articles of association. Upon incorporation, the memorandum
becomes a historical document that records the names of the first members of the
company (the ‗subscribers‘). This document should be stored with the company‘s
records.
The memorandum confirms that the subscribers agree to form a company under the
Companies Act, 1994 and become members of that company by either taking at least
one share (if the company is limited by shares) or by ‗guaranteeing‘ at least a
nominal sum (if the company is limited by guarantee).
1.9. DEFINITION OF MEMORANDUM OF ASSOCIATION
Memorandum of Association (MoA) is the most important document of a company.

It states the objects for which the company is formed. It contains the rights,
21
privileges and powers of the company. It is treated as the constitution of the
company. It determines the relationship between the company and the outsiders.
According to the Companies Act 1994, "Memorandum" means the Memorandum of

Association of a company as originally framed or as altered in pursuance of the
provisions of this act.
This definition of act does not throw any light on the scope, use and importance of
the memorandum of association in a company. We shall, therefore, examine some
better definitions given by judges.
Lord Cairns in the leading case of Ashbury Railway Carriage Co. V. Riche observed
that ―The Memorandum of Association of a company is its charter and defines the
limitation of the powers of a company. The memorandum contains the fundamental
conditions upon which alone the company is allowed to be incorporated.‖
According to Lord Macmillan, ―The purpose of the memorandum is to enable the

shareholders, creditors and those who deal with the company, to know what is its
permitted range of enterprise.‖
According to Lord Salborne, ―The Memorandum of Association is an important and

unalterable (excluding a few conditions) charter. The company is incorporated only
for such objects which are given in the Memorandum.‖
Thus, a Memorandum of Association is a document which sets out the constitution

of the company. It clearly displays the company‘s relationship with outside world. It
also defines the scope of its activities. It enables the shareholders, creditors and
people who has dealing with the company in one form or another to know the range
of activities.
1.10. CONTENTS OF MEMORANDUM OF ASSOCIATION
According to the Companies Act 1994, the Memorandum of Association of a

company must contain certain information that are pointed below.
In the case of a company limited by shares, the memorandum shall state followings
as per section 6 of the act:
(a) the name of the company, with "limited" as the last word in its name;
(b) The address of the registered office;
(c) the objects of the company, and, except in the case of trading companies, the
territories to which they extend;
(d) that the liability of the members is limited;
(e) the amount of share capital with which the company proposes to be registered,
and the divisions thereof into shares of a fixed amount;
(f) each subscriber of the memorandum shall take at least one share and shall write
opposite to his name the number of shares he takes.
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In the case of a company limited by guarantee, the memorandum shall state
followings as per section 7 of the act:
(a) the name of the company, with "limited" as the last word in its name.
(b) the address of the registered office;
(c) the objects of the company, and, except in the case of trading companies, the
territories to which they extend;
(d) that the liability of the members is limited;
(e) that each member undertakes to contribute to the assets of the company in the
event of its being wound up while he is a member or within one year afterwards, for
payment of the debts and liabilities of the company contracted before he ceases to be
a member, ad of the charges and expenses of winding up, and for adjustment of the
right of the contributories among themselves, such amount as may be required, not
exceeding a specified amount;
(f) if the company has a share capital-
(i) the memorandum shall also state the amount of share capital with which the
company proposes to be registered and the division thereof into shares of a fixed
amount;
(ii) each subscriber of the memorandum shall take at least one share;
(iii) each subscriber shall write opposite to his name the number of shares he takes.
In the case of an unlimited company, the memorandum shall state followings as per
section 8 of the act:
(a) the name of the company;
(b) the address of the registered office of the company;
(c) the objects of the company and, except in the case of trading companies, the
territories to which they extend.
(d) if the company has a share capital-
(i) each subscriber of the memorandum shall take at least one share;
(ii) each subscriber shall write opposite to his name the number of shares he takes.
1.11. CHANGE OF MEMORANDUM OF ASSOCIATION
(1) Subject to the provisions of this Act, a company may, by special resolution, alter
the provisions of its memorandum with respect to the objects of the company, so far
as may be required to enable it-
(a) to carry on its business more economically or more efficiently; or
(b) to attain its main purpose by new or improved means; or
(c) to enlarge or change the local area of its operations; or
(d) to carry on some business which, under the existing circumstances may
conveniently or advantageously be combined with the business of the company; or
(e) to restrict or abandon any of the objects specified in the memorandum; or
(f) to sell or dispose of the whole or any part of the undertaking of the company; or
(g) to amalgamate with any other company or body of persons.
(2) The alteration shall not take effect until and except in so far it is confirmed by
the Court on petition.
(3) Before confirming the alteration, the Court must be satisfied-
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(a) that sufficient notice has been given to every holder of debentures of the
company, and to any person or class of person whose interest will, in the option of
the Court, be affected by the alteration; and
(b) that, with respect to every creditor who in the opinion of the Court is entitled to
object, and who signifies his objections in manner directed by the Court, either his
consent to the alteration has been obtained or his debt or claim has been discharged
or has been determined, or has been secured to the satisfaction of the Court;
Provided that the Court may, in the cases of any person or class, for special reasons,
dispense with the notice required by this section.
1.12. DEFINITION OF ARTICLES OF ASSOCIATION
The Articles of Association (AoA) is the legal document that along with the
memorandum of association serves as the constitution of the company. It is
concerned with the internal management of the company and aims at carrying out
the objectives as mentioned in the memorandum. It defines the company‘s purpose
and lay out the guidelines of how the task is to be carried out within the
organization. It covers the information related to the board of directors, general
meetings, voting rights, board proceedings, etc.
The Companies Act 1994 of Bangladesh states that "articles" means the articles of
association of a company including, so far as they apply to the company, the
regulations contained in Schedule I to this act. Provided that the article of
association of a company framed under any law relating to companies at any time in
force before the commencement of this Act shall, so far as they are not inconsistent
with the provisions of this Act, be deemed to be the articles of association of that
company framed in accordance with the provisions of the act.
As per Companies Act 2013 of India, articles means the Articles of Association of a
company originally framed or altered or applied in pursuance of any previous
company law or of this Act. In the U.S. and Canada, articles of association are often
referred to as "articles" for short.
The contents of articles of association should not contradict with the Companies Act
and the Memorandum of Association. If the document contains anything contrary to
the Companies Act or the Memorandum of Association, it will be inoperative. The
private concern that are limited by shares and those limited by guarantee and
unlimited companies must have their articles of association. Public companies may
not have their articles but may adopt articles.
1.13. CONTENTS OF ARTICLES OF ASSOCIATION
While the preparation of the articles of association, the utmost caution should be
exercised. Certain provisions of the Company Act 1994 are also applicable to the
company at the same time ―notwithstanding anything to the contrary in the
discussion‖. So, the discussion must contain the provisions in respect of all matters
24
which are required to be contained therein so that the workings of the company
couldn‘t be hampered later.
(i) Adoption of preliminary contracts: A statement adopting all preliminary
contracts.
(ii) Number and value of the shares: What is the total number of shares and what is
the value of shares needs to be mentioned.
(iii) Issues of preference share: The number of preference shares issued need to be
mentioned.
(iv) Allotment of shares: How many shares have been allotted to whom and what are
its values should be mentioned in the articles.
(v) Calls on shares: How much money is to be called on shares is to be mentioned.
(vi) Lien on shares i.e., if the member is unable to fulfill his debt to the company,
who will retain the possession of shares.
(vii) Transfer and transmission of shares: The provisions related to the transfer of
shares need to be mentioned in the articles.
(viii) Nominations: All nominations need to be mentioned.
(ix) Forfeiture of shares: How can a company forfeit its shareholders.
(x) Alteration of capital: The provisions related to the alteration of shares must be
mentioned in an article of association.
(xi) Buyback: How can a company buy back its shares from existing shareholders.
(xii) Share certificate: The provisions regarding the share certificate is required to be
mentioned in the articles.
(xiii) Dematerialisation: The process by which securities are converted into
electronic format.
(xiv) Conversion of shares into stock: Procedure to be adopted for the conversion of
shares into stock should be mentioned.
(xv) Voting rights and proxies: All the voting rights and proxies need to be
mentioned.
(xvi) Meeting and rules regarding committees.
(xvii) Directors: their appointment and delegation of power.
(xviii) Nominee directors: Who can be appointed as a director to the board of a
company in order to represent the interests of his appoint or on that board.
(xix) Issue of debentures and stocks: How can the debentures and stocks be issued.
(xx) Audit Committee: All the provisions regarding the audit committee along with
its functions and powers must be prescribed in the articles.
(xxi) Managing director, Whole-time director, Manager and Secretary.
(xxii) Additional directors: Who can be the additional directors.
(xxiii) Seal: what will be the official seal of the company.
(xxiv) Remuneration of directors: The amount of remuneration to be provided to the
directors.
(xxv) General meetings: When will the general meeting to be held.
(xxvi) Director‘s meetings: When will the director‘s meetings will be held.
(xxvii) Borrowing powers: Every company should have borrowing power and the
provision regarding the borrowing power must be mentioned in the articles.
(xxviii) Dividends and reserves: The amount of dividends to be distributed and
reserves to be kept.
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(xxix) Accounts and audit: When will be an audit of the accounts will be done.
(xxx) Winding up: The provisions related to the winding up of the company is
required to be mentioned in the articles. in this procedure is required to be followed
during the winding up.
(xxxi) Provisions regarding common seal: Contains all the provisions regarding
common seal.
(xxxii) Capitalisation of reserves: The amount of reserve that needs to be capitalized.
1.14. CHANGE OF ARTICLES OF ASSOCIATION
(a) Take the necessary decision by convening a Board Meeting to change all or any
of the existing Articles of Association and fix up the day, time, place and agenda for
a general meeting for passing special resolution to effect the change.
(b) Issue notices for the general meeting proposing the special resolution and
explaining the reasons of the changes being proposed.
(c) If the shares of the company are enlisted with any recognised Stock Exchange,
then forward copies of all notices sent to the shareholders with respect to change in
the Articles of Association to the Stock Exchange.
(d) Hold the General Meeting and pass the special resolution.
(e) File with the stock exchange with which your company is enlisted six copies of
such amendments as soon as the company adopts it in General Meeting. Out of the
six copies, one copy must be a certified true copy.
(f) Forward promptly to the Stock Exchange with which your company is enlisted
three copies of the notice and a copy of the proceedings of the General Meeting.
(g) File the Special resolution with the concerned Registrar of companies with
explanatory statement in Form No.23 within thirty days of its passing after payment
of the requisite filing fee. If the Articles of Association have been completely or
substantially changed, file a new printed copy of the Articles after paying the
requisite fee.
1.15. DISTINCTION BETWEEN MEMORANDUM AND ARTICLES OF

