Institute of Chartered Accountants of Bangladesh(ICAB)

Business Law-Certificate Level

Overview of Companies Act, 1994

 Prospectus

A prospectus may be defined as any documents, notice, circulars, advertisement or

an invitation to purchase shares or debentures of a company. Prospectus has the
following characteristics:

 It is a document described or issued as a prospectus;

 It includes any notice, circulars or advertisement;
 It is an invitation to the public;
 The public is invited to subscribe the share or debenture of a company;
 Contents of Prospectus
According to Part-I of Schedule-III of the Companies Act 1994 following items to be
included in the prospectus:
• The names, addresses, descriptions and occupations of the signatories to MOA & no. of
shares subscribed for them.
• Total number and classes of shares.
• The number of redeemable preference shares intended to be issued.
• The number of shares fixed by the articles as the qualification share of director.
• Particular regarding directors, managing agents, manager, secretaries and treasures etc.
• Remuneration of the directors
• The minimum amount of subscription and amount payable on application.
• Time of opening of subscription list.
• Preliminary expenses incurred.
• Particulars regarding purchase of property.
• Details of any premium or under-writing commissions paid.
• Particulars of reserves including reserve capital.
Continue….
• Nature and extent of interest of every director and promoter.
• Names and addresses of the auditors of the company.
• The nature and extent of restrictions upon members at company meetings.
• Restrictions upon powers of the directors.
• Voting rights, capitalization of reserves and surplus of revaluation.
 Registration of prospectus
Before publication for invitation to subscribe share or debenture a copy of
prospectus must be delivered to register for registration on or before the date
of publication and it should be-
-signed by director or proposed director
-contained all list of documents

The register shall not register the prospectus unless it contains all elements
of prospectus.
 Penalty for untrue statement in prospectus

As per section 146 of Co. Act.1994 when any prospectus included any untrue
statement every person who in authorized the issue of prospectus shall be
punishable with 02(two) years imprisonment or fine not exceeding Tk. 5000 or
both until it is prove that it was immaterial or true.
 Documents used in incorporation of companies

The papers and documents to be submitted to the Registrar along with the
Memorandum of Association and Articles of Association are as follows:
In case of private Company-
i. Declaration of Compliance (Form-1)
ii. Notice of situation of Registered Office (Form-Vl)
iii. Particulars of Directors, Manager and Managing Agents (Form-XII)
iv. Consent of Directors to act (Form-IX)
v. Lists of persons consenting to be Directors (Form-X)
 Commencement of business

A public company who is issuing a prospectus, cannot commence its business until
the Registrar issues a certificate known as the "Certificate of Commencement of
Business". This certificate is issued after the following formalities have been
complied with:

i. The minimum subscription has been raised.

ii. Every director has paid the money payable for allotment for shares for him.
iii. A declaration by a director or the secretary has been filed with the Registrar.

However, a public company not issuing a prospectus, will get the commencement
certificate if the following conditions are fulfilled:
iv. A statement in lieu of prospectus has been filed with the Registrar.
v. The directors have paid the money due from them on account of shares.
vi. A declaration by a director or the secretary has been filed with the registrar
stating that condition has been satisfied.
 Capital maintenance
The capital of a company means the amount of money which it is authorized by its
memorandum to raise generally by the issue of shares. It is also called share capital.
In company law, the word capital is used to mean the following:

Nominal or authorized share capital: The authorized capital of a company is the

maximum amount of share capital that the company is authorized by its MOA to issue.
Issued share capital: which is actually offered to the public for sale.
Subscribed share capital: which is taken up and accepted by the public.
Paid up capital: Paid up capital is the amount of money actually paid by the
subscribers or credited as so paid.
Reserve capital: By a special resolution a company may declare that capital shall not
be
capable of being called up except when the company is wound up.
 Shares

The shareholders are the owner of a company. Therefore, a share may be defined
as an interest in the company entitling the owner of a proportionate part of the
profits, if any, and of a proportionate part of assets of the company upon
liquidation.

Classification of shares:
The share capital of a company is generally dived into the following classes of
shares:

Ordinary Shares: a normal equity ownership in a company;

Preference Shares: No voting rights, receive dividend before all other shares and
repaid liabilities first if the company goes into liquidation
Redeemable Shares: Redeemed at the option of the issuer and/or the shareholder.
Founder Shares: Share issued to the originators.
 Share Vs Stock
Subject Share Stock
Meaning The capital of a company, is divided The conversion of the fully paid up
into small units, which are shares of a member into a single fund
commonly known as shares. is known as stock.

Paid up value Shares can be partly or fully paid up. Stock can only be fully paid up.

Definite A share have a definite number A stock does not have such number..
number known as distinctive number.

Fractional Not possible. Possible

transfer

Nominal value Yes No

Denomination Equal amounts Unequal amounts