ASSOCIATION
When someone found a company two important documents Memorandum of

Association and Articles of Association are always there. The fundamental points of
distinction between these are as follows:
Basis for Memorandum of Association Articles of Association

comparison
(a) Definition It is a document that specifies It is a document that defines
all the fundamental data which the rules and regulation
is required to incorporate a which is required to govern
company. the company.
(b) Defined in Section 2(1)(n) of the Section 2(1)(a) of the
Companies Act 1994. Companies Act 1994.
(c) Registration It is registered during the time Not mandatory to register.
of incorporation.
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(d) Alteration Alteration of memorandum is Articles can be altered by
quite difficult and in many passing a special resolution
cases approval of certain by the members.
statutory authority is required.
(e) Position It is the main document of the It is a subordinate document
company and is subordinate to and is subordinate to both the
the Companies Act. memorandum of association
and the Companies Act.
(f) Contents A memorandum must contain The articles can be drafted as
six clauses. per the choice of the
company.
(g) Filing Every company has to file a It is not compulsory for a
memorandum of association. public limited company to
file articles of association.
(h) Objective The objective and power of the The articles are the means to
company is specified into the attain the objectives and
memorandum. power.
(i) Relation It prescribes the relationship of It prescribes the relationship
the company with outsiders. of the members with the
company.
(j) Validity Acts beyond the memorandum Acts which are beyond
are invalid and cannot be articles can be ratified by the
ratified even by a unanimous members, provided that they
vote of the members. do not violate the
memorandum.
1.16. MODE OF WINDING UP OF A COMPANY
The modes of winding up may be discussed under the following three heads,
namely:- (a) Compulsory winding up by the court, (b) Voluntary winding up
without the intervention of the court, and (c) Voluntary winding up with the
intervention of the court i.e., under the supervision of the court.
(a) Compulsory winding up by the court:

Winding up of a Company by an order of the court is called the compulsory winding
up. The Companies Act, 1994 lays down the circumstances under which a company
may be compulsorily wound up.
(i) If the company has by special resolution, resolved that the company may be
wound up by the court.
(ii) If default is made in delivering the statutory report to the Registrar or in holding
the statutory meeting.
(iii) If the company does not commence its business within a year from its
incorporation or suspends it for a whole year.
(iv) If the number of members is reduced, in the case of a public company below
seven, and in the case of a private company below two.
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(v) If the company is unable to pay its debts.
(vi) If the court is of the opinion that it is just and equitable that the company should
be wound up.
(b) Voluntary winding up:

A voluntary winding up occurs without the intervention of the court. Here the
company and its creditors mutually settle their affairs without going to the court.
This mode of winding up takes place on:
(i) The expiry of the prefixed duration of the company, or the occurrence of event
whereby the company is to be dissolved, and adoption by the company in general
meeting of an ordinary resolution to wind up voluntarily; or
(ii) The passing of a special resolution by the company to wind up voluntarily.
(c) Winding up subject to supervision of the court:

Windings up with the intervention of the court are ordered where the voluntary
winding up has already commenced. As a matter of fact, it is the voluntary winding
up but under the supervision of the court. A court may approve a resolution passed
by the company for voluntary winding up but the winding up should continue under
the supervision of the court.
The court will issue such an order only under the following circumstances:
(i) If the resolution for winding up was obtained by fraud by the company; or
(ii) If the rules pertaining to winding up are not being properly adhered to; or
(iii) If the liquidator is found to be prejudicial or is negligent in releasing the assets
of the company.
The court may exercise the same powers as it has in the case of compulsory winding
up under the order of the court.
1.17. PROCESS OF WINDING UP OF A COMPANY
The following steps are followed in the case of a company winding up −

(a) An administrator, usually denoted as a liquidator, is appointed in the context of
liquefaction or winding up of a company.
(b) The liquidator takes control over the company, assembles its assets, pays debts of
the company and finally distributes any surplus amongst the members according to
their rights and liabilities.
(c) The company has no assets or liabilities at the end of liquefaction or winding up.
(d) The dissolution of a company takes place when the assets and liabilities of a
company are completely wound up.
(e) On the context of winding up, the name of the company is stuck off from the list
of companies and its identity as a separate legal person is lost.
(f) If a company is unable to pay its debts or the debts taken by the company is
worth more than the assets it owns and no agreements have been made with the
creditors, then the company is considered insolvent and is subjected to compulsory
liquidation or compulsory winding up.
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(g) If an insolvent owes money to a natural person, he may ask the court of law to
make a compulsory winding up order against the company.
(h) On the issuance of the order, the order is informed by the court to the official
receiver, who eventually becomes the liquidator.
(i) The official receiver informs the creditors and conducts interviews with the
directors of the company on the context of the winding up.
(j) If it is believed by the official receiver that the company has enough assets to pay
its creditors, then the official receiver will seek for the appointment of an insolvency
practitioner as the liquidator.
(k) The appointment of the liquidator is done either by calling a creditors‘ meeting
for the creditors to elect a liquidator by vote or by requesting the Secretary of the
State to appoint one.
(l) If there are no assets left, then the official receiver will become the liquidator.
(m) Other business corporations or individuals can request the order of winding up
of a company.
(n) Insolvency service, an agent of the government, is an investigating agency,
which investigates the winding up of a company.
(o) The Insolvency Service investigates financial failure and misconduct of
individuals and companies.
(p) The official receiver works for the Insolvency Service.
(q) The official receiver finds out when and why an individual became bankrupt and
finds out the primary cause behind the liquidation of a company.
(r) The procedure of winding up differs according to the registration status of the
company, i.e., if the company is registered or if it is an unregistered company.
(s) If the winding up of a company is processed in the court of law, the liquidator is
termed as official liquidator.
(t) The official liquidator acts through a recognized reporting system under the
supervision of the court.
1.18. DEFINITION OF OFFICIAL LIQUIDATOR
The official liquidator shall be described by the style of the official liquidator of the
particular company in respect of which he is appointed, and not by his individual
name. He manages the entire liquidation process. He is appointed when a company
goes into liquidation or is wound up by the court in a compulsory liquidation
process, which is brought about by a disgruntled creditor.
1.19. APPOINTMENT OF OFFICIAL LIQUIDATOR
(1) For the purpose of conducting the proceedings in winding up a company and
performing such duties in reference thereto as the Court may impose, the Court may
appoint a person or persons, other than the official receiver, to be called an official
liquidator or official liquidators.
(2) The Court may make such an appointment provisionally at any time after the
presentation of a petition and before the making of an order for winding up, but
29
shall, before making any such appointment, give notice to the company unless for
reasons to be recorded it thinks fit to dispense with such notice.
(3) If more persons than one are appointed to the office of official liquidator, the
Court shall declare whether any act, by this Act required or authorised, to be done by
the official liquidator is to be done by all or any one or more of such persons.
(4) The Court may determine whether any and what security is to be given by any
official liquidator on his appointment.
(5) The acts of an official liquidator shall be valid notwithstanding any defect that
may afterwards be discovered in his appointment.
Provided that nothing in this sub-section shall be deemed to give validity to acts
done by an official liquidator after his appointment has been show to be invalid.
(6) A receiver shall not be appointment of assets in the hands of an official
liquidator.
1.20. POWERS OF OFFICIAL LIQUIDATOR
The official liquidator shall have power with the sanction of the Court, to do the
following things-
(a) to institute or defend any suit or prosecution, or other leagl proceeding, civil or
criminal, in the name and on behalf of the company;
(b) to carry on the he business of the company so far as may be necessary, for the
beneficial winding up of the same,
(c) to sell the immovable and movable property of the company by public auction on
private contract, with power to transfer the whole thereof to any person or
organisation or company, or to sell the same in parecis.
(d) to do all acts and to execute, in the name and on behalf of the company, all
deeds, receipts, and other documents, and for that purpose to use, when necessary
the company's common seal;
(e) to prove, rank and claim in the insolvency of any contributory, for any balance a
against his estate, and to receive dividends in the insolvency, in respect of that
balance, as a separate debt due from the insolvent, and rateably with the other
separate creditors;
(f) to draw, accept, make and endorse any bill of exchange, hundi or promissory note
in the name and on behalf of the company, with the same effect with respect to the
liability of the company as if the bill, hundi or note had been drawn, accepted, made
or endorsed by or on behalf of the company in the course of its business;
(g) to raise on the security of the assets of the company any more requisite;
(h) to take out in his official name letters of administration relating to the estate of
any deceased contributory or his estate which cannot be conveniently done in the
name of the company, and in all such cases the money due shall, for the purpose of
enabling the liquidator to take out the letters of administration or recover the money
be deemed to be due to the liquidator or himself;
Provided that nothing in clause (h) shall be deemed to affect the rights, duties and
privileges of the Administrator General appointed under the Administrator General's
Act, 1913 (III of 1913);
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(i) to do all such other things as may be necessary for winding up the affairs of the
company and distributing its assets.
1.21. DEFINITION OF SHARE
A share represents a unit of equity ownership in a company. Share capital refers to

all of the shares of an enterprise. The denominated value of a share is its face value,
and the total of the face value of issued shares represent the capital of a company,
which may not reflect the market value of those shares. The owner of shares in the
company is a shareholder (or stockholder) of the corporation. In simple words, if
you are a shareholder of a company, you hold a percentage of ownership of the
issuing company in proportion to the shares you have bought.
1.22. TYPES OF SHARE
Shares can be widely divided into two categories namely, equity shares and
preference shares. They vary based on their profitability, voting rights and treatment
in the event of liquidation.
(1) Equity shares:

These are also known as ordinary shares and comprise the bulk of the shares being
issued by a particular company. Equity shares are transferable and are traded
actively by investors in stock markets. As an equity shareholder, you are not only
entitled to voting rights on company issues but also have the right to receive
dividends. Here are the different types of shares in this category:
(a) Based on share capital:
(i) Authorised share capital: Every company, in its Memorandum of Associations,

requires to prescribe the maximum amount of capital that can be raised by issuing
equity shares. The limit, however, can be increased by paying additional fees and
after the completion of certain legal procedures.
(ii) Issued share capital: This implies the specified portion of the company‘s
capital, which has been offered to investors through the issuance of equity shares.
For example, if the nominal value of one stock is Tk.200 and the company issues
20,000 equity shares, the issued share capital will be Tk.40 lakh.
(ii) Subscribed share capital: The portion of the issued capital, which has been
subscribed by investors is known as subscribed share capital.
(iii) Paid-up capital: The amount of money paid by investors for holding the
company‘s stocks is known as paid-up capital. As investors pay the entire amount at
once, subscribed and paid-up capital refer to the same amount.
31
(b) Based on definition:
(i) Bonus shares: Bonus share definition implies those additional stocks which are
issued to existing shareholders free-of-cost, or as a bonus.
(ii) Rights shares: Right shares meaning is that a company can provide new shares
to its existing shareholders - at a particular price and within a specific period - before
being offered for trading in stock markets.
(iii) Sweat equity shares: If as an employee of the company, you have made a
significant contribution, the company can reward you by issuing sweat equity shares.
(iv) Voting and non-voting shares: Although the majority of shares carry voting
rights, the company can make an exception and issue differential or zero voting
rights to shareholders.
(c) Based on returns:
(i) Dividend shares: A company can choose to pay dividends in the form of issuing
new shares, on a pro-rata basis.
(ii) Growth shares: These types of shares are associated with companies that have
extraordinary growth rates. While such companies might not provide dividends, the
value of their stocks increases rapidly, thereby providing capital gains to investors.
(iii) Value shares: These types of shares are traded in stock markets at prices lower
than their intrinsic value. Investors can expect the prices to appreciate over some
time, thus providing them with a better share price.
(2) Preference shares:

Preferential shareholders receive preference in receiving profits of a company as
compared to ordinary shareholders. Also, in the event of liquidation of a particular
company, the preferential shareholders are paid-off before ordinary shareholders.
Here are the different types of shares in this category:
(a) Cumulative and non-cumulative shares: In the case of cumulative preference

shares, if a particular company doesn‘t declare an annual dividend, the benefit is
carried forward to the next financial year. Non-cumulative preference shares don't
provide for receiving outstanding dividends benefits.
(b) Participating and non-participating shares: Participating preference shares

allow shareholders to receive surplus profits, after payment of dividends by the
company. This is over and above the receipt of dividends. Non-participating
preference shares carry no such benefits, apart from the regular receipt of dividends.
32
(c) Convertible and non-convertible shares: Convertible preference shares can be
converted into equity shares, after meeting the requisite stipulations by the
company‘s Article of Association (AoA), while non-convertible preference shares
carry no such benefits.
(d) Redeemable and irredeemable share: A company can repurchase or claim

redeemable preference share at a fixed price and time. These types of shares are sans
any maturity date. Irredeemable preference shares, on the other hand, have no such
conditions.
1.23. ISSUE OF SHARE WARRANTS TO BEARER
(1) A company limited by shares if so authorised by its articles may with respect to
any fully paid-up shares or to stock issue under its common seal a warrant stating
that the bearer of the warrant is entitled to the shares on stock therein specified and
may provide by coupons or otherwise for the payment of the future dividends on the
shares or stock included in the warrant in this Act termed as share-warrant.
(2) Nothing in this section shall apply to a private company.
1.24. TRANSFER OF SHARES
(1) An application for the registration of the transfer of shares in a company may be
made either by the transferer or the transfere, provided where such application is
made by the transferer no registration shall in case of party paid shares be effected
unless the company gives motive of the application to the transferee and subject to
the provisions of sub-section (7) the company shall, unless objection is made by the
transferee two weeks from the date of receipt of the notice, enter in its register of
members the name of the transferee in the same manner and subject to the same
conditions as if the application for registration was made by the transferee.
(2) For the purpose of sub-section (1), notice to the transferee shall be deemed to
have been duly given if despatched by prepaid post to the transferee at the address
given in the instrument of transfer and shall be deemed to ave been delivered in the
ordinary course of post.
(3) It shall not be lawful for the company to register a transfer of share in or
debentures of the company unless the proper instrument of transfer duly stamped
and executed by the transferor and the transferee has been delivered to the company
along with script.
(4) If a company refuses to register the transfer of any shares or debentures the
company, shall, within one month from the date on which the instrument of transfer
was lodged with the company, send to the transferee and the transferor notice of the
refusal.
(5) If default is made in complying with sub-section (4) of this section, the company
shall be liable to a fine not exceeding one hundred taka for everyday during which
the default continues and every director, manager secretary other officer who is
knowing by a party to the default shall, be liable to a like penalty.
33
(6) Nothing in sub-section (3) shall prejudice any power of the company to register
as shareholder or debenture holder any person to whom the right to any shares in or
debentures of the company has been transmitted by operation of law.
(7) Nothing in this section shall prejudice any power of the company under its
articles to refuse to register the transfer of any shares.
1.25. REDUCTION OF SHARE CAPITAL
(1) Subject to confirmation by the Court, a company limited by shares, if so

authorised by its articles, may by special resolution reduce its share capital in any
way, and in particular the company may, as part of this general power-
(a) extinguish or reduce the liability on any of its shares in respect of share capital
not paid-up;
(b) either with or without extinguishing or reducing liability on any of its shares,
cancel any paid-up share capital which is lost or presented by available assets;
(c) either with or without extinguishing or reducing liability on any of its shares, pay
off any paid-up share capital which is in excess of the wants of the company;
(d) so far as is necessary, alter its memorandum by reducing the amount of its share
capital and of its shares accordingly.
(2) A special resolution under this section is in this Act called a resolution or
reducing share capital.
1.26. MEANING OF ANNUAL GENERAL MEETING
Every company shall in each year of the Grogorian calendar hold in addition to any
other meetings a general meeting as its annual general meeting and shall specify the
meeting as such in the notices calling it; and not more than fifteen months shall
elapse between the date of one annual general meeting of a company and that of the
next:
Provided that a company may hold its first annual general meeting within a period of
not more than eighteen months from the date of its incorporation; and if such general
meeting is held within that period, it shall not be necessary for the company to hold
any annual general meeting in the year of its incorporation.
1.27. PROCEEDINGS OF ANNUAL GENERAL MEETING
Proceedings of conducting an Annual General Meeting as per section 81 of the

Companies Act, 1994:
(1) Every company shall in each year of the Grogorian calendar hold in addition to
any other meetings a general meeting as its annual general meeting and shall specify
the meeting as such in the notices calling it; and not more than fifteen months shall
elapse between the date of one annual general meeting of a company and that of the
next:
Provided that a company may hold its first annual general meeting within a period of
not more than eighteen months from the date of its incorporation; and if such general
34
meeting is held within that period, it shall not be necessary for the company to hold
any annual general meeting in the year of its incorporation or in the following year;
Provided further that the Registrar may, on an application made by a company
within thirty days from the date of expiry of the period specified for holding the
annual general meeting as aforesaid, extend the time within which any annual
general meeting, not being the first annual general meeting shall be held, by a period
not exceeding ninety days or not exceeding the 31st December of the calendar year
in relation to which the annual general meeting is required to be held, whichever is
earlier.
(2) If a company defaults in complying with the provisions of sub-section (1), the
Court may, on the application of any member of the company, call or direct the
calling of a general meeting of the company and give such ancillary or consequential
direction as the Court thinks expedient in relation to the calling holding and
conducting of the meeting.
1.28. PENALTY FOR DEFAULT IN HOLDING ANNUAL GENERAL

MEETING
Section 82 of the Companies Act 1994 states that, if default is made in holding a
meeting of the company in accordance with sub-section (1) of section 81, or in
complying with any directions of the Court under sub-section (2) thereof, the
company and every officer of the company who is in default, shall be punishable
with fine which may extend to ten thousand taka and in case of a continuing default,
with a further fine which may extend to two hundred fifty taka for every day after
the first day during which such default continues.
1.29. APPOINTMENT OF DIRECTORS
As per section 91 of the Companies Act 1994:

(1) Notwithstanding anything contained in the articles of a company—
(a) the subscribers of the memorandum shall be deemed to be the directors of the
company until the first director are appointed.
(b) the directors of the company shall be elected by the members from among their
number in general meeting; and
(c) any casual vacancy occurring among the directors may be filled in by the other
directors but the person appointed shall be a person qualified to be elected a director
under clause (b) and shall be subject to retirement at the same time as if he had
become a director on the day on which the director in whose place he is appointed
was last appointed a director.
(2) Notwithstanding anything contained in the articles of a company other than a
private company not less than one third of the whole number of directors shall be
persons whose period of office is liable to determination at any time by retirement of
directors rotation.
35
1.30. DUTIES OF DIRECTORS
Board of Directors acts as agent of the company. However while acting for
company, director needs to take care of his duties which are as follows:-
(a) Deciding the company‘s future goals and priorities.
(b) Communicating with the stakeholders to inform them of the company‘s growth
and ensuring their input plays a part in the company‘s future.
(c) Checking the external market conditions to ensure that the company is headed in
the right direction.
(d) Monitoring the performance of employees and encouraging them to achieve their
targets is one of the primary duties of directors.
(e) Setting the budget for the company‘s operations and keeping tabs on the profit
and loss margin.
(f) Reporting back to the stakeholders at the Annual General Meeting (AGM).
(g) Establishing rules and regulations and forming policies that everyone in the
company would follow.
(h) Making sure the organisation has a good system of governance and that there is
no gap in communication.
(i) Doing effective risk management assessment.
1.31. QUALIFICATION OF DIRECTOR
(1) Without prejudice tot he restrictions imposed by section 92, it shall be the duty
of 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.
(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).
1.32. DISQUALIFICATIONS OF DIRECTORS
(1) A person shall not be capable of being appointed director of a company, if -

(a) he has been found to be of unsound mind by a competent court and the finding is
in force; or
(b) he is an undischarged insolvent; or
(c) he has applied to be adjudicated as an insolvent and his application is pending; or
(d) he has not paid any call in repect of shares of the company held by him, whether
alone or jointly with others, and six months have elapsed from the last day fixed for
the payment of the call; or
(e) he is a minor.
(2) A company may in its articles provide additional grounds for disqualification of
a director.
36
1.33. REMOVAL OF DIRECTORS
(1) The company may be extraordinary resolution remove any share-holder director
before the expiration of his period of office and may by ordinary resolution appoint
another person in his stead and the person so appointed shall be subject to retirement
at the same time as if he had become a director on the day on which the director in
whose place he is appointed was last elected director.
(2) A director so removed shall not be re-appointed a director by the Board of
Directors.
1.34. APPOINTMENT OF AUDITORS
(1) Every company shall, at each annual general meeting appoint an auditor or
auditors to hold office from the conclusion of that meeting until the next annual
general meeting and shall within seven days of the appointment, give intimation
thereof to every auditor so appointed.
(2) Every auditor appointed shall, within thirty days of the receipt from the company
of the intimation of his appointment, inform the Registrar in writing that he has
accepted, or refused to accept, the appointment.
(3) At any annual general meeting a retiring auditor, by whatsoever authority
appointed, shall be reappointed, unless-
(a) he is not qualified for re-appointment; or
(b) he has given the company notice in writings of his unwillingness to be re-
appointed; or
(c) a resolution has been passed at that meeting appointing somebody else instead of
him or providing expressly that he shall not be re-appointed.
(4) if an appointment of an auditor is not made at an annual general meeting, the
Government may appoint a person to fill the vacancy.
(5) The first auditor or auditors of a company shall be appointed by the Board of
Directors within one months of the date of Registration of the company, and the
auditor or auditors so appointed shall hold office until the conclusion of the first
annual general meeting.
1.35. REMOVAL OF AUDITORS
The members of a company may remove an auditor from office at any time during
his or her term of office or decide not to re-appoint him or her for a further term.
They must give the company 28 days' notice of their intention to put a resolution to
remove the auditor, or to appoint somebody else, to a general meeting. A copy of the
notice of the intended resolution must be sent to the auditor, who then has the right
to make a written response and require that it be sent to the company's shareholders.
If an auditor ceases for any reason to hold office, he or she must deposit a statement
at the company's registered office. The statement should set out any circumstances
connected with his ceasing to hold office that he or she considers should be brought
to the attention of the members and creditors of the company.
37
If there are any such circumstances, the company must send a copy of the statement
to all the shareholders unless a successful application is made to the court to stop
this.
1.36. QUALIFICATION AND DISQUALIFICATION OF AUDITORS
(1) No persons shall be appointed an auditor of any company unless he is a

"chartered accountant" within the meaning of the Bangladesh Chartered Accountants
Order, 1973:
Provided that a firm whereof all the partners practising in Bangladesh are qualified
for appointment as aforesaid may be appointed by its firm name to be auditor of
company in which case any of the auditors so practising may act in the name of the
firms.
(2) None of the following persons shall be qualified for appointment as auditor of a
company namely-
(a) an officer or employee of the company;
(b) a person who is partner, or who is in the employment of an officer or employee
of the company;
(c) a person who is indebted to the company for an amount exceeding one thousand
taka, or who had given any guarantee or provided any security in connection with
the indebtedness of any third person to the company for an amount exceeding one
thousand taka:
(d) a person who is director or member of a partner company, or a partner of a firm,
which is the managing agent of the company;
(e) a person who is a director, or the holder of shares exceeding five percent in
nominal value of the subscribed capital, of any body corporate which is the
managing agent of the company.
38
CMA QUESTIONS AND ANSWERS
Q-1. A meeting was called upon by the requisition of members of ABC public
Ltd. company on 1st December 2022 at 10:00 AM. But till 10:30 AM only two
members were present. Describe what will be the consequence of the said
meeting. Specify your decision if the meeting is called by otherwise.
CMA Adapted – May 2023

Answer.
The section 85(2)(b) of the Companies Act 1994 states that ―in the case of a public
limited company, five members personally present shall be a quorum.‖ If the
quorum is not present within half an hour of the timeset for a meeting to begin, then
the meeting will be adjourned, and it shall be held on the same day and at the same
time next week, or any other date and time as the Board may determine. If the
meeting is adjourned then the date, time and place of the meeting will be notified
personally or via advertisement.
Q-2. The date of latest AGM of ABC Ltd., a listed company of DSE is fixed on
28 November, 2022. XYZ, Chartered Accountants is the current auditor of the
Company. In the AGM dated 28 November, 2022 the current auditor XYZ,
Chartered Accountants is replaced by new auditor DEF, Chartered
Accountants. Write down the minutes of the said AGM regarding the
appointment of new auditor.
Answer.
ABC Limited
6, Motijheel C/A, Dhaka
Date: November 6, 2022
Minutes of the Annual General Meeting
All concerned of the company are hereby notified that the 5th Annual General
Meeting of ABC Limited is going to be held on 28 November 2022 at 10.00 am in
the head office of the company.
You are specially requested to remain present in that meeting in time.
By order of the Board

M
Company Secretary
Agenda:
- Reading out and approval of the director‘s report
- Declaration of dividend
39
- Replacement of current auditor
- Deciding about the date and time of the next meeting
Q-3. Describe who shall sign the Balance Sheet, Profit & Loss Account as per
provision of the „Companies Act, 1994‟.
Answer.
Every balance sheet, and every profit and loss account or income and expenditure
account shall be signed on behalf of the Board of Directors-
(i) in the case of banking company, by the manager, or managing agent, if nay, and,
where there are more than three directors of the company, by at least three of those
directors or, where there are not more than three directors, by all the directors;
(ii) in the case of any other company, by its managing agent, manager or secretary, if
any, and by not less than two directors of the company one of whom shall be the
managing director where there is one.
Q-4. What are the privileges that a private limited company can enjoy than that
of a public limited company under Companies Act, 1994?
CMA Adapted – January 2023

Answer.
Both private and public limited companies are regulated by the provisions of the
Companies Act, 1994. However certain provisions of the Act do not apply to a
private company. These are the privileges which a Private Limited Company can
enjoy than that of a Public Limited Company are summarized below:
(a) The minimum number of members in a private company can be two only as
against seven in a public company.
(b) Provisions regarding minimum subscription before allotment of shares do not
apply to a private company.
(c) A private company need not file a prospectus or a statement in lieu of prospectus
with the Registrar
(d) Further shares can be issued without passing special resolution obtaining Central
Government‘s approval and need not be offered other existing members
(e) Private companies may issue share capital of such kinds in such forms and with
such voting rights as it may think fit. However, its paid up capital shall not be less
than rupees one lac.
(f) Private company can commence business immediately on incorporation.
(g) Private company need not keep an index of members.
(h) Private company need not hold statutory meeting or file statutory report.
(i) Provisions as to overall maximum managerial remuneration and remuneration to
directors do not apply to a private company.
(j) Minimum number of directors is only two in a private company.
(k) Provisions as to proportion of directors liable to retire by rotation do not apply to
a private company.
40
(l) Restrictions on appointment of directors as regards their consent and holding
qualification shares do not apply to a private company.
Q-5. Why quorum is needed in the meeting?

Answer.
Without a quorum, the decisions made by a small number of members may not
reflect the views of the entire group, leading to illegitimate and unfair outcomes. A
quorum also serves to prevent abuse of power by a minority of members who may
try to dominate the decision making process. Therefore, a quorum is vital for the
functioning of democratic processes and ensuring fair and equitable outcomes.
Q-6. According to SEC guideline what are the qualifications to be an

independent director?
Answer.
A person who is a non-executive director and who does not have any pecuniary
relationship with the company, its promoters, senior management or affiliate
companies, is not related to promoters or the senior management, and/or has not
been an executive with the company in the three preceding financial years can be an
independent director.
It also says that an independent director should not have been a partner or executive
director of the auditors/lawyers/consultants of the company in preceding three years
or should not hold 1% or more of shares of the company. Further, he should not be a
supplier, service provider or customer of the company.
Q-7. Define a company? Describe the characteristics of a company?

Answer.
Definition of a company:
A company is a legal entity formed by the association and group of people to work
together towards achieving a common objective. It allows them to buy and sell
goods and services. Just like humans, companies can hire and fire workers.
Additionally, companies can borrow and lend money and own property.
The Companies Act, 1994 of Bangladesh defines "company" as a company formed

and registered under this act or an existing company. 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, and is in operation after commencement
of this act.
41
Characteristics of a company:
(a) Legal person: It is created by law. It is considered as a person in the eyes of law.
(b) Artificial person: It has no body and mind of its own. It can act only through
other persons elected for the purpose.
(c) Continued existence: A company has a life of its own distinct from the life of its
members. So the death of a member will not affect the life of the company.
(d) Limited liability: The liability of the members are limited to the extent of the
face value of the shares held by them.
(e) Freely transferable: Shares of a company are freely transferred except in case
of a private company.
(f) Can buy and sell assets: A company at its own discretion can buy or sell any
asset.
(g) Can sue and be sued: A company like any other person can sue a third party
and be sued.
(h) Separation of ownership and management: A company is managed through a
board of directors elected by its members. A member has no right to participate in
the management of its day-to-day affairs.
(i) Common seal: Every company should have a common seal of its own. It is
similar to the signature of a natural person.
(j) Dissolution: The company can be dissolved only by which creates it.
Q-8. What is meant by the term capital in connection with company

information?
Answer.
Capital refers to the financial resources that company can use to fund its operations
like cash, machinery, equipment and other resources. These are the assets that allow
the company to produce a product or service to sell to customers. This is a vital
source of financing across all types of businesses because companies need these
resources in order to operate. Companies raise capital by issuing stocks and bonds to
investors who purchase these financial instruments with cash or other assets.
Q-9. Discuss the provision of statutory meeting which is must for a new
company.
Answer.
Statutory meeting is the first meeting of the shareholders of a public limited

company. It is not required for a private limited company. Every public company
limited by shares and guarantee shall within a period of not less than 30 days and not
more than 180 days from the date at which the company is entitled to commence its
business, must hold such meeting. This is held only once during the life time of the
company.
42
If default is made in holding such a meeting, the directors or the defaulting officer
may be fined up to Tk.5,000. The court may even wind up the company if default is
made in filing the statutory report to the registrar or in holding such meeting.
Q-10. What are the information that must be included in Memorandum of

Association?
Answer.
The Memorandum of Association must include the following information:
(a) Name clause: The name of the proposed company is mentioned in this clause.
The name of a company must end the word ‗Limited‘ in the case of a public
company and the words ‗Private Limited‘ in the case of a private company. The
name should not be identical with the name of any existing company. The name
should not create an impression that the company is carrying on the business of
some other existing company. The name should not be misleading.
(b) Registered office clause: The name of the ‗State‘ in which the registered office
of the company is to be situated is mentioned in this clause. This clause determines
the jurisdiction of the Registrar of Companies and the court. This clause also
ascertains the nationality of the company. The full address of the registered office
must be communicated to the Registrar of Companies for future communication.
(c) Object clause: This clause states the object with which the company is proposed
to be established. A company is not legally entitled to do any business other than
that specified in its clause. The object clause should include:
(i) Main objects to be pursued after incorporation;
(ii) Incidental objects ancillary to the attainment of the main objects;
(iii) Other objects not included in (i) and (ii) above.
(d) Liability clause: This clause states the nature of liability of the members of the
company:
(i) In case of a company limited by shares, members‘ liability is limited to the face
value of the shares.
(ii) In case of a company limited by guarantee, the liability clause must state the
extent of liability of each individual member in the event of its being wound up.
(iii) In case of an unlimited company, the liability clause does not appear in the
memorandum of association.
(e) Capital clause: This clause states the total capital of the proposed company. The
amount of capital as stated in the memorandum is known as the authorized capital of
the company. A company cannot collect funds exceeding the authorized capital.
43
The division of capital into equity share capital and preference share capital should
also be mentioned. The number of shares in each category and their value should be
given in the memorandum.
Q-11. What are the differences between Prospectus and Statement in lieu of
prospectus?
CMA Adapted – December 2017
Answer.
Differences between prospectus and statement in lieu of prospectus:
Prospectus Statement in lieu of prospectus

(a) Prospectus is an invitation, notice
(a) When promoters of a public limited
or advertisement to the public to company procure their capital from
subscribe the share capital or private arrangement, a statement in lieu
debenture of a company. of prospectus is issued.
(b) Prospectus is issued for offering (b) A statement in lieu of prospectus is
sale of shares or debentures. issued in the absence of prospectus.
(c) Any public limited company can (c) When minimum subscription is not
publish prospectus. collected, the public limited company
prepares a statement in lieu of
prospectus.
(d) It can invite public for (d) It cannot invite public for purchase
subscription or purchase of any share of any share or debenture.
or debenture.
Q-12. Describe in detail of appointment of directors and their power and duties.

Answer.
Appointment of directors:
As per section 91 of the Companies Act 1994, notwithstanding anything contained
in the articles of a company-
(a) the subscribers of the memorandum shall be deemed to be the directors of the
company until the first director are appointed.
(b) the directors of the company shall be elected by the members from among their
number in general meeting; and
(c) any casual vacancy occurring among the directors may be filled in by the other
directors.
Power of directors:
(a) Power to make calls in respect of money unpaid on shares;
(b) Call meetings on suo moto basis;
(c) Issue shares, debentures, or any other instruments in respect of the Company;
(d) Borrow and invest funds for the Company;
44
(e) Approve Financial Statements and Board Report;
(f) Approve bonus to employees;
(g) Declare dividend in the Company;
(h) Power to grant loans or give guarantee in respect of loans;
(i) Authorize buy back of securities;
(j) Approve Amalgamation/Merger/Takeover;
(k) Diversify the business of the Company.
Duties of directors:
(a) Deciding the company‘s future goals and priorities;
(b) Communicating with the stakeholders to inform them of the company‘s growth
and ensuring their input plays a part in the company‘s future;
(c) Checking the external market conditions to ensure that the company is headed in
the right direction;
(d) Monitoring the performance of employees and encouraging them to achieve their
targets is one of the primary duties of directors;
(e) Setting the budget for the company‘s operations and keeping tabs on the profit
and loss margin;
(f) Reporting back to the stakeholders at the Annual General Meeting (AGM);
(g) Establishing rules and regulations and forming policies that everyone in the
company would follow;
(h) Making sure the organisation has a good system of governance and that there is
no gap in communication;
(i) Doing effective risk management assessment.
Q-13. What are the duties and responsibilities of an Issue Manager?

Answer.
The duties and responsibilities of an Issue Manager

(a) An issue manager acts as an indispensable pilot facilitating a public/ rights issue.
(b) An issue manager essentially acts a financial architect, by providing advice
relating to capital structuring, capital gearing and financial planning for the
company.
(c) An issue manager allows for underwriting the issues of securities made by
corporate enterprises.
(d) As issue managers often act as the market makers for the issues lead managed by
a company.
(e) The issue manager is required to co-ordinate with a large number of institutions
and agencies while managing an issue in order to make it successful.
Q-14. As per provision of the Companies Act, 1994 every company shall keep
which books of accounts?
Answer.
45
Every company shall keep proper books of account with respect to-
(a) all sums of money received and expended by the company and the matters in
respect of which the receipt and expenditure take place;
(b) all sales and purchases of goods by the company;
(c) the assets and liabilities of the company; and
(d) in the case of a company engaged in production, distribution, marketing,
transportation, processing, manufacturing, milling extraction and mining activities,
such particulars relating to utilisation of material, labour and other items of overhead
cost.
Q-15. Who not be a Director of the Company?

Answer.
A person shall not be capable of being appointed as director of a company, if –

(a) he has been found to be of unsound mind by a competent court and the finding is
in force; or
(b) he is an undischarged insolvent; or
(c) he has applied to be adjudicated as an insolvent and his application is pending; or
(d) he has not paid any call in repect of shares of the company held by him, whether
alone or jointly with others, and six months have elapsed from the last day fixed for
the payment of the call; or
(e) he is a minor.
Q-16. What do you mean by independent director?

Answer.
An independent director is a person other than an executive officer or employee of

the company.
An independent director is a director who either does not hold any share in the
company or holds less than one percent share of total paid-up shares of the company
and he is not a sponsor of the company and he is not connected with the company‘s
any sponsor or director or shareholders who holds one percent or more shares of the
total paid-up shares of the company. His family members also should not hold above
mentioned shares in the company.
Q-17. Define companies limited by guarantee.

Answer.
46
Limited by guarantee companies are most often formed by non-profit organisations
such as sports clubs, workers' co-operatives and membership organisations, whose
owners wish to have the benefit of limited financial liability.
A company limited by guarantee does not have any shares or shareholders (like the
more common limited by shares structure) but is owned by guarantors who agree to
pay a set amount of money towards company debts.
Furthermore, there will generally be no profits distributed to the guarantors as they

will instead be re-invested to help promote the non-profit objectives of the company.
If any profits are distributed to the owners, then the company will forfeit its right to
apply for a charitable status.
Q-18. What are the differences between Memorandum and Articles of

Association? Which is more important to the company and why? Can a public
limited company operates without Articles of Association? Explain with reason.
CMA Adapted – June 2020

Answer.
Differences between Memorandum and Articles of Association:
Memorandum of Association Articles of Association

(a) Memorandum of Association is a (a) Articles of Association is a
document that contains all the document containing all the rules and
fundamental information which is regulations that governs the company.
required for the incorporation of the
company.
(b) It is subordinate to the Companies (b) It is subordinate to the
Act. memorandum.
(c) A memorandum must contain six (c) The articles can be drafted as per
clauses. the choice of the company.
(d) It defines the relation between (d) It regulates the relationship
company and outsider. between company and its members.
(e) The memorandum of association of (e) The articles of association can be
the company cannot be amended amended retrospectively.
retrospectively.
(f) Acts done beyond the scope is void. (f) Acts done beyond the scope can be
ratified by shareholders.
Important document to the company:

The most important document in the constitution of a company is the Memorandum
of Association of the company. The Articles of Association is the second most
important document that needs to be registered by any company for its
incorporation, registration and subsequent operation. It is a public document laying
47
down the rules for the internal management of the company and it does not have the
force of ‗law‘.
Operation of public limited company without Articles of Association:

Articles of Association of the company contain rules and regulations for the general
management of the company. All registered companies must have articles of
association. The Articles are subordinate to the Memorandum of Association.
Therefore, the Articles should not contain any regulation, which is contrary to
provisions of the Memorandum or the Companies Act. The Articles are binding on
the members in relation to the company as well as on the company in its relation to
members. Articles of Association may be changed by the shareholders passing a
special resolution in a general meeting. Any such change must be notified to the
Companies Registry.
Q-19. What is the legal effect of Memorandum of Association?

Answer.
The legal effect of Memorandum of Association:

(a) It is the foundation of a business. It shows the capacity to contract of a company.
(b) It is constitution of a company which relates with the outside world. No company
is allowed to temper with its contents without the sanction of central government or
court of law.
(c) Any act of the company outside the scope of activities as laid down in the
memorandum is said to be ultra-vires and non binding on it.
(d) Every member shall be bound to comply with the provisions contained in the
memorandum. In case of non-compliance, the company may sue a member.
Q-20. State what statement is written in bold type on face of a prospectus in red
color in Bangla language?
Answer.
A red herring prospectus is a document submitted by a company (issuer) as part of

a public offering of securities (either stocks or bonds). A red herring prospectus is
issued to potential investors, but does not have complete particulars on the price of
the securities offered and quantum of securities to be issued. The front page of the
prospectus displays a bold red disclaimer stating that information in the prospectus
is not complete and may be changed, and that the securities may not be sold until the
registration statement, filed with the market regulator, is effective. Potential
investors may not place buy orders for the security, based solely on the information
contained within the preliminary prospectus. Those investors may, however, express
an "indication of interest" in the offering, provided that they have received a copy of
the red herring at least 48 hours prior to the public sale. After the registration
statement becomes effective, and the stock is offered to the public, indications of
48
interest may be converted to purchase orders, at the buyer's discretion. The final
prospectus must then be promptly delivered to the buyer.
Q-21. How a company is different from its members and the individuals
composing it?
Answer.
A company is a legal entity that is separate and distinct from its members,
shareholders and the individuals composing it. When a company is formed, it is said
to have become ―incorporated‖. A company is capable of owning property, making
contracts, employing people and being sued or of suing. Under the eye of the law,
anything that is capable of rights and duties is a person and thus has a personality.
Persons can be of two types under the eye of law (i) natural persons and (ii) artificial
persons. Natural persons are human beings and artificial persons are those created
for the purpose of laws known as corporations or companies. As soon as a company
is registered under the company act, it attains the status of a person which can buy,
lend money, file and defend suit, sell goods and hold property.
Q-22. What is meant by the term capital in connection with company

information?
Answer.
Capital refers to the financial resources that businesses can use to fund their
operations like cash, machinery, equipment and other resources. These are the assets
that allow the business to produce a product or service to sell to customers. This is a
vital source of financing across all types of businesses because companies need
these resources in order to operate. Businesses raise capital by
issuing stocks and bonds to investors who purchase these financial instruments with
cash or other assets.
Q-23. What are the main contents of memorandum of company limited by

shares?
Answer.
According to the Companies Act, 1994 the following matters should be stated in
memorandum of association:
(a) The name of the company with the word ‗Limited‘ at the end of the name in case
of public company and private company must be contained.
(b) The place where the registered office of the company is situated.
(c) To state that the liability is limited.
(d) The total amount of share capital with which the company proposes to register.
(e) The members desire to form a company and agree to take shares must be stated
against their names.
49
Q-24. What are the procedures of removal of directors and CEO as Companies
Act, 1994?
Answer.
Removal of directors:
Power to remove directors has always been bestowed on shareholders, as we all
know that at the end of the day, directors are answerable to shareholders. As per
Companies Act, 1994 shareholders can remove a director from the company before
the expiry of his tenure, except appointment by government. As per Companies Act,
removing a director is possible; however the director can challenge the removal.
This will create a lot of legal problems.
Removal of CEO:
The government has the power for removal of a CEO and board is responsible for
evaluating his/her performance. The government has the discretion to remove a CEO
but it is subject to judicial review.
Q-25. Write down the name of the rule according to which information are
disclosed in the prospectus. What is road show?

Answer.
According to the Companies Act, 1994, following information are disclosed in a

prospectus:
(a) Name and address of the company and issuing date of the prospectus
(b) The main objects of the company with the name, occupation and address of the
directors and signatories to the memorandum and number of shares subscribed by
them and their remuneration.
(c) The numbers and classes of shares and debentures and the interest of the
shareholders in the profit and property of the company
(d) Dividend policy and expected dividend to be declared by the company
(e) Name and address of auditors and their reports
(f) Voting power and obligations of shareholders
(g) Name and address of vendors
(h) The underwriting commission
(i) Amount of preliminary expenses
Road show:
A road show is a presentation given by an issuer of securities to potential buyers.
The management of a company or its underwriters issuing securities or doing an
initial public offering (IPO) travels around the country to give presentations to
analysts, fund managers, and potential investors. The road show is intended to
generate excitement and interest in the issue or IPO, and is often critical to the
success of the offering.
50
Q-26. How can one become a member of a company?

Answer.
There are two basic ways in which a person may become a member of a company,
namely: by subscribing to the memorandum of the company or by agreeing to
become a member and therefore the entry of his name in the company's register of
members. A person may become a member of a company in either one of the
following ways:
(a) Subscribing to the memorandum. Section twenty eight, sub-section one

provides that the subscribers to the company's memorandum shall be deemed to
have agreed to become members of the company, and on registration of the
memorandum shall have their names entered in the company's register of members.
The provision regarding entry in the register is an administrative directive for the
company's implementation and non-compliance which does not affect the pre-
existing membership.
(b) Allotment. A person to whom a company's shares have been allotted acquires
his membership by virtue of sub-section two of section twenty eight, being a person
who has agreed to become a member. However, it was held in Nicol's case that the
membership commences from the moment the name is entered in the member's
register. If the company wrongfully refuses to enter the name in the register, the
allotted must take rectification proceedings for a court order directing the company
to enter the name in its member's register.
(c) Transfer. A transfer is a purchase of shares from a company's shareholder, and

not from the company itself. A transferee, also acquires his membership by virtue of
sub-section two of section twenty eight, being a person who has agreed to become a
member. The principle in Nicol's case applies to transferees as well. A transferee
becomes a member from the moment his name is entered in the register of members.
(d) Transmission on death of a member. A transmission is a legal process by

which ownership of shares in a company changes automatically on the death of a
member to his personal representative. This is acknowledged in article twenty nine
which provides that "Incase of the death of a member, the personal representatives
of the deceased where he or she was a sole holder shall be the only persons
recognized by the law as having any title to his or her interest in the shares. If the
personal representative elects or decides to be registered himself as the holder of the
shares, the election constitutes the agreement to be a member. Similarly, he will
become a member from the moment his name is entered in the register of members.
(e) Transmission on bankruptcy of a member. A bankrupt member's shares in a

company will be transmitted to his trustee in bankruptcy according to the principles
of bankruptcy law. The company's articles may give the trustee an option of being
51
personally registered as a member, as is provided for in article thirty. If the trustee
elects or decides to be registered as the holder of the shares, the election constitutes
the agreement to be a member. Therefore, the provisions of sub-section two of
section twenty eight become applicable - the trustee in bankruptcy will become a
member from the moment his name is entered in the register of members.
(f) Compliance with section 182, sub-section 2. A person who has consented to be
a director, and has given the statutory undertaking to take and pay for his qualified
shares, is declared by section one hundred and eighty two, sub-section two to be, "In
the same position as if he had signed the memorandum." The provisions of section
twenty eight, sub-section one apply to him, and he becomes a member of the
company at the moment the memorandum of association is registered.
(g) Estoppel. A person who, without having agreed to be a company's member, is

aware that his name is wrongly entered in its register of members but takes no steps
to have his name removed therefore may be estoppel from denying his apparent
membership to somebody who relied on it and extended credit to the company.
Q-27. What are the acts that members can do by special resolution?

Answer.
The Companies Act defines a number of transactions which require a special

resolution to be passed, including the following:
(a) To change the company name
(b) To amend the company‘s articles of association
(c) A reduction in the company‘s share capital
(d) Disapplication of shareholder pre-emption rights
(e) Certain cases where the company purchases its own shares
(f) Changing the company‘s status by registration, for example:
- From an unlimited company to a limited company (or vice versa)
- A private company to a public company (or vice versa)
(g) Winding up of the company voluntarily (or by the court)
Q-28. What reports are to be included in prospectus as per provision of the

section 135 of the Companies Act, 1994?
Answer.
Following reports are to be included in prospectus as per provision of the section

135 of the Companies Act, 1994:
(a) Reports by the auditors of the company with respect to its profit and losses and
assets and liabilities and such other matters as may be prescribed.
52
(b) Reports relating to profits and losses for each of the five financial years
immediately preceding the financial year of the issue of prospectus including such
reports of its subsidiaries and in such manner as may be prescribed.
(c) Reports made in the prescribed manner by the auditors upon the profits and
losses of the business of the company for each of the five financial years
immediately preceding issue and assets and liabilities of its business on the last date
to which the accounts of the business were made up, being a date not more than one
hundred and eighty days before the issue of prospectus.
(d) Reports about the business or transaction to which the proceeds of the securities
are to be applied directly or indirectly.
Q-29. How a Public Limited Company is converted in to a Private Limited

Company?
Answer.
A public limited company can choose to convert itself into a private limited
company. In such a case, it should pass a special resolution to alter its
Articles suitably to incorporate the provisions of a private company. In other words,
the Articles should be modified so as to include provisions relating to:
(a) Limiting the maximum number of members to 50,
(b) Restricting the right to transfer shares, and
(c) Prohibiting invitation to the public for subscription of shares or debentures.
Within 3 months of passing the special resolution to alter its articles, the company
should seek the permission of the Central Government.
Once the government gives approval, the company must file a copy of the altered
articles with the Registrar of Companies. The Registrar shall issue the required
certificate of incorporation duly changing its name by adding the word ‗Private‘.
Q-30. In the context of the formation of companies explain the articles of

association paying particular regard to how these can be altered?

Answer.
Articles of association:
The Articles of Association is a document that contains the purpose of the company
as well as the duties and responsibilities of its members defined and recorded
clearly. It is an important document which needs to be filed with the Registrar of
Companies.
53
Alteration procedure of the articles of association:
(a) Take the necessary decision by convening a Board Meeting to change all or any
of the existing Articles of Association and fix up the day, time, place and agenda for
a general meeting for passing special resolution to effect the change.
(b) Issue notices for the general meeting proposing the special resolution and
explaining the reasons of the changes being proposed.
(c) If the shares of the company are enlisted with any recognised Stock Exchange,
then forward copies of all notices sent to the shareholders with respect to change in
the Articles of Association to the Stock Exchange.
(d) Hold the General Meeting and pass the special resolution.
(e) File with the stock exchange with which your company is enlisted six copies of
such amendments as soon as the company adopts it in General Meeting. Out of the
six copies, one copy must be a certified true copy.
(f) Forward promptly to the Stock Exchange with which your company is enlisted
three copies of the notice and a copy of the proceedings of the General Meeting.
(g) File the Special resolution with the concerned Registrar of companies with
explanatory statement in Form No.23 within thirty days of its passing after payment
of the requisite filing fee. If the Articles of Association have been completely or
substantially changed, file a new printed copy of the Articles after paying the
requisite fee.
Q-31. Explain and distinguish between companies limited by guarantee and

companies limited by shares.
Answer.
Distinction between companies limited by guarantee and companies limited by

shares:
(a) A company limited by guarantee does not usually have a share capital or
shareholders, but instead has members who act as guarantors. The guarantors give
an undertaking to contribute a nominal amount in the event of the winding up of
the company. A company limited by shares means that the liability of the
shareholders to creditors of the company is limited to the capital originally invested,
i.e. the nominal value of the shares and any premium paid in return for the issue of
the shares by the company.
(b) Companies limited by guarantee are non-profit making while companies limited
by shares are profit making.
54
(c) Companies limited by guarantee have members and not shareholders whereas in
case of companies limited by shares, there are shareholders.
(d) There is no share capital in case of companies limited by guarantee and it also
has self-imposed restrictions while companies limited by shares can engage in legal
trade and have general clauses.
(e) Companies limited by guarantee are only suitable for ‗not for profit‘ or charitable
types of company. The most common type of company is a private company limited
by shares, commonly referred to as a 'Limited company'.
Q-32. What do you mean by „proximate cause‟ of loss? Where the peril insured
against is not the last cause of loss, but a preceding cause, how is the actual
cause of loss to be determined? Discuss.
Answer.
Proximate cause of loss:
Proximate cause of loss is the cause having the most significant impact in bringing
about the loss under a first-party property insurance policy, when two or more
independent perils operate at the same time (i.e., concurrently) to produce a loss.
Determination of the actual cause of loss:
(a) “But for” test:

Some states follow the ―but for‖ rule to determine if an event is the proximate cause.
This rule considers whether the injury would not have happened but for the
defendant‘s negligent action or omission. When there is a finding that an injury
would not have happened but for a defendant‘s action, it establishes the element of
proximate cause.
(b) “Substantial factor” test:

Other states use the ―substantial factor‖ test in connection with proximate cause.
Under this rule, the court will consider whether the defendant‘s actions or omissions
were a substantial factor in causing the injury.
Q-33. What are the agenda of Annual General Meeting?

Answer.
The agenda of annual general meeting:

(a) Reading out the notice by the secretary
(b) Drawing attention of the members as to whether the report of directors will be
read out or not
(c) Approval of the directors‘ report
55
(d) Reading out the auditors‘ report
(e) Declaration of dividend
(f) Filling up the vacant post of director
(g) Increasing the tenure of auditor
(h) President‘s speech and closing the meeting.
Q-34. What are the powers of auditors as per provision of the Companies Act,
1994?
Answer.
The powers of auditors as per provision of the Companies Act, 1994:
(a) Access to books:

Every auditor of a company has a right of access at all times to the books of
accounts and vouchers of the company. This power is exercisable whether books,
etc. are kept at the registered office of the company or elsewhere.
(b) Requiring information:

He has the power to require from the directors and officers such information and
explanation as he may consider necessary for the performance of his duties.
(c) Right to attend meeting:

He is entitled to receive notice of and attend any general meeting of the company at
which any accounts which have been examined or reported on by him are to be laid
down by the company.
(d) Right to make statement:

He is entitled to make any such statement or explanation which he desires in respect
of the accounts.
The whole book carries 231 pages

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CORPORATE & BUSINESS LAWS

According to the following syllabus

No part of this publication may be reproduced, stored, transmitted in any form or by

Edition : October 2023

Published By : Nobbodoy Publication

Copyright : All rights reserved by the Author

Online Support : www.facebook.com/groups/nobbodoy

Price : BDT 430.00 Only

√ স঳এভএ ফযাচেয ঳কর স঱ক্ষাথথী আইস঳এভএসফ প্রসতষ্ঠাচনয;

ক্লাস নিবেি লেখক ল াোঃ সাজ্জাদ ল াবসি, নসএ এ ১৮০০ পাশ

Chapter Title Page No.

Part A – Corporate Laws

1. The Companies Act, 1994 14

2. The Financial Reporting Act, 2015 56

3. The Banking Companies Act, 1991 66

4. The Financial Institutions Act, 1993 78

5. The Insurance Act, 2010 83

Part B – Business Laws

6. The Contract Act, 1872 98

7. The Negotiable Instruments Act, 1881 134

8. The Partnership Act, 1932 156

9. The Bangladesh Labour Act, 2006 179

√ স঳এভএ ফযাচেয ঳কর স঱ক্ষাথথী আইস঳এভএসফ প্রসতষ্ঠাচনয;

ক্লাস নিবেি লেখক ল াোঃ সাজ্জাদ ল াবসি, নসএ এ ১৮০০ পাশ

Bhai Bhai Photostat and Computer

Contact to collect by courier,

Get original book only from the above addresses.

√ আয়কয সযটানথ প্রস্তুতকযণ;

এ঳ ক঴াচ঳ন এন্ড ককািং

Any criticism, favorable or unfavorable, and any constructive suggestion in regards

Date: October 2023 Md. Sajjad Hossain

Chapter Title and Contents Page No.

Chapter-1: The Companies Act, 1994 14

1.35. Removal of auditors 36

Chapter-2: The Financial Reporting Act, 2015 56

Chapter 3: The Banking Companies Act, 1991 66

Chapter-4: The Financial Institutions Act, 1993 78

Chapter-5: The Insurance Act, 2010 83

5.2. Features of insurance 83

Chapter-6: The Contract Act, 1872 98

Chapter 7: The Negotiable Instruments Act, 1881 134

7.8. Discharge of negotiable instrument 137

Chapter-8: The Partnership Act, 1932 156

Chapter 9: The Bangladesh Labour Act, 2006 179

9.19. Establishment of participation fund and welfare fund 189

1.1. DEFINITION OFCOMPANY

A company has different definitions based on the country it is situated in.

The Companies Act, 1994 of Bangladesh defines "company" as a company formed

In the UK, a company is a body corporate or an incorporated business organization

According to the law in the USA, a company can be a ―corporation, partnership,

1.2. TYPES OF COMPANY

(iii) Public company: A company which is formed by a minimum number of seven

(b) On the basis of liabilities:

(i) Company limited by shares: Company limited by shares is one in

(ii) Company limited by guarantee: A company in which the liability of members

(iii) Unlimited Company: An unlimited company is a company whose liability

(c) On the basis of control:

(iii) Associate company: A company in which another company possess

(d) Special companies:

(iii) Charitable company:

1.3. BENEFITS OF PRIVATE COMPANY OVER PUBLIC COMPANY

1.4. DIFFERENCES BETWEEN PRIVATE AND PUBLIC COMPANIES

Basis of Private company Public company

1.5. CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY