Corporate Laws and Practice

Summary of Corporate Laws and Practice
Application Level
Prepared By: Amitav Deb Nath Articled Student ACNABIN
Amitav Deb Nath Cell # 01675833732
Companies Act, 1994

1. What do you understand by certificate of incorporation of a company? What are the principal documents to be filed for the purpose of incorporation of a company? [Nov-Dec10]
The certificate issued by the registrar after a company is registered is called the Certificate of incorporation. Section 25 of the Act states that the Certificate about the following matters: 1. All the requirements of the Act have been complied with respect of registration and matters precedent and incident thereto; 2. The association is a company authorized to be registered and duly registered under the Act; and 3. The legal existence of the company begins from the date of issue of the certificate. To obtain a certificate of incorporation the following documents need to submit: 1. Memorandum of association signed by each subscriber and dated. 2. The signature must be witnessed by a third party. 3. Articles of association signed, dated and witnessed as same subscribers. 4. A statutory declaration that all the legal formalities have been complied. 5. Notice of situation of registered office. 6. Particulars of directors, managing agent and Manager 7. A list of persons who have consented to become directors. 8. A written consent of the directors to act as such. 9. Thereafter, the proper stamp duty for registration has to be paid and the register shall enter the name of the company on the register of the companies and issue a certificate of incorporation. 2. What conditions are to be fulfilled before a company commences business? [Nov-Dec10]
A public company, having a share capital and issuing a prospectus, cannot commence 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 on application and an allotment for the shares taken up by him. iii. No money is repayable for failure to obtain stock exchange recognition for the shares, where such recognition was promised. iv. A duly verified declaration by a director or the secretary has been filed with the Registrar that the above requirements have been complied with. However, a public company having share capital but not issuing a prospectus will get the commencement certificate if the following conditions are fulfilled: i. A statement in lieu of prospectus has been filed with the Registrar. ii. The directors have paid the money due from them on account of shares. iii. A declaration by a director or the secretary has been filed with the registrar stating that condition (b) has been satisfied.
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3.
How far contracts entered into by a company before the commencement of business are binding on the company? [Nov-Dec10]
A company cannot be bound by a contract which was made on its behalf by any Person (including a promoter) before the company itself had been formed. At the time when the contract is made, the company is non-existent, it cannot after its formation ratify a contract to which it could not have been a party when the contract was made [Kenner v Baxter (1866)]. In Kenner's case goods had been ordered for the company's business before the company was formed. But the company is not bound by a contract merely because it later performs it, e. g. by accepting the goods or services. The company will, of course be liable if it makes a fresh contract after the company is formed; but there must be clear evidence that it intended to do so. ln the circumstances, the simplest and safest course for a promoter is to bring the negotiations to the point of agreement but to postpone any binding contract until the company is formed and can enter into the contract for itself. However, if it is essential to some formula of assignment or notation to be made after incorporation and when it does so, or if it does not do so within a specified time, he is then to be released. 4. Discuss the power to alter the Articles of Association of a company. Mention the restrictions/ limitations, if any, on the nature and extent of the alterations that can be made. [Nov-Dec10]
Subject to the provisions of this Act and to the conditions contained in its memorandum, a company may by special resolution alter, exclude from or add to its articles: and any alteration, exclusion or addition so made shall be as valid as if originally contained in the articles, and be subject in like manner to alteration, exclusion or addition by special resolution. Notwithstanding anything in the memorandum or articles of a company, no member of the company shall be bound by an alteration made in the memorandum or articles after the due on which he becomes, member, if and so far as the alteration requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made, or in any way increases his liability is at that date to contribute to the share capital of, or otherwise to pay money to the company. 5. Distinguish between a floating charge and a fixed charge. When does a floating charge crystallize? [Nov-Dec10, Nov-Dec09, May-June08] A fixed charge is one which creates legal interest of a specific property of the company or all the properties of the company. Thus a fixed charge is equivalent to mortgage. The company can sell, lease etc. of the property, subject to the right of the charge holder. The floating charge does not amount to mortgage. The owner of such a property can deal with it and the transferee gets it, free of the charge. The floating charge crystallize on happening of the following events1. Inability of the company to pay interest for 3 months. 2. When the court issues warrant for confiscation properties for 7 days 3. When the receiver of the company is appointed on application of debenture holders. 4. When the liquidation process of the company commences.
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6.
Define Member of a company [Nov-Dec10] Every subscriber of the memorandum of company shall be deemed to have agreed to become a member of the company and on its registration shall be entered as a member in its register of members. Every other person who agrees to become a member of a company, and whose name is entered in its register of members shall be a member of the company.
7.
"Directors are trustees as well as agents of the company". Discuss [Nov-Dec10, May- June05]
Directors are trustee and agent of the Company Directors are trustees as well as agents of the Company. All activities, business and transactions of the Company for its developments, promotions is done by the directors for and on behalf of the Company like an agent. The articles of association empowered the Directors to do/run the Company. The directors can do the followings for and on behalf of the Company as contained in the articles of association: 1. 2. 3. 4. 5. 6. 7. 8. 9. To run the business of the company; To recommend dividend; To enter into contract; To maintain reserves; To issue, forfeiture of share; To issue debenture; To Invest fund; To take, redeem loan; and To appoint officers & staffs and to pay their emoluments.
The above activities are done by the directors as agent of the Company. Directors are to do all activities as trustee of the Company. All assets resources are to be kept safety and to utilize them for the interest of the Company. Under any circumstances Directors are not allowed to use asset of the Company for their own without the approval of the Board. Directors are to maintain proper accounts as required by law and to do many other activities as trustee of the company, such as: 1. To run the Company efficiently; 2. To optimum utilization resources; 3. To save the Company from losses/damages; 4. To maintain proper books of accounts; 5. To call the AGM; 6. To maintain secrecy of the organization; and 7. To refrain from doing such activities prohibited by the act. In the above sense it is said Directors are trustees of the Company.
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8.
Discuss the provisions of Section 233 of the Companies Act, 1994 regarding protection of interest of minority shareholders. [Nov-Dec10, Nov-Dec08, May-June07, Nov-Dec02]
(1) Any member or debenture holder of a company may either individually or jointly bring to the notice of the court by application that(a) the affairs of the company are being conducted or the powers of the directors are being exercised in a manner prejudicial to one or more of its members or debenture holders; or (b) the company is acting or is likely to act in a manner which discriminated or is likely to discriminate the interest of any member or debenture holder; (c) a resolution of the members, debenture holders or any class of them has been passed or is likely to be passed which discriminates or is likely to discriminate the interest of one or more of the members or likely to debenture holder. (2) The Court shall, on receipt of an application under sub-section (1) send a copy thereof to the Board and fix a date for hearing the application; (3) If after hearing the parties present on the date so fixed, the Court is of opinion that the interest of the applicant or applicants has been or is being or is likely to be prejudicially affected for reasons specified in the application, it may make such order as prayed for or such other order as it deems fit including a direction(a) to cancel or modify any resolution or transaction ; or (b) to regulate the conduct of the company's affairs in future in such manner as is specified therein; or (c) to amend any provision of the memorandum and articles of the company. 9. In which ground the Registrar of Joint Stock Company can present a petition for winding up a company? [Nov-Dec10]
Petition for winding up by the Registrar: Under the following grounds as contained in Section - 197(b) the Registrar of Joint Stock Companies and firms can present a petition for winding up a company as per Section-204 of CA 1994: i. That the business of the company is being conducted with intent to defraud its creditors, members, any other persons or otherwise for a fraudulent or unlawful purposes; or ii. That the persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or iii. That the members of the company have not been given all the information with respect to its affairs which they might reasonably expect. 10. Define a foreign company as envisaged under Section 378 of the Companies Act, 1994. What are the documents to be delivered to the Registrar of Joint Stock Companies by foreign companies carrying on business in Bangladesh? [Nov-Dec10, May-June09] When a company which is incorporated outside Bangladesh but establishes business in Bangladesh with same name and nomenclature with or without a place of business in the country, it is regarded as a foreign company in Bangladesh. Documents to be delivered According to section 379, if foreign companies establish a place of business in Bangladesh shall, within one month of the establishment of the place of business, deliver the following to the Registrar for registration:
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1. A certified copy of the charter or statutes or memorandum and articles of the company or other instrument constituting or defining the Constitution of the company; and if the instrument is not written in Bengali or English language, a certified Bengali or English translation thereof; 2. The full address of the registered or principal office of the company; 3. A list of the directors and secretary, if any, of the company; 4. The name and address or the names and addresses of one or more Persons resident in Bangladesh, authorized to accept on behalf of the company service of process and any notice or other document required to be served on the company 5. The full address of the office of the company in Bangladesh which is to be deemed its principal place of business in Bangladesh. 11. Define a Company and mention its essential characteristics. [May-June10] A company in ordinary non-technical sense however, means an association for attaining some common objectives which may be with or without profit. Essential characteristic: 1. A company is regarded by law and it has a legal personality; 2. A company has perpetual succession; 3. The liability of the members of a company is limited; 4. A company is required to comply with various statutory obligations regarding management. 12. Distinguish between Holding Company and Subsidiary Company what are the relationships between the two? [May-June10] Holding Company When a company acquires controlling interest in the affairs of another company or companies, it is known as the holding company. The Companies Act in its definition clause at section 2 clarifies, interalia, that the holding of such controlling interest should take all or one of the following forms: 1. its assets may consist in whole or in part of shares in another company; 2. such shares or other interests may be held either directly or through a nominee. 3. such interest should be in the form of holding more than fifty percent of shares or voting rights in that other company. 4. such voting right gives power directly or indirectly to appoint the majority of the directors in that other company otherwise than by virtue of the provision of a trust deed. Subsidiary Company It is a company more than fifty percent of whose issued share capital or voting power is held by another company or the majority of whose directors can be appointed by another company. A subsidiary company may be a public or private company or not even be a company at all within the meaning of the Companies Act. Where the shares of such a company are held as security by a company the ordinary business of which is lending of money or where the majority of directors can be appointed by a company by virtue of powers contained in a debenture trust-deed, the former company will not be deemed to be a subsidiary company of the latter.
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13. State the rules relating to conversion of a public company into a private company. [May-June10] According to section 2321. A public company, having not more than fifty members at the time of conversion, may be converted into a private one by passing a special resolution altering its articles so as to exclude provisions if any, in the articles of association applicable to public company and include therein provisions applicable to a private company. 2. lf the company has secured creditors, their written consent shall have to be obtained before passing a resolution as per provision of sub section (l) and the shares enlisted with the Stock Exchange shall have to be de-listed. 14. What is a Memorandum of Association? State the contents of the Memorandum of Association. [May-June10] The memorandum of association is the charter /constitution of the company. It is the written documents containing the object and power of the company upon which the company is incorporated and the company cannot go beyond the limitation/contained in the M/A. It cannot change without the consent of the court / Govt. The memorandum shall be: 1. Printed 2. It shall be divided into paragraphs and numbered consecutively, and 3. It shall be signed by each subscribed (giving his address and description) in the presence of at least one witness who shall attest his signature. Contents of Memorandum of association: 1. Name clause: The memorandum shall state the name of the company with limited as the last word in its name. It signature that the liability of the shareholders is limited. The liability may Limited by shares or by guarantee. 2. Registered office situate clause: After the name the M/A usually state the name of the place where the registered office of the company. The reasons why the place of its registered office is stated in the M/A It fixed the domicile of the company and determines jurisdiction of the court with regard to the company It provides some definite places at which notice and other processes may be served on it. It also determines where the records of the company are to be kept Changes the register office 3. Object clause: The third requirement of the M/A is object clause. It determines: The power of the company and It restricts the power of the company 4. Liability clause: The fourth particular in an M/A is a statement that the companys liability is limited. In case of a company limited by shares is wound up the members of company will not be liable to contribute more than the amount up paid on their shares But if the number of members is reduced in case of Pvt. Limited co below two and in case of public limited co. below seven and the business carried
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on more than 6 months thereafter, then the member are personally liable irrespectively of limited liability for all debts contracts during the period (U/S 222). 5. Capital clause: The amount of the nominal capital of the company and the number of the shares must be clearly stated in M/A. There is or legal limit to the amount of the capital or of each shares. Alteration of capital clause: may by usually. The article of association contains the power and procedure to alter the capital clause. Otherwise a special resolution has to be passed in a general meeting to alter the A/A in this regard. A notice in this regard shall have to be filed to the registrar within 15 days. 15. State the points of difference between the Memorandum of Association and the Articles of Association of a Limited Company. [May-June10, May-June06] The differences between the Memorandum and Article of Association are as follows: Memorandum of Association The memorandum is the fundamental constitution of the Company determining its Objectives Memorandum is the main guideline of the company Alteration of Memorandum is difficult, in some cases it requires Court's permission Memorandum defines the power of the Company Articles of Association The Articles are rules regarding internal management.
Any rules in the articles contrary to the memorandum is invalid Alternation of article is easy; it requires a special resolution only. Articles define the internal regulation and Management process Acts done by the company beyond the power of Acts done by the Company beyond the the memorandum is void which cannot be articles can be ratified by the share holders ratified provided they are within the power of the Memorandum There are 5 clauses There are long list of clauses 16. Define prospectus. State the contents of a prospectus. [May-June10] A prospectus is an invitation to the public to purchase shares or debenture of a company. In other words, a prospectus may be defined as any document that includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any share in, or debentures of a body corporate. Prospectus has the following characteristics: It is a document described or issued as a Prospectus. It includes any notice, circular, advertisement inviting deposits from the public. It is an invitation to the Public. The public is invited to subscribe the shares or debentures of a company.
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Contents of the Prospectus Every prospectus issued by or on behalf of a company shall state the matters specified in Part- I of schedule 111 of the Companies Act 1994. According to the Part I of Schedule III, the following items are to be included in the Prospectus: 1. The names, addresses, descriptions and occupations of the signatories to the memorandum and the number of shares subscribed for them; 2. The number and classes of shares and the nature and extent of interest of holders in the property and profits of the company; 3. The number of redeemable preference shares intended to be issued with the date of redemption; 4. The rights in respect of capital and dividend attached to different classes of shares; 5. The number of shares fixed by the articles as the qualification of director; 6. Particulars regarding directors, managing agents, manager, secretaries and treasures etc; 7. Remuneration of the directors; 8. The minimum amount of subscription and amount payable on application; 9. Time of opening of subscription list; 10. Preliminary expenses incurred; 11. Particulars regarding purchase of property; 12. Details of any premium or under-writing commissions paid; 13. Particulars of reserves including reserve capital; 14. Nature and extent of interest of every director and promoter; 15. Names and addresses of the auditors of the company; 16. The nature and extent of restrictions upon members at company meetings; 17. Restrictions upon Powers of the directors; and 18. Voting rights, capitalization of reserves and surplus of revaluation. 17. Explain how the share capital of a company can be increased? [May-June10] (1) Where a company having a share capital, has increased its share capital, beyond the registered capital, it shall file with the Registrar, in the case of an increase of share capital, within fifteen days after the passing of the resolution authorizing the increase and the Registrar shall record the increase. (2) The notice under sub section (1) shall include particulars of the classes of shares, affected and the conditions, if any, subject to which the new shares are to be issued. 18. What are the consequences of the failure by a company to hold its Annual General Meeting? [May-June10] If default is made in holding annual general meeting of the company in accordance with section 81, 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. 19. Explain the provision of the Companies Act 1994 relating to appointment of the auditors of a company. [May-June10] There are the following rules as per the Companies Act 1994 dealing with the appointment of auditor:
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Every company shall appoint auditors at each AGM and the auditor will hold office until the next AGM. Provided that, no person can be appointed as auditor unless his written consent has been obtained prior to his appointment or re-appointment. Every auditor will inform to the registrar in writing his acceptance or refusal within 30 (thirty) days from the date of receipt of appointment. A retiring auditor shall have right to be re-appointed at AGM, unless: He is not qualified for re-appointment. He has given written notice for his unwillingness. A resolution has been passed at that meeting appointing somebody instead of him.
20. Can a director be removed? How? [May-June10] As per section 106 of the Companies Act 1994 (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. 21. State the steps involved in the formation of a company under the Companies Act 1994. [NovDec09, May-June 06] Formation of a Company: 2 (two) or more persons (not more than 50) and 7 or more persons (unlimited) may form a Private or a Public Limited Company respectively by subscribing their signature in the Memorandum of Association. They may form a Company limited by shares; a Company limited by guarantee; an unlimited Company. There are 3 stages for formation of a company i. Promotion; ii. Registration; iii. Commencement of business. Promotion stages i. Promoters ii. Clearance of name iii. Sponsors' equity iv. Consent of the Directors v. Selection of objectives. Registration: i. Submission of Memorandum & Articles of Association. ii. Payment of stamp duty & Registration fees. iii. Obtaining certificate of incorporation.
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Commencement of business: For a Private Limited Company, the business of the Company can be commenced after getting the registration i.e. certificate of incorporation. For a Public Limited Company, the Company shall obtain the certificate of commencement of business from the Registrar. 22. Discuss the disqualifications of Directors as laid down in section 94 of the Companies Act, 1994. [Nov-Dec09] Disqualifications of directors as per section 94 of the Companies Act 1994: (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 respect 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. 23. Discuss the procedure of calling Annual General Meeting and Extraordinary General Meeting of a company. State what businesses are transacted in an Annual General Meeting. [Nov-Dec09] A general meeting shall be held (within eighteen months from the date of its incorporation and thereafter once at least in every year) at such time (not being more than fifteen months after the holding of the last preceding general meeting) and place as may be prescribed by the company in general meeting. Proceedings at General Meeting Fourteen days' notice at least (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which notice is given) specifying the place, the day and the hour of meeting. No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business If within half an hour from the time appointed for the meeting a quorum is not Present, the meeting, if called upon the requisition of members, shall be dissolved. The Chairman selected among them by the Board of Directors shall preside as chairman at every general meeting of the company. Provided that the Chairman and the Managing Director shall not be the same person. lf there is no such chairman, or if at any meeting he is not present within thirty minutes after the time appointed for holding the meeting, or is unwilling to act as chairman, the members Present shall choose someone of their number of be chairman' The chairman may with the consent of any meeting at which a quorum is present, adjourn the meeting from time to time and from place.
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Extra Ordinary Meeting: All meetings of the shareholders other than the annual meetings or those provided for in the articles are known as extra ordinary meeting. These meetings may be called by the directors either suo moto or the requisition of not less than one-tenth of the shareholders and where the directors fail to call such a meetings so requisitioned within the prescribed time limit, by the requisitions themselves. Businesses that are transacted in an Annual General Meeting: 1. To receive, consider and adopt the Directors Report and the Audited Balance Sheet and the Profit and Loss Account with Auditors Report thereon. 2. To declare dividend. 3. To elect Director (s) 4. To appoint the auditors and fix up their remuneration. 5. To transact any other business which can be transacted by ordinary resolution, with the permission of the chair. 24. Name the mortgages and charges required to be registered compulsorily with the Registrar of Joint Stock Companies. What is the effect of non-registration of such mortgages and charges? [Nov-Dec09, May-June08] The mortgages and charges those are required to be registered compulsorily with the Registrar of Joint Stock Companies: a) a mortgage or charge for the purpose of securing any issue of debentures; or b) a mortgage or charge on uncalled share capital of the company, or c) a mortgage or charge on any immovable property wherever situated or any interest therein, or d) a mortgage or charge on any book debts or the company, or e) a mortgage or charge, not being a pledge on any moveable property of the company except stock-in- trade. Due to non-registration of above mentioned mortgages and charges to be considered void and when a mortgage or charge becomes void, the money secured thereby shall immediately become payable. 25. State the circumstances in which a company may be wound up by the Court. [Nov-Dec09] Section 241 states the following circumstances under which a company may be wound up by the Court: i. lf the company has by special resolution resolved that the company be wound up by the Court; or ii. lf default is made in filing the statutory report or in holding the statutory meeting; or iii. lf the company does not commence its business within a year from its incorporation, or suspends its business for a whole year; or iv. lf the number of members is reduced, in the case of a private company below two, or, in the case of any other company, below seven; or v. lf the company is unable to pay its debts; or vi. If the Court is of opinion that it is just and equitable that the company should be wound up.
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26. What are the procedures for reduction of share capital and how the same is confirmed? [NovDec09] Reduction of share capital The power to reduce capital must be given by the articles. If no such power, the articles may be changed by a special resolution. According to section 59, the share capital may be reduced by: a) reducing or extinguishing the liability of members for uncalled share capital; or b) writing off lost share capital; or c) paying off share capital which is in excess of the wants of the company; or d) All these are to be done only by way approve by the court. Procedure for Reduction of Share Capital Reduction of capital is possible only by passing a special resolution and confirmation by the court. The court would inquire into the objections, if any, raised by the creditors. In this respect the court settles the list of creditors entitled to object and issues public notices (sec. 62). On hearing the objections, the court may confirm the reduction on such terms and conditions as it may dam fit (sec. 64). 27. Discuss the requirements of law relating to filing of accounts of companies operating in Bangladesh but incorporated outside Bangladesh [Nov-Dec09, May-June08] (1) Every foreign company shall, in every calendar year(a) make out a balance sheet and profit and loss account or in the case of a company not trading for profit, and income and expenditure account it the company is handling company, group accounts in such form and consigning such particulars and including such documents, and under the provision of this Act it would, if it had been accompany within the meaning of this Act, have been required to make out and lay before the company in general meeting; and (b) Deliver three copies of those documents to the Registrar: Provided that the Government may by notification in the official Gazette direct that in the case of a foraging company or class of foreign Combines the requirements of clause (a) shall not apply, or shall apply subject to such exceptions and modification as many be specified in the notification. (2) If any such document as is mentioned in sub-section (1) is not written in Penal or English language, there shall be annexed to it a certified translating thereof. 28. What documents, registers and books are maintained in a companys registered office? [MayJune09, Nov-Dec07, May-June04, May-June03, Nov-Dec02] Books: Statutory Books: The companies Act requires every company to keep the following books: a) Register of members: 1. Name & address & occupation 2. Respective shares, 3. Date of registration as member, 4. Date at which any person ceased to be a member
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b) Register of Directors: 1. In case of individual director- name, address, nationality, occupation & particulars of directorship, 2. In case of a corporation- corporate name, principal office and name, address & nationality of each of its directors, 3. In case of a firm- name, address & nationality of each partner and the date on which each became a partner. c) Register of qualifying share of directors, d) Register of debenture holders, e) Register of mortgages and enter there in specific description, f) Minutes of meetings, g) Register of contracts, h) Books of accounts: i) Statement of receipts & payments, j) Statement of sales & purchases, k) Statement of assets &liabilities, l) Cost records, if applicable. Statistical books: (Sec. 36) 1. Share application & allotment, 2. Addition of shareholder, 3. Share transfer, 4. Dividend, 5. Interest on dividend. 29. Who can inspect those documents and books and take copies thereof? [May-June09, NovDec07, May-June04, May-June03, Nov-Dec02] The books of account and other books and papers of every company shall be open to inspection during business hours by the registrar or by such other Government officer as may be authorized by the Government in this behalf It shall be the duty of every director or other officer of the company to produce to the person making inspection. It shall also be the duty of every director and other officer of the company to give to the inspection person all assistance in connection with the inspection, which the company may be reasonable, expected to give. Where an inspection of the books of account and other books and papers of the company has been made under this section the inspecting person shall make a report to the Government.
30. State the provisions of the Companies Act, 1994 as to appointment, terms and remuneration of Managing Directors [May-June09, Nov-Dec05, May-June03]. The managing director is a director who is entrusted with any substantial power of Management The appointment of managing director: The appointment of a managing director or of a whole time director can be made by any of the methods:
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1. 2. 3. 4.
An agreement with the company A clause in a memorandum or articles of the company A resolution passed by a company in its general meeting Resolution of the board of director
No company shall, after the commencement of this Act, appoint or employ any individual as its managing director for a term exceeding five years at a time. Power and duties of a managing director The power and duties of a managing director are specified in the agreement with the company by which he is appointed in the memorandum or articles of the company in a resolution passed by the company in general meeting a resolution by its board of director 31. What remedies are available to an applicant who has been induced to buy shares of a company by a material mis-representation of facts in a prospectus? [May-June09, Nov-Dec03, MayJune08] Remedies available to the shareholders for untrue statement in the prospectus: In case of untrue and misleading information furnished in the prospectus its promoters and directors will be held liable. The shareholders may claim to refund the value of shares allotted and the Shareholders may claim demurrage for any losses incurred for such misstatement furnished in the prospectus. But they cannot retain the Ave and claim the demurrage simultaneously. 32. What are the liabilities of contributories as present and past members in case of winding-up of a company [May-June09]. Section 235 states that 1. In the event of a company being wound up, every present and past member shall be liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities and the costs, charges and expenses of the winding up, and for the adjustment of the rights of the contributories among themselves, with the qualifications following, that is to say:i. A past member shall not be liable to contribute if he has ceased to be a member for one year or upwards before the commencement of the winding up; ii. A past member shall not be liable to contribute in respect of any debt or liability of the company contracted after he ceased to be a member; iii. A past member shall not be liable to contribute unless it appears to the Court that the existing members are unable to satisfy the contributions required to be made by them in pursuance of this Act; iv. In the case of a company limited by shares, no contribution shall be required from any member exceeding the amount, if any, unpaid on the shares in respect to which he is liable as a present or past member; v. In the case of a company limited by guarantee, no contribution shall be required from any member exceeding the amount undertaken to be contributed by him to the assets of the company in the event of its being wound up;
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Nothing in this Act shall invalidate any provision contained in any policy of insurance or other contract whereby the liability of individual members on the policy or contract is restricted or whereby the funds of the company are alone made liable in respect of the policy or contract; vii. A sum due to any member of a company in his character of a member, by way of dividends, profits or otherwise, shall not be deemed to be a debt of the company payable to that member in a case of competition between himself and any other creditor who is not a member of the company. 2. In the winding up of a company limited by guarantee which has a share capital, every member thereof shall be liable to pay the following amounts namely: (a) The amount undertaken to be contributed by him to the assets of the company in the event of its being wound up; and (b) An amount to the extent of any sums unpaid on any shares held by him. 33. Discuss about the remedies available to a debenture holder when his/her debentures are in jeopardy [May-June09]. If the company fails to pay interest or principal on the due date or fails to comply with any of the terms and conditions under which the debenture was issued, the debenture holder can adopt any of the following remedial measures: 1. He may file a suit for the recovery of money by sale of the assets which were charged for the payment of the money. 2. He may file an application for the appointment of a receiver by the court. 3. He may himself appoint a receiver if the terms of the debenture entitled him to do so. 4. The trustees may sell the properties charged, if such a Power is given to them under the terms of the debenture. 5. He may apply to the court for the foreclosure of the company's right to redeem the properties charged for the Payment of the money. 6. He may present Petition for the winding up of the company. 34. Distinguish between a Private Ltd. Company and a Public Ltd. Company [May-June09]. Public ltd co. Minimum- 07, Maximum ltd by share. Transfer of share Share can only be transferred among No restriction of transfer of share. person. Invitation of Can not invite to general meeting Can invite to general subscription meeting Statutory meeting Statutory meeting of filling statutory After start of business the company of Report report to register of JSE in not is bound to call statutory meeting obligation. within 1 to 6 month of submit statutory report. Commencement of Can start business only after getting Can start business after getting the business the certificate of incorporation certificate of commencement from JSE No of Directors At least 2 directors. At least 3 directors. Consent of No consent and certificate is to be Consent and certificate is to be Directors Required. required. Members
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vi.
Private ltd co. Minimum-02, Maximum-50
35. What is the purpose of stating the "object clause" of a company in its memorandum? Can it be altered? How? [Nov-Dec08, Nov-Dec04] Objective Clause: Objective clause is one of the important elements of Memorandum of Association. The main objects of the company are disclosed clearly in the objective clause. The Companies Act 1994 requires disclosing the main ' objectives relating to form a company under his Act. The main objects and objects incidental are identified in the objective clause to enable the members of the company, its creditors and the public to know the range of activities of the company. Without stating objective clause no company can be registered under this Act. A company can change the objective clause under the following circumstances (Section 12): 1. To carry on its business more economically and efficiently; 2. To attain its business operation by new and improved way; 3. To enlarge the area of operation; 4. To carry on some operation which will be more advantageous for the interest of the company; 5. To restrict, abandon any of its objects; and 6. To amalgamate with any other company or body. Objective clause can be changed by passing a special resolution and having permission of the court. 36. What is the effect of carrying on business by a Company with less than the legal minimum number of members? [Nov-Dec08] If at any time the number of members of a company is reduced, in the case of a private company, below two or, in the case of any other company, below seven and it carries on business for more than six months, while the number is so reduced every person who is a member of the company during the time that it so carries or business during that periods and is cognizant of the fact that it is carrying on business with fewer than two members or seven members, as the case may be, shall be individually liable for the payment of the whole debts of the company contracted during that time and may be used for the same without joinder in the suit of any other member. 37. What are the effects of irregular allotment of shares? [Nov-Dec08] (1) An allotment made by a company to an applicant shall be voidable at the instance of the applicant within one month after the holding of the statutory meeting of the company and not later or, in any case where the company is not required to hold a statutory meeting or where the allotment is made after the holding of the statutory meeting, within one month after the date of the allotment and not later, and shall be so voidable notwithstanding that the company is in the course of being wound up. (2) If any director of a company knowingly contravenes or permits or authorizes with respect to allotment, he shall be liable to compensate the company and the allottee for any loss, damages or costs which the company or the allottee may have sustained or incurred thereby: Provided that Proceedings to recover any such loss, damages or costs shall not be commenced after the expiration of two years from the date of the allotment.
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38. What is meant by the term "ultra Vires"? [Nov-Dec08, Nov-Dec07, May-June05] Meaning of the term "ultra Vires": Any transaction, activity or business done by the Company beyond the power of the Memorandum and Articles of Association is "ultra vires" i.e. void. The Company cannot do anything outside the memorandum of association. 39. Distinguish between member's voluntary winding up and creditor's voluntary winding up. [NovDec08] Members' voluntary winding up: When the company is solvent and is able to pay its debts in full, in which case it is not necessary to consult the creditors or call their meeting, then the company in general meeting must appoint one or more liquidators for winding up the affairs of the company and fix his or other remuneration. On such appointment, all the powers of the directors of the company come to an end except in so far as the company in general meeting, or the liquidator, sanctions the continuance thereof (Section 292). Creditors' voluntary winding up: In the case of the creditors' voluntary winding up, the company is obliged to convene a meeting of the creditors on the day on which the meeting for passing the resolution for winding up is to be held. The company must send the notices of such meeting to the creditors simultaneously with the notice of the company's meeting. The duty of the creditors of the company is to cause a full statement of the position of the company's affairs, together with a list of the creditors of the company and the estimated amount of their claims, to be laid before the creditors' meeting to be held as aforesaid. They must also appoint one of their members to preside at the meeting. At the same meeting, the creditors and the company may respectively nominate a person to be a liquidator or the purpose of the winding up. lf they each nominate a different person, the one nominated by the creditors shall be the liquidator unless, on an application of any director, member or creditor of the company made within seven days after the date of the nomination by the creditors, the Court orders that the person nominated by the company shall be the liquidator instead of or jointly with the one nominated by the creditors (Section - 299). 40. Under what circumstances may a company limited by shares (i) pay interest out of capital; (ii) write off preliminary expenses? [Nov-Dec08, Nov-Dec04, May-June03] Power of company to pay interest out of capital i. Power of company to pay interest out of capital in certain cases where any shares of a company are issued for the purpose of raising money to defray the expenses of the construction of any works or building or the provision of any plant which cannot be made profitable for a lengthened period, the company may pay interest on so much of that share capital as is for the time being paid up for the period and subject to the conditions and restrictions in this and may charge the same to capital as part of the cost of construction of the work or building or the provision of plant. ii. The writing off of preliminary expenses is the discretion of the company. The company may amortize the preliminary expenses over several according periods as may be determined in the Article of association or as per the decision of the Board of Directors meeting.
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41. Discuss the provisions of the Companies Act, 1994 as to the issue of shares at a discount [NovDec08, May-June05, Nov-Dec04] Following rules relates to the issuance of shares at a Discount: 1.It should be an existing company which has issued share earlier; 2.Court permission must be taken and to be confirmed at Annual General Meeting; 3.Maximum rate would be 107, which is to be confirmed at Annual General Meeting; 4.The Company shall not issue share at a discount within one year from the date of commencement of business; 5.The shares to be issued within 6 months from the date of the approval of the Court to issue share at a discount. 42. What are the pre-conditions of reduction of share capital of a Company? [Nov-Dec08, MayJune03, Nov-Dec04] Reduction of share capital: As contained in section 59 of the companies Act 1994, any company limited by share if it is authorized by its articles, by passing a special resolution, having approval from the Court can reduce the share capital as follows: By reducing or extinguishing the liability on any shares not paid-up; Cancel any paid-up share capital which is lost or not represented on the assets; Repay the capital, which is in excess of the wants of the company; Reduce the share capital and shares as required by alteration of memorandum. 43. What do you understand by the pre-emptive rights of shareholders in respect of further issue of shares? [Nov-Dec08] Where the directors decided to increase the subscribed capital of the company by issue of further shares within the limit of the authorized capital, such further shares shall be offered to the members in proportion, to the capital paid up on the existing share held by such member, irrespective of class, at the date of the offer. This is the pre-emptive rights of shareholders to get such offer. 44. What is the tenure of an auditor duly approved in an AGM of a limited company? [Nov-Dec08] Every company shall appoint an auditor or auditors to hold office from the conclusion of annual general meeting until the next annual general meeting and shall within seven days of the appointment, give intimation thereof to every auditor so appointed. 45. Describe the provisions of the section 211 of the Companies Act concerning appointment and termination of auditors. [Nov-Dec08] Special notice shall be required for a resolution at an annual general meeting appointing as auditor a person other than a retiring auditor, or providing expressly that a retiring auditor shall not be reappointed. On receipt of such notice the company shall forthwith send a copy thereof to the retiring auditor.
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46. Discuss the provisions of section 150 of the Act about the Restriction on Commencement of Business. [Nov-Dec08, Nov-Dec04] Certificate of commencement of business: (Section 150) A company (Public Limited) shall not commence any business or exercise any borrowing powers unless: a) Shares held subject to the payment of whole amount thereof in cash have been allotted to an amount not less than the minimum subscription; b) Every Director of the company paid in cash each of the share held; c) A certificate of compliance by the Company Secretary or a Director that above formalities have been complied; d) A statement in lieu of prospectus has been submitted where no prospectus is issued for invitation to subscribe the share to the public. 47. Describe the legal positions of pre-incorporation contracts. What are the exceptions to those contracts? [May-June08, May-June02] Pre-incorporation contract A company cannot be bound by a contract which was made on its behalf by any person and excluding a promoter before the company itself had been formed. The company cannot ratify any pre-incorporation contract and the promoters will be personally liable. In these circumstances, the simplest and safest course for promoter is to bring the negotiation to the point of agreement but to postpone any binding contract until the company is formed and can enter into the contract for itself. In this regard a fresh contract can be accorded by the company after the incorporation. 48. What contracts are required to be made under the Seal of a company? [May-June08, MayJune03] Use of common seal The common seal of the company shall not be affixed to any instrument except by the authority of resolution of the Board of Directors, and in the presence of at least two Directors and of the secretary or such other person as the directors may appoint for the purpose, and those two directors and secretary or other person as aforesaid shall sign every instrument to which the seal of the company is so affixed in the their presence. 49. What is a prospectus? Do all the companies issue it? What could be an alternative to prospectus? Write a few lines about it. [May-June08, May-June04, Nov-Dec-03] Prospectus A prospectus is an invitation to the public to purchase shares or debenture of a company. In other words a prospectus may be defined as any document that includes any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any share or debentures of a body corporate. No, all the companies do not issue a prospectus. Only the Public Limited Companies having permission from the Securities and Exchange Commission may issue a prospectus.
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Alternative to a prospectus As per Section-141 a Public Limited Company having a share capital and not issuing prospectus must at least 31 days before the first allotment of shares or debentures, file with the Registrar for registration a statement in lieu of prospectus. The statement must be in the form prescribed in schedule - IV of the Companies Act-1994. Every private limited company which is converted to a public limited company shall also a statement in lieu of Prospectus as per Schedule-V. 50. Who are authorized to make an application to the court for the winding up of a company? Tabulate the difference between the winding up of a company and the dissolution of a partnership. How does the winding up affect the position of servants and the Directors of the company? [May-June08, Nov-Dec-02] Application to the Court for winding-up: According to Section 239, the winding-up of a Company may be done in any one of the following three ways: 1. Compulsory winding up by court; 2. Voluntary winding up by the members or by creditors; 3. Voluntary winding up under the supervision of the court. In above all cases winding up may be made by the application of: i. Any member of the Company with the special resolution; ii. Any member of the Company with the Extra-ordinary resolution; iii. The regulatory authority in case of default in filing the statutory meeting, report, etc. iv. Any creditors/members if the Company is unable to pay its debts. Winding up and dissolution or a partnership firm Point of difference Winding up of a company Dissolution of partnership Firm the Dissolution of partnership among all the partners Partnership Act 1932 Liability is unlimited As per partnership deed Partnership will dissolved by the death of a partner
Meaning of winding The activities of up/ dissolution company is ended Related laws Liability of the owner Companies act 1994 Liability is limited
Distribution of assets As per companies Act Cause of winding up/ By the death of a member dissolution it is not wound up. Because it has perpetual subsection. Winding up affecting the position of officers
As per Section - 252(3), a winding-up order by the court executed as a dismissal or discharge of the servant of the Company. Such discharge relieves the servant from all obligations under his contract of service. The power of the directors is also usually cease on the winding-up of a Company. a) Misfeasance: Under section 331, if any promoter, director, liquidator or officer of the Company has misapplied or retained money or property of the Company or has been guilty of misfeasance
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or breach of trust, the court may, on the application of the liquidator or of any creditor or contributory, examine into his conduct and order him to repay or restore money or property or to pay compensation. b) Criminal Liability: Section-332 provides punishment for falsification, or fraudulent secretion of any of the books, papers of securities of the Company which is being wound-up. 51. What is the effect of an "ultra vires" transaction as far as the company and its directors are concerned? [Nov-Dec07, May-June05] Effect of an ultra vires transaction: The company and its Director's shall do all activities within the power of Memorandum and Article of Association any transaction beyond the power is "ultra vires" and the transaction will not bind the Company, effect of an ultra vires transaction relating to the Memorandum and Article of Association are as follows: 1. Transaction beyond the memorandum. 2. Transaction beyond the article of association. Transaction beyond the memorandum: The transaction is ultra vires and void. It will not bind the Company and the Directors will be personally liable. Transaction beyond the Articles: The transaction is also ultra vires and Directors are personally liable, but if the transaction is incidental or non-sequential then the transaction will be valid and binding on the Company. 52. Statutory Meeting is a must within a specified time for a new company. State the specified time. What matters can be transacted in such meeting? [Nov-Dec07] Every public company limited by shares and every company limited by guarantee and having a share capital, must within a period of not less than one month and not more than six months from the date at which the company is entitled to commence business, hold a general meeting of members which is to be called, the Statutory Meeting. In this meeting the members are discuss a report by directors, known as the Statutory Report, which contains particulars relating to the formation of the Company. 53. State the modes of winding up of a company as per Company Act, 1994 [May-June07]. According to section 234, the winding up of a company, may be done in any one of the following three ways: 1. Compulsory winding up by the Court 2. Voluntary winding up b), the members or by creditors 3. Voluntary winding up under the supervision of the court. 54. State the circumstances in which a company may be wound up by the court. [May-June07, MayJune04] As per section 241, a Company shall be wound up if the Company: i. Passed a special resolution for winding up of the company by court. ii. Fails to furnish statutory report or fails to hold statutory meeting. iii. Suspend its business operation for one year or fails to commence business within one year of its incorporation.
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iv. v. vi. 55.
Members reduced to less than 2 or 7 for Private & Public Limited Company respectively. Unable to pay its debt. Court is satisfied that it is just and equitable to wind-up the Company. Can a contributory present a petition for winding up of a company? When? [May-June07]
A contributory shall not be entitled to present a petition for winding up a company, unless (i) either the number of members is reduced in the case of a private company, below two, or, in the case of any other company, below seven; or (ii) the shares in respect of which he is a contributory or some of them either were originally allotted to him or have been held by him, and registered in his name for at least six months during the eighteen months before the commencement of the winding up, or have devolved on him through the death of a former holder; 56. What are the conditions that a contingent or prospective creditor has to fulfill for hearing of his petition for winding up before the court? [May-June07] The Court shall not give a hearing to a petition for winding up of a company by a contingent or prospective creditors until such security for costs has been given as the Court thinks reasonable and until a prima facie case for winding up has been established to the satisfaction of the Court. 57. How many copies of Balance Sheet and Profit & Loss A/C and within how many days from the date of AGM are to be filed with the registrar? Who can sign these? What are the consequences of default? [May-June07] As per section 190 of the Companies Act, three copies of the balance-sheet and the profit and loss account or the income and expenditure account shall be filed with the Registrar, within thirty days after Annual General Meeting. The balance-sheet and the profit and loss account or the income and expenditure account signed by the managing director, managing agent, a manger or secretary of the company or if there be none of these, by a director of the company. If a company makes default in complying with the requirements of this section, it shall be liable to a fine not exceeding one hundred taka for every day during which the default continues, and every office of the company who knowingly and willfully authorizes or permits the default shall be liable to the like penalty. 58. Are Balance Sheet and Profit & Loss A/C required to be filed with registrar - (1) If there is no AGM held? When? (2) If the shareholders do not adopt the Balance Sheet laid before the AGM? Explain why? [May-June07] Where the annual general meeting of a company for any year has not been held, there shall be filed with the Registrar within thirty days from the last day on which that meeting should have been held. If the shareholders do not adopt the Balance Sheet laid before the AGM, a statement of that fact and of the reasons therefore shall be annexed to the balance-sheet and to the copies thereof required to be file with the Registrar.
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59. Who can authenticate the proceeding or a document of a company? Is the authentication of document needed under company seal? [May-June07] A document or proceeding requiring authentication by a company may be signed by a director, secretary or other authorized officer of the company, and need not be under its common seal. 60. One of your prospective clients from USA is contemplating to start their business in Bangladesh. The client requests your opinion over the legal position of opening their business in the form of Liaison Office, Branch Office and forming a subsidiary in terms of: (i) legal steps; (ii) taxation and (iii) remittances and employment. [Nov-Dec06] Regulations relating to legal steps, taxation, remittances and employment of a Foreign Company: As per section 378(a) of the Companies Act (CA) 1994, any Company incorporated outside Bangladesh which, establish a place of business within Bangladesh shall be treated as a Foreign Company. The following regulations are related to Foreign Companies: Legal Steps as required by the CA 1994: Registration of foreign Companies: As contained in Section- 379 a Foreign Company can be registered in Bangladesh. The Foreign Companies, which after the commencement of this Act establish a place of business within Bangladesh shall, within one month of the establishment of the place of business, deliver the following documents to the Registrar for registration. 1. A certified copy of the charter or statutes or memorandum and articles of the Company or other instrument constituting or defining the constitution of the Company; and if the instrument is not written in Bengali or English languages a certified Bengali or English translation thereof; 2. The full address of the registered or principal office of the Company; 3. A list of the Directors and Secretary if any, of the Company; 4. The name and address or the names and addresses of one or more persons resident in Bangladesh, authorized to accept on behalf of the Company service of process and any notice or other document required to be served on the company; 5. The full address of the office of the Company in Bangladesh, which is to be deemed to be its principal place of business in Bangladesh. Accounts of Foreign Companies Every Foreign Company shall, in every calendar year make out a Balance Sheet, Profit and Loss Account, Group Account (if it is a holding company) and such other documents and information as required by the Act and deliver 3 copies of the same to the Registrar (section-380). Obligation to state name, etc. of Foreign Company Every foreign company shall, a) in every prospectus inviting subscription in Bangladesh for its shares or debenture, state the country in which the company is incorporated; b) exhibit on the outside of every office or place where it carries on business, the name of the company and the country of incorporation in legible English or Bengali Character; c) Disclose the name of the company, country of incorporation in English and Bengali in all bills, letter head, notices and other official publications (section 381). As per section 388 the company shall submit a certified copy of the prospectus to the Registrar if the company wants to issue prospectus offering to the public for subscription of shares/debentures.
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Other related regulations The Company shall be registered with the Board of Investments (BOI) as a foreign company or a joint venture company by paying prescribed fees to Government. Clearance from the Office of the Environment A clearance letter from the office of the Environment is to be obtained by paying adequate fees along with complying with other formalities to the Government. Obtaining a trade license A trade license is also to be obtained by paying prescribed fees from the City Corporation or Union Porishad concerned as the case may be to run its business in any City corporation, Pouroshabha or Union Parishad area. TIN Number The Company would require TIN number from the Income Tax Office concerned as per IT Ordinance 1984 & recurrent finance bill. VAT registration The Company will be registered with the Divisional Officer, VAT and collect a certificate of VAT registration, i.e., 'VAT-8' as per VAT Act 1991. Taxation of Foreign Companies Income Tax: The Foreign Company may get special Tax benefit if it is located in Export Processing Zone (EPZ). In this case, the Company will get lax exemption period for 10 years. No Income Tax will be deducted at source from the income of the Company as well as from the import value of the Company. In case the company is an export oriented one it will pay no Duties, Tax, VAT, etc. on import of raw materials. After the Tax holiday period the Company will also enjoy 50% Income tax relief on its export earnings. VAT: The VAT rate for export of items of any company is Zero. But if the company sells its products locally it will pay VAT as per VAT Act 1991 and amendments thereto. Remittance and Employment After registration of the Company by the Registrar, it will take permission from the Bangladesh Bank through the Board of Investment for remittance from the overseas by way of loan, equity, etc. and for remittance from Bangladesh for payment of dividend, interest etc. For recruitment of any foreigners in the company, the company will take work permit of the employees from the Board of Investment. For Bangladeshi employees no such permission is required to work in foreign companies.
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61. Your client is a listed company in both Dhaka and Chittagong Stock Exchanges. Board of Directors of your client company decided to merge with another company. You are asked to advise your client on the legal steps to follow in line with the regulatory requirements of relevant corporate and regulatory authorities of Bangladesh. [Nov-Dec06] Regulations relating to compromise for amalgamation/ Merger of Companies A Company if it is authorized by its Articles may decide to merge with other Company by passing a special resolution having permission from the Court. Where a compromise or arrangement is proposed between two Companies the process of such compromise or arrangement is to be conducted in a manner as the Court directs. As per section 228(2) if a majority in number representing three-fourths in value of creditors or of members as the case may be, present either in person or by proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall if sanctioned by the court be binding on all the creditors, members and the company. As per section 228(4) a certified copy of the order of the Court is to be filed with Registrar. Where an application is placed before the Court for the sanctioning of a compromise arrangement purpose between the companies in connection with a scheme for reconstruction of any company or companies for the amalgamation of any two or more companies, and that under the scheme the whole or any part of under taking and the property of the company concerned in the scheme (transferor company) is to be transferred to another company (transferee company). In this regard the court may order that: a) the transfer to the transferee company of the whole or any part of the undertaking and of the property or liabilities of any transferor company; b) the allotting or apportioning by the transferee company of any shares, debentures, policies, or other like interests in that company to or for any person; c) the continuation by or against the transferee company of any legal proceeding pending by or against any transferor company ; d) the dissolution, without winding up, of any transferor company; e) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out. A scheme or contract involves the transfer of shares or any class of shares in a company (Transferor Company) to another company (Transferee Company). Within 120 days after making of the offer on that behalf by the transferee company, the offers is to be approved by the holders of not less than 3/4th in value of the shared affected. 62. State the procedures of calling Annual General Meeting and Extraordinary General Meeting of a Company State what businesses are transacted in Annual General Meeting. [Nov-Dec06] Annual General Meeting As per section 81(1) of the Companies Act 1994 every Company shall hold one Annual General Meeting (AGM) of the Company in every Gregorian calendar year. But the period from one AGM to next AGM shall not exceed 15 months. Every company shall hold its first AGM after incorporation within 18 months from the date of incorporation. But as per SEC regulations the AGM is to be held within 6 months from the end of its Accounting year.
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For calling AGM notice to the shareholders is to be given at least 14 days before the AGM, mentioning the date, time, agenda and venue of the meeting therein. The annual report of the company is to be accompanied. Extra ordinary general meeting As per Section-84, the above meeting can be called on requisition from holders of 1/10lh members or 1/10 holders of paid-up capital. If the Directors do not cause a meeting to be called within twenty-one days from the date of the requisition being so deposited, the requisionist or a majority of them in value may themselves call the meeting, but in either case any meeting so called shall be held within three months from the date from the deposit of the requisition. Notice for holing the meeting is to be given at least 21 days before the date of the meeting. The Agenda of the meeting is to be mentioned in the notice. Following businesses are generally transacted in the AGM 1. Adoption of annual financial statements and auditors' report thereon; 2. Declaration of Dividend; 3. Appointment of Auditors and fix their remuneration; , 4. Appointment of Director(s) after requirements thereof: 5. Any other matter with the permission of chair. 63. How and in which meeting a special Resolution of a Company is passed? [Nov-Dec06] Special resolution: This is passed in a General Meeting by the three-fourth majority of the members present in person or by proxy where proxy is allowed. Notice for which 21 days specifying the-intention to propose the resolution is to be given before the date of the meeting. Special resolutions are necessary for the following purposes: i. To change the name of the Company; ii. To alter the Memorandum of Association; iii. To alter the Articles of Association; iv. To reduce the share capital; v. To convert any portion of the capital, uncalled in to reserve capital; vi. To appoint inspectors to investigate the company's own affairs; vii. For winding-up of a Company voluntarily. viii. To pay interest out of capital for raising money to meet expenses of construction work; ix. To convert public limited company to private limited company 64. Discuss the qualification and disqualification of a director of a company. How directors are appointed? [Nov-Dec06] Qualification of Directors: Articles of Association of a Company usually fix the minimum number of shares which every Director must subscribe in order to become a Director. The minimum number which is determined by the Articles is known as qualification number of shares as contained in Section 97(1) of CA 1994. Every Director shall hold that minimum qualification shares within 60 days or within the lime as may be specified in the Articles whichever is earlier.
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As per Section 97(2), if after the expiration of the period mentioned in sub-section (1) any such unqualified person acts as a Director of the Company he shall be liable to pay fine not exceeding Tk.200 per day for the period of holding as an unqualified Director under this section. As per section 92 every person shall not act as a Director unless he has signed and filed with the Registrar to consent in writing to act as such Director and; signed the Memorandum for a number of shares not less than his qualification shares, or taken from the Company and paid or agreed to pay for his qualification shares. Disqualification of Directors: Following persons shall not be eligible for appointment as director: (Sec-94j: An unsound mind, declared by a competent court; An insolvent or an un-discharged insolvent; A person applied to be adjudicated as an insolvent and his application is pending; Any person fails to pay his shares money after it is called up and 180 days have elapsed from the last day fixed by the call; A minor; Any other person/persons as may be prescribed in the article. As per Section 91 of CA 1994 directors are appointed as follows: Subscriber of Memorandum shall be treated as the first Directors; Generally Directors are appointed at the AGM by the shareholders among themselves; One-third of Directors shall retire by rotation in each year; Existing Director may appoint a person as Directors to fill up any casual vacancy. 65. What are the difference types of resolutions envisaged in the Companies Act 1994? What are the processes of passing a special resolution? [May-June06, May-June04] Different type of resolutions: i. Ordinary resolution ii. Special resolution iii. Extra-ordinary resolution. Special resolution: This is passed in a General meeting by the three-fourth majority of the members present in person or by proxy if proxy is allowed, Notice for which specifying the intention to propose the resolution is to be given before 21 days the date of the meeting. Special resolutions arc necessary for the following purposes: i. To change the name of the Company; ii. To alter the Memorandum of Association; iii. To alter the Articles of Association; iv. To reduce the share capital; v. To convert any portion of the capital, uncalled in to reserve capital; vi. To appoint inspectors to investigate the company's own affairs; vii. For winding-up of a Company voluntarily.
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66. Who are authorized to make an application to the court for the winding up of a company? [MayJune06, Nov-Dec02, Nov-Dec01] Application to the Court for winding-up: According to Section 239, the winding-up of a Company may be done in any one of the following three ways: 1. Compulsory winding up by court; 2. Voluntary winding up by the members or by creditors. 3. Voluntary winding up under the supervision of the court. In above all cases winding up may be made by the application of: i. Any member of the Company with the special resolution; ii. Any member of the Company with the Extra-ordinary resolution; iii. The regulatory authority in case of default in filing the statutory meeting, report, etc.; iv. Any creditors/members if the Company is unable to pay its debts. 67. You are Company Secretary of a public limited company. In the coming month the company's annual general meeting has to be held, for which the Board of Directors meeting needs to be convened. Following items arc included on the agenda: Investment in an associated company; Approval of the annual financial statements; Issue of shares to new foreign shareholders; Approval of new company logo; Remuneration of the recently appointed Chief Financial Officer & Chief Executive Officer; and Recommendation of final dividend. Some of the directors representing the foreign shareholders with 30% shareholding/representation on the Board may not be able to attend the meeting. You have been asked by these non-resident directors to get their approval on the decisions through circular resolution or by any other means. Discuss on this suggestion in the light of the corporate laws and practices. [May-June06] A Board of Directors meeting is required after end of the financial year of a Company and before the Annual General Meeting is held. The main cause of the requirements of the Board of Directors meeting is for the Approval of annual accounts, Recommendation of dividend, Proposal for appointment of Auditors and to fix their remuneration, retirement & appointment of Directors, etc. which are to be placed before the shareholders for approval in the AGM. As per section 95 of the Companies Act 1994, the notice of the Board of Directors meeting is to be served to the Bangladeshi address. But notice of such meeting can be served outside Bangladesh by Fax, e-mail or otherwise as may determined by the Articles of Association of the Company. The decision of the Board meeting of the Company is taken by the majority vote of the members of the Board present which requires quorum. The quorum of the Board meeting is determined by the Articles.
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The absence of any members of the Board will not hamper the decision of the Board meeting, if quorum exists. In this case, the member(s) of the Board are living outside Bangladesh which represents 30% voting power of the Board but not majority. It may be opined that the notice of the Board meeting is to be served to their Bangladeshi address by Fax to the address of the Members of the Board. But prior approval or any other kinds of approval is not required to hold the meeting or to take decision in the Board meeting. However, the Directors may send their opinion to the Board by fax, e-mail, phone or otherwise relating to the agenda mentioned in the notice that may be placed before the Board for decision. Any other procedure may be followed if the Articles of Association provides any guideline in this respect. 68. "All listed companies are public companies but not vice-versa" - Discuss the statement. [NovDec05, Nov-Dec03, Nov-Dec01] Listing Companies As per listing regulations clause 7(1), only the public limited Company can be listed with the Stock Exchanges. As per Companies Act 1994, Securities of a private limited Company are prohibited for transfer and it cannot be sold publicly. So, the Stock exchanges deal with those securities which are transferable. So, no private limited Company is eligible for listing with any stock exchange but a public limited Company is not mandatory to be listed. It is the discretion of the shareholder/sponsors public limited company as to whether their Company will be placed to the Stock Exchanges for listing. So it can be said that "All listed companies are public companies but not vice-versa." 69. What is prospectus? What do you know about registration of prospectus? [Nov-Dec05] Prospectus: A prospectus is an invitation to the public to purchase shares or debenture of a company. In other words, a prospectus may be defined as any document that includes any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any share or debentures of a body corporate. Prospectus has the following characteristics: 1. It is a document described or issued as a prospectus; 2. It includes any notice, circular, advertisement to the public for sale of securities; 3. It is an invitation to the public; 4. The public is invited to subscribe the shares or debentures of a Company. Registration of Prospectus: Before publication of a prospectus inviting people to subscribe shares or debentures of a Company, a copy of the prospectus must be delivered to the Registrar for registration on or before the date of publication. It should be signed by the Directors or proposed Directors of the Company or by their agent. On the face of the prospectus delivered to the Registrar for registration, it should be stated that a copy has been delivered for registration; and must contain a list of statements included in the prospectus. The registrar shall not register a prospectus unless the prospectus contains all the required elements as per Companies Act 1994, Public Issue Rules 1998, and other SEC regulations and the prospectus is accompanied by the consent in writing of the person if any, named therein as the auditor, legal adviser, attorney, solicitor, banker or broker of the Company to act in that capacity. No prospectus shall be
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issued more than ninety days after the date on which a copy thereof is delivered for registration. If a prospectus is issued without delivering a copy thereof to the Registrar, the Company and every person from those who have knowingly been a party to the issue of the prospectus shall be punishable with a fine which may extend to five thousand taka (Section 138) 70. How a foreign company can be registered in Bangladesh? Discuss on registration procedure. [Nov-Dec05, Nov-Dec03] Registration of foreign Companies: As contained in Section 379, a foreign Company can be registered in Bangladesh. The foreign Companies, which after the commencement of this Act establish a place of business within Bangladesh shall, within one month of the establishment of the place of business, deliver the following documents to the Registrar for registration: a) A certified copy of the charter or statutes or memorandum and articles of the Company or other instrument constituting or defining the constitution of the company; and if the instrument is not written in Bengali or English languages a certified Bengali or English translation thereof; b) The full address of the registration or principal office of the Company; c) A list of the Directors and secretary if any of the Company; d) The name and address or the names and addresses of one or more persons resident in Bangladesh, authorized to accept on behalf of the Company service of process and any notice or other document required to be served on the company; e) The full address of the office of the Company in Bangladesh, which is to be deemed its principal place of business in Bangladesh. 71. A company was incorporated in December, 2004. Due to an error; regulations relating to the conduct of meetings of members were not included in the Articles of Association submitted by the Company to the Registrar of Joint Stock Companies for registration. How can the members' meeting would be regulated in the absence of such regulations in the company's Articles? Can such regulations be included now in the Articles of Association and, if so, how and what will be the status' of such addition? [Nov-Dec05] Regulations relating to the absence of the Articles As per Section-18 of Companies Act 1994 the Company will conduct the meeting of its member which shall be governed as per the regulation contained in the "Schedule-L" The company can change the Article of Association by passing a special resolution as contained in Section-20 subject to the limitations as specified in Section-85 and Memorandum of Association. 72. What are the three possible positions of pre-incorporation contracts of a company? [Nov-Dec05] Pre- incorporation contract: A company cannot be bound by a contract which was made on its behalf by any person and including a promoter before the Company itself had been formed. The Company cannot even ratify any pre-incorporation contract and the promoters will be personally liable. In this regard a fresh contract can be accorded by the Company after the incorporation.
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73. What are illegal associations? [Nov-Dec08, Nov-Dec05, Nov-Dec02] Illegal Association: (Section-4) No company, Association, Partnership shall be formed consisting of 10 member for banking business and more than 20 members for other business unless it is registered under this Act. If any Association is formed contravening this section it shall be an illegal association. 74. The following are some points noted by Company Secretary of a listed company immediately after the Board meeting for approval of accounts:i. Interim dividend 20% already paid; proposed final dividend 20% in addition to interim. ii. Auditors - existing auditors have consented to their re-appointment, iii. Acquiring 40% stake in an existing company. iv. Appointment and remuneration of Chief Financial Officer approved. v. Capital expenditure of up to 10% of equity. vi. Bonus issue utilizing all available reserves. vii. Increase in paid up capital through further issue to existing shareholders. Draft a notice for the forthcoming Annual General Meeting (AGM) of the company and the agenda containing items that are normally included in an AGM for members' approval. Also comment on any aspect that is not in accordance with the provisions of the company law or related rules. [Nov-Dec05] Notice of the Annual General Meeting: Notice is hereby given that the 12th Annual General Meeting of the Shareholders of TPL Company Ltd. will be held at 10.00 am on Wednesday, the 20th December, 2012 at the BDR Darbar Hall, Pilkhana Dhaka to transact the following business. A G E N D A
1. To receive, consider and adopt the Director's Report and the Balance Sheet together with the Profit & Loss Account of the Company for the year ended on June 30, 2007 along with the Auditors Report thereon 2. To declare dividend as recommended by the Board of Directors @ 20% To appoint Auditors for the year 2007-2008 and to fix their remuneration. 3. To elect Directors. 4. To transact any other business which may be transacted at an ordinary general meeting with the permission of the chair. For and on behalf of the Board Company Secretary
Dated: 19 June 2012
The matter relating to acquiring 40% stake, appointment of CEO, capital expenditure and new issue of shares are not the matter of business to be transacted in the AGM.
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75. Discuss the procedures of issuing shares at a premium. How does the Companies Act provide for application of 'Receipts' from premium? [Nov-Dec05, May-June03] Issuance of a share at a premium A Company can issue share at a premium having permission from the Securities and Exchange Commission. A share premium account is to be opened and the amount of premium to be transferred to the share premium account Application of premium received on issue of shares: A share premium account is to be opened which can be used for the following: i. Un-issued share capital to be issued to the member as fully paid Bonus share. ii. To write off preliminary expenses. iii. To write off discount, commission and expenses on issue of share or debenture of the company. iv. To pay premium payable on redemption of redeemable preference share or debenture of the company. 76. How does the winding up affect the position of officers of the company? [Nov-Dec05, MayJune03] Winding up affecting the position of officers As per Section - 252(3), a winding-up order by the court executed as a dismissal or discharge of the servant of the Company. Such discharge relieves the servant from all obligations under his contract of service. The powers of the directors are also usually ceased on the winding-up of a Company. (a) Misfeasance: Under section 331, if any promoter, director, liquidator or officer of the Company has misapplied or retained money or property of the Company or has been guilty of misfeasance or breach of trust, the court may, on the application of the liquidator or of any creditor or contributory, examine into his conduct and order him to repay or restore money or property or to pay compensation. (b) Criminal Liability: Section-332 provides punishment for falsification, or fraudulent secretion of any of the books, papers of securities of the Company which is being wound-up. 77. Discuss the position, powers and liabilities of directors. [May-June05] Legal position of Directors: There are different views about the legal position of Directors. They have been described sometimes as trustees of the company and sometimes as its agents. Neither view is wholly correct but both contain elements of truth. Fiduciary Position: It is generally agreed that the Directors occupy a fiduciary position in relation to the Company. They must make full disclosure of all material facts of the Company. Officers: The Section 2(i) (o) of the Companies Act provides that a Director is an officer of the Company.
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Power of Directors: Directors derive their power and authority from two sources (i) the Articles of Association of the Company and (ii) the Companies Act. The articles of association generally contain a list of the powers, which may be exercised by Directors and the limitation on those powers. All acts and things done by the Board of Directors, within the powers given to it by the articles, are valid and binding on the company. It may be noted that a Director individually has no authority over the affairs of the Company except as regards matters, which have been specifically delegated to him by the Board. Liabilities of Directors: The liabilities of Directors may be analyzed with reference to liability of Directors to third parties, liability to the company, liability for breach of statutory duties and liability for acts of his Co-Directors. Directors' liability may be civil liability, criminal liability and unlimited liability. Civil Liability: The directors may, under certain circumstances, be liable to pay compensation to the Company and to outsiders, such as: 1. Untrue statements in the prospectus. 2. Ultra vires acts. Criminal liability: For certain breaches of duty the Companies Act imposes criminal liabilities upon Directors such as: Untrue statements in prospectus, failing to keep certain register, falsification of books and reports etc. 78. Discuss the provisions of the Companies Act, 1994 relating to auditors as to: 1. appointment; 2. qualifications; 3. rights, and; 4. duties. [May-June05, Nov-Dec04, Nov-Dec02] Appointment and Remuneration of Auditors: Auditors are appointed in the Annual General Meeting by the Shareholders; First Auditors of the Company is appointed by the Directors; The Directors may appoint Auditors in case of casual vacancy; The Govt. may appoint an Auditor if the above authorities fail to appoint an Auditor; Auditor's remuneration is to be fixed by the authority of appointing the Auditor. Qualification of Auditors: The auditor shall be a Chartered Accountant as per P.O. 2 of 1973. Following persons are not eligible for appointment as Auditor of the Company:
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Officers and staff of the Company. Any partner, staff or officers of the officers and staff of the Company. Any person indebted to the Company for more than Tk.1,000 or indebted by any Guarantee for the above amount. Any Director, Partner, Member of Managing Agent firm The SEC regulation imposed some additional qualifications for appointment of Auditors. Rights and duties of Auditor: The Auditors have right to access any books of accounts, information, voucher, statement as required to perform the audit work. The auditors may require any information explanation from any officers, staff of the Company for the audit. They should investigate the followings: Security given against the loan and advances whether it is secured or not and whether the terms arc detrimental to the interest of the company. The transactions, which have been shown in the books of accounts, whether they are detrimental to the interest of the company. Whether or not any assets, shares, debenture or any other securities have been sold lower than the purchase price (other than banking); Any loan and advances have duly been shown or not by the company. Whether or not any personal expenditure has been shown in the revenue account; Any share issued in cash whether the cash actually received or not and whether the presentation in the Balance Sheet for the same is misleading or not. The auditors will enclose the audit Report with the Accounts and their report shall include: Whether or not they have obtained all information and explanations as required by them; Whether or not the Balance Sheet and Profit & Loss Accounts exhibits a true and fair review of the state of affairs of the company; Whether or not proper books of Accounts have been maintained ; Whether or not the Balance Sheet and Profit and Loss Account are in agreement with the books of Accounts kept by the company; If any answer is in the negative the Auditor should disclose the fact and report to the shareholders. 79. Differentiate between ordinary resolution, special resolution and extra ordinary resolution. [May-June05] Ordinary Resolution: This is passed by the majority vole of members present at a general meeting. Such a resolution is passed in the ordinary way and deals with ordinary business, such as passing of accounts, appointing directors, auditors, and declaration of dividends and so on.
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Special resolution: This is passed in a general meeting by the three-fourths majority of the members present in person or by proxy, provided notice for such meeting specifying the intention to propose the resolution is given at least twenty-one days before the date of the meeting. Special resolutions are required a) to change the name of the company with consent of the registrar; b) to alter the memorandum; c) to alter the articles etc. Extra Ordinary resolution: This is passed by such majority vote at a meeting of which 21 days notice has been given. The notice must specify the intention to propose the resolution as an extra-ordinary resolution [Section-87(i)]. Such resolution is necessary when a company is sought to be wound-up voluntarily on the ground of that it cannot continue its business on account of its liabilities and also for a number of other reasons. 80. In what circumstances can the directors decline a transfer of shares? [May-June05] Clause 20(1) of Schedule -I: The directors may decline to register any transfer of shares not being fully paid up shares, to a person of whom they do not approve, and may also decline lo register any transfer of shares on which the company has lien. The directors may suspend the registration of transfer during the fourteen days immediately preceding the ordinary general meetings in each year. The directors may decline to recognize any instrument of transfer or refuse to register such transfer, unless a) the instrument of transfer is accompanied by the certificate of share to which it relates; and b) Such evidence as the Directors may reasonably require showing the right of the transferor to make the transfer has been furnished. c) Form 117 is duly filled up. 81. Draft a specimen notice of refusal to register transfer of shares. [May-June05] NOTICE I do hereby beg to draw your kind self that the Board of Directors in the meeting held on. Declined to recognize the transfer of enclosed number of shares as applied by you on .. due to the non submission of form 117 from your end. By order of the board. Company Secretary.
82. State the time limit for registration of transfer of shares. [May-June05] Completion of share transfer As per clause 12(2) of listings regulations the Company shall complete share transfer and have those ready for delivery the share certificates lodged for registration of transfer within 45 days of the application for such transfer and its registration.
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83. Draft a hypothetical resolution of transfer of shares to be adopted by a board of directors. [MayJune05] Minutes of 120th Board Meeting held on 4th March 2007 of ABC Co. Ltd. at its registered office House No. 5, Road No. 16, Dhanmondi, Dhaka. A meeting of the Board of Director of Tanmoy Company limited was held on at its registered office. Following members of the Board were present: 1. Mr. X 2. Mr. Y 3. Mr. Z Mr. X, Chairman of the Board presided over the meeting. Following business were transacted in the meeting: Agenda: 1 Proposal of transfer of shares of shareholder Mr. T
The board was informed that Mr. T applied for transfer of 100 shares from his name to Mr. K and form 117 and related share certificates were submitted duly for necessary action. After discussion the Board decided as follows: "The proposal for transfer of shares is approved". As there being no other issues to discuss the meeting ended with vote of thanks to and from the Chair. Mr. L Company Secretary Mr. X Chairman of the Board of Directors
84. Discuss the duties and functions of promoters. Directors and Auditors of a company [NovDec04]. Duties and functions of Promoters: The main duties and functions of a promoter is to undertake to form a Company with reference to agreement for the project. He has to handle all legal formalities for formation of a Company. Promoters may have three possible positions: 1. He may be a promoter to acquire the property for the company in which case, all the rules of agency would apply. Accordingly, any profit he may make will belong to the company. 2. He may acquire the property himself and then decide to form a Company and sell the property to it in which case no question of agency or trusteeship arises. He can make what bargain he chooses without being under any obligation to disclose the profits. 3. He may acquire the property with a view to resell it to the Company which he intends to promote, in which case he becomes bound by the fiduciary obligation and if he makes a profit he must disclose it to the Company.
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Duties and functions of Directors: 1. Distribution of work: among the staff; 2. Every director must act honestly and in the interest of the Company; 3. A Director must exercise such degree of skill and diligence as would amount to the reasonable care. 4. A Director should perform his duties at a greater degree of skill. 5. A Director should attend the Board or other meetings and should act according to the decision of the meeting. 6. To hold the AGM. 7. To maintain proper books of accounts. 8. Recommendation of dividend. 9. Disclosure of information as required by the Act and as required by others Act, rules, regulations and regulatory authorities. Duties and functions of Auditor: The main duty of an Auditor of a Company is to express an independent opinion on the financial statements prepared by the company. The auditor should conduct the Audit in accordance with BSA to obtain a reasonable assurance about whether the financial statements are free from all material misstatements. The auditor shall inquire into the following. a) Whether loans and advances made by the company on the basis of security which have been properly secured and whether the terms on which they have been made are not prejudicial to the interests of the company or its members. b) Whether transactions of the company which arc represented merely as book-entries arc prejudicial to the interests of the company. c) Where the company is not an investment company or a banking company, whether so much of the assets of the company as consist of shares, debentures and other securities, have been sold at a price less than its purchased price by the company. d) Whether personal expenses have been charged to revenue account. e) Whether it is stated in the books and paper of the company that any shares have been allotted for cash, whether cash has actually been received in respect of such allotment and if no cash has actually been so received, whether the position as stated in the accounts, books and the balance sheet is correct, regular and not misleading. 85. Discuss the circumstances on which the court orders for winding up of a Company on "just and equitable" ground. [Nov-Dec04] Just and equitable ground lf the Court is of opinion that it is just and equitable if the company should be wound up, the company would be wound up compulsorily .The interpretation of just and equitable clause depends on the facts of each case, the Court may order winding up of a company in case of just and equitable ground : 1. When the object for which it was incorporated has substantially failed or it is impossible to carry on the business of the company except at a loss or the existing and provable assets are inadequate to meet the liabilities; or 2. When the majority of the shareholders are using their powers unfairly; or 3. Where there is a deadlock in the management of the company; or 4. Where public interest is likely to be prejudiced; or 5. When the company was formed to carry out fraudulent or illegal business; 6. When the company is a mere bubble and does not carry on any business.
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86. When a company is deemed to be unable to pay its debts and what consequences may follow for such inability of payment of debts by a company? [Nov-Dec04] The Company unable to pay its debt would fall under following consequences: As per section 242, under the following circumstances a Company may be treated as unable to pay its debt: i. Any creditors issue demand notice for his receivable amount for more than Tk.5,000 and company does not take any action neglected for 3 weeks. ii. Any order passed by the court for payment but no action is taken by the company. iii. If the Court is satisfied that the company is unable to pay its debt. As per section 241 a company shall be wound-up compulsorily if it is unable to pay its debt. As per section 286 a Company may be wound-up voluntarily if the Company is unable to pay its debt and any extra ordinary resolution is passed for winding up of the Company. 87. What arc the procedures of reduction of share capital and how the same is confirmed? [NovDec04, May-June03] Procedures of reduction of share capital A special resolution is to be passed for reduction of share capital. As per section 60 where a company has passed a resolution for reducing its share capital it shall furnish petition to the Court for an order confirming the reduction. As per section 64, order of the Court confirming reduction will be required. The Court if satisfied with respect to every creditor of the company who under this act is entitled to object to the reduction, that either consent to the reduction has been obtained or his debt or claim has been discharged or has been determined or has been secured, may make an order confirming the reduction or such terms and conditions as it thinks fit. As per Section 65 the Registrar shall on production to him register the following documents, namely: a) the certified copy of the order of the court confirming the reduction of the share capital of a company; b) a copy of the minutes approved by the court showing the following; i. the amount of the reduced share capital; ii. the number of shares into which it is to be divided; iii. the nominal value of each such share; iv. the amount if any at the date of registration, deemed to be paid up on each such share. On the registration under sub-section (i) and not before, the resolution for reducing share capital as confirmed by the order so registered shall take effects. Notice of the registration shall be published in such manner as the court may direct. The Registrar shall certify under his hand the registration of the order and minutes, and his certificate shall be conclusive evidence that all the requirements of this Act with respect to reduction of share capital have been complied with and that the share capital of the company is such as is stalled in the minute.
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88. Is it binding on a director to hold qualification shares? [May- June04, Nov-Dec03] Qualification shares of Directors The Articles of a Company usually fix a minimum number of shares which every Director must subscribe in order to become a Director. This minimum number is known as the qualification shares of Directors. It is the duty of every Director who is required by the articles to hold a specified number of shares for qualification and who has" not already qualified himself accordingly, to obtain his qualification within two months after his appointment or such shorter time as may be fixed by the articles,. If after the expiration of the period mentioned above any such 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). 89. When office of a director stands vacated? [May- June04, Nov-Dec03] Vacation of the office of the Director As per section 108 of the Companies Act, the office of a Director shall become vacant under the following circumstances: 1. If he fails to obtain within the due time or at any time thereafter ceases to hold the qualifications shares, if any, necessary for his appointment; or 2. If he is found to be of unsound mind by a competent court; or 3. If he is adjudged an insolvent; or 4. If he fails to pay calls money made on him in respect of shares held by him within six months from the date of such calls being made; or 5. If he or any firm of which he is a partner or any private company of which he is a director, without the sanction of the company in general meeting accepts or holds any office of profit under the company other than that of a managing director or manager or a legal or technical adviser or a banker; or 6. If he absents himself from three consecutive meeting of the Directors or from all meetings of the Directors for a continues period of three months, whichever is the longer, without leave of absent from the Board of Directors; or 7. If he or any firm of which he is a partner or any private company of which he is a director accepts a loan or guarantee from the company in contravention of section 103; or 8. If he acts in contravention of section - 105. 90. Explain briefly the procedures of rotation of director. [May- June04] Rotation of Directors At the first general meeting of the company the whole of the directors shall retire from office, and at the general meeting in every subsequent year one-third of the directors for the time being or, if their number is not three or a multiple of three then the number nearest to onethird shall retire from office. The Directors to retire in every year shall be those who have been longest in office since their last election, but as between persons who become directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lottery. A retiring director shall be eligible for re-election. The company at the general meeting at which a director retires in manner aforesaid may fill up the vacated office by electing a person thereto.
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The directors shall have power at any time and from time to time, to appoint a person as an additional director who shall retire from office at the next following ordinary general meeting but shall be eligible for election by the company at that meeting as an additional director.
91. State the provisions of the Companies Act, 1994 regarding an Extra-Ordinary General Meeting to be held on requisition of its members. [May- June04] Extra ordinary general Meeting As per Section-84, the above meeting can be called on requisition from holders of 1/10th members or 1/10th holders of paid-up capital. This meeting is required for voluntary winding-up of the Company. If the Directors do not cause a meeting to be called within twenty-one days from the date of the requisition being so deposited, the requisitionists or a majority of them in value may themselves call the meeting, but in either case any meeting so called shall be held within three months from the date from the deposit of the requisition. 92. Discuss about the powers of the court to rectify the Register as stated in the Companies Act, 1994 [May- June04]. As contained in Section-194 the Registrar may make an application to the first class Magistrate having jurisdiction for an order for the seizure of such books and papers. The Magistrate may consider the application of Registrar and order as necessary after hearing. 93. Discus the salient features of the prospectus as required by the Companies Act, 1994 while taking into account registration of the same [May- June04]. Salient feature of a prospectus and its registration Before publication prospectus inviting people to subscribe shares or debentures of a company, a copy of the prospectus must be delivered to the Registrar for registration on or before the date of publication. It should be signed by the directors or proposed directors of the company or by their agent. On the face of the prospectus it should be stated that a copy has been delivered for registration; and must contain a list of statements included in the prospectus. The Registrar shall not register a prospectus unless the prospectus contains all the required elements and the prospectus is accompanied by the consent in writing of the person if any, named therein as the auditor, legal adviser, attorney, solicitor, banker or broker of the company or intended company, to act in that capacity. No prospectus shall be issued more than ninety days after the date on which a copy thereof is delivered for registration. If a prospectus is issued without delivering a copy thereof to the Registrar, the company and every person from those who have knowing been a parly to the issue of the prospectus shall be punishable with the fine which may extend to five thousand Taka (Section-138). 94. State the requirements for "Return of allotment" u/s 151 of the Companies Act, 1994. [MayJune04] Features as to allotment As contained in the Section-151 of CA 1994, a company having share capital makes any allotment of shares, the company shall within 60 days thereof, file with the Registrar the following documents:
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a) A return of allotment, stating the. member, nominal value of shares, names, address, nationality, amount paid-up in Cash; b) Amount paid-up other than in cash, any contract, vendor's agreement; c) Number of shares allotment and its nominal value; d) Share allotted against any immovable property. 95. In what ways may a promoter of a company be remunerated for his services? [Nov-Dec03] Promoter: A promoter may have three possible positions: 1. He may be a promoter to acquire the property for the company, which case, all the rules of agency would apply. Any profit he makes will belong to the company. 2. He may acquire the property himself and then decide to form a company and sell the property to it, in which case no question of agency or trusteeship arises. He can make what bargain he chooses without begin under any obligation to disclose the profits. 3. He may acquire the property with a view to re sell it to the company which he intends to promote, in which case he becomes bound by the fiduciary obligation and if he make a profit he must disclose it to the company. 4. A Promoter may be issued shares for his remuneration or as founder share 96. What is prospectus? What do you know about registration of prospectus? List the financial contents of a prospectus [Nov-Dec03]. Prospectus: A prospectus is an invitation to the public to purchase shares or debenture of a company. In other words a may be defined as any document that includes any notices, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any share Debenture of a body corporate. Registration of Prospectus: Before publication of a prospectus inviting people to subscribe shares or debentures of a Company, a copy of the Prospectus must be delivered to the Registrar for registration on or before the date of publication. It should be signed by the Directors or proposed Directors of the Company or by their agent. On the face of the prospectus Adhered to the Registrar for registration, it should be stated that a copy has been delivered for registration; and it contain a list of statements included in the prospectus. The registrar shall not register a prospectus unless speckles contains all the required elements as per Companies Act 1994, Public Issue Rules 1998, and other SBC regulations and the prospectus is accompanied by the consent in writing of the person if any, named therein as Ac auditor, legal adviser, attorney, solicitor,' banker or broker of the Company to act in that capacity. No prospectus shall be issued more than ninety days after the date on which a copy thereof is delivered for registration. If a prospectus is issued without delivering a copy thereof to the .Registrar, the Company and every person from those who have knowing been a party to the issue of the prospectus shall be punishable with the fine which may extend to five thousand taka (Section 138). Financial Condition to be incorporated in the prospectus: a) If the company had no revenues from operations in each of the last two years, the company's plan of operations for the next twelve months shall be described in the prospectus which shall, among others, include: i. a discussion of its cash requirement;
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ii. a summary of any product research and developments; iii. any expected purchase or sale of land; iv. any expected change in the number of employees; b) If the Company had revenue from operations in above period shall include the following: i. Resources of cash; ii. Expected capital expenditure; iii. Cause of changes of income, cost, operating expenses and net profit; iv. Seasonal aspects of business; v. Loan taken by the company; vi. Taxation yet to be paid; vii. Operating and finance lease; viii. Payment to manager to the issue, underwriter. 97. Can a shareholder become director without qualification shares? Can share warrant form the share qualification for directorship? [Nov-Dec03]. Qualification of Directors: Article of Association of a Company usually fix the minimum number of shares which every Director must subscribe in order to become a Director. The minimum number which is determined by the Articles is known as qualified number of shares as contained in Section 97(1) of CA 1994; every Director shall hold minimum qualified number of shares within 60 days or within the time as may be specified in the Articles whichever is earlier. As per Section 97(2), if after the expiration of the period mentioned in sub-section (1) any such unqualified person acts as a Director of the Company he shall be liable to pay a fine not exceeding Tk. 200 per day for the period of holding as an unqualified Director under this section. ' As per section 92, every person shall not act as a Director unless he has signed and filed with the Registrar to consent in writing to act as such director and signed the Memorandum for a number of shares not less than his qualified shares, or taken from the Company and paid or agreed to pay for his qualification shares. Share warrant is not taken into consideration for qualification of share of a Director. 98. Prepare a hypothetical company's report from the chairman of the Board of Directors to the shareholders for the ensuing annual general meeting. [Nov-Dec03]. Hypothetical report of the Chairman of the Board It is indeed a great honor and privileges for me to greet you all, once again, to this 10th annual General Meeting of your Company. It also gives me immense pleasure to place before you the Annual report along with the audited accounts of your company and auditors report thereon for the year 2006. Business Condition: 2006 experienced yet another successful year both in terms of sales and profitability despite the volatile political situation and economy of the country. Your share price has gone up by 100%. We were able to overcome all odds situation prevailed during the year.
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Expansion program: Some new products were added in the last financial year including introduction of 10 show rooms for enhance the distribution net work of our product to the customers. Financial aspects: Sales revenue was gone up by 50% compared to last year; Net profit before tax has been increased by 25% compared to last year; Shareholders equity has gone up to Tk.400 per share; Fixed assets and investments rose up to Tk.5000 million. Human resources: The achievement would not have been possible without the dedication and commitment of our employees who are the foundation of our company. Conclusion: Here I would like to take this opportunity on behalf of the Board of Directors and express my deepest appreciation to all our valued customers for their confidence in our product, to the employees for their tireless etc, to the suppliers for their quality goods, to the fellow shareholders and most honored shareholders for '.heir continuous support and interest for the welfare of the company. We shall however continue to seek this last support & confidence upon us. Thank you all. Chairman of the Board 99. Do the articles constitute a contract between: a) a company and its director; b) a company and its members; c) a company and its non-members; d) a company and its auditors/solicitors? Give reasons for your answer. [Nov-Dec03]. a) A company and its Directors: Yes, the signatories of the members of the company are the first directors and thereafter all the directors are liable to comply all the rules regulation contained in the articles. After submission of the form consent of the director to act constitutes a contract with the companies Articles of Association (A/A). b) A company and its members: Yes, the members of the company and the company as per rules regulation contained in the A/A. c) A company and its non-members: No, but if any contract is made with any non-members then it binds him to act as a contact, as per company's A/A.
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d) A company and its Auditors: The contract of the auditor is as per Companies Act and other relevant regulations but not with the A/A. 100. How shares of a company are transferred? [Nov-Dec03] Completion of share transfer As per clause 12(2) of listings regulations the Company shall complete share transfer and have ready for delivery the share certificates lodged for registration of transfer within 45 days of the application for such transfer and its registration. The transfer instrument is to be filled up by the transferor and the transferee and to be submitted to the company for necessary action. The transfer of shares requires Board's appointment. But at present, the electronics shares require no form of 117 for transfer. Just a valid intention of sale and buy is to submit to the Broker house for sales, buy, transfer of shares. It transfers automatically and instantly. 101. What are the restrictions for transfer of shares? [Nov-Dec03] The main restriction for transfer of share is that any shares when it is pledged to any body against any loan or the company has a lien on the share. In case of shares of a Pvt. Limited Company is restricted. The share is not transferable without the consent of all the members as well as complying with all regulation contained in the Articles of Association of the company. 102. Can Board of Directors express refusal to any transfer of shares? If so, how? [Nov-Dec03] Transfer of shares (Clause 20(1) of Schedule -1) The Directors may decline to register any transfer of shares not being fully paid up shares, to a person of whom, they do not approve, and may also decline to register any transfer of shares on which the company has lien. The Directors may suspend the registration of transfer during the fourteen days immediately preceding the ordinary general meetings in each year. The Directors may decline to recognize any instrument of transfer or refuse to register such transfer, unlessa. the instrument of transfer is accompanied by the certificate of share to which it relates; and b. Such evidence as the Directors may reasonably require showing the right of the transferor to make the transfer has been furnished. c. Form 117 is duly filled up.
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103. What purposes an extra-ordinary resolution can be used for? [May-June03] Seizure of such books As- contained in Section-194 the Registrar may make an application to the first class magistrate having jurisdiction for an order for the seizure of such books and papers. The register may consider the application of registrar and order as necessary. 104. How does money paid in advance of calls rank in winding up of a company? [May-June03] Reserve capital In case of reserve capital the share money is not called up until the winding-up of the company. The call money is required to meet up its winding up expenses. 105. What is a contributory? [May-June03] Contributory As per section 237 of CA 1994, any person who is liable to contribute to the fund of the company as per the provision of the act to meet up its financial obligation at the time of its winding up. The contributory may include: Any past and present directors; Any shareholders 106. To what extent are the different types of contributories liable on the winding up of a company? [May-June03] Extent of liabilities of different types of Contributories: i. A past member shall not be liable to contribute if he ceased to be a member for one year before the commencement of the winding up; ii. A past member shall not be liable to contribute in respect of any debt or liability created after he ceased to be a member; iii. A past member shall not be liable to contribute unless it appears to the Court that the existing members are unable to satisfy the contributions required to be made by them in pursuance of this act; iv. In case of a company limited by shares, no contributions shall be required from any member exceeding the amount of unpaid share capital; and v. In case of a company limited by guarantee, no contribution shall be required from any member exceeding the amount of undertaken to be contributed by him in the event of winding up. 107. Discuss the propositions: (i) that dividends must not be paid out of capital; and (ii) that dividends may only be paid out of profits. [May-June03] Payment of dividend out of profit Dividend is paid out of profit of the company. But the Companies Act has not mentioned anything about the composition of profit, i.e. capital profit of revenue profit. The dividend can be paid out of capital Profit if the profit is realized. But the dividend must not be paid out of capital which reduces the capital and the company will not be able to maintain its financial strength for continuity.
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But dividend may be paid out of profit acquired by the company after making all adequate provision as required by 'he policy, regulations etc. Generally dividend arc paid from the revenue profit for the year. But in some cases dividend can be paid out of capital profit if it is realized in full. 108. "Auditors verify the books & records after expenses have been incurred" - In such situation should they be held responsible for non-business expenditure shown in the business? [NovDec02] Responsibility of Auditors: Rights and duties of Auditor, Section-213: The Auditors have right to access any books of accounts, information, voucher, statement as required to perform the audit work. The auditors may require any information explanation from any officers, staff of the Company for the audit. They should investigate the followings: Security given against loan and advances whether it is secured or not and whether the terms arc detrimental to the interest of the company. The transactions, which have been shown in the books of accounts, whether they arc detrimental to the interest of the company. Whether or not any assets, shares, debenture or any other securities have been at a price sold lower than the purchase price (other than banking). Any loan and advances have duly been or not shown by the company. Whether or not any personal/unusual expenditure has been shown in the revenue account. Any share issued in cash whether the cash actually received or not and whether the presentation in the Balance Sheet for the same is misleading or not. The main duties of auditors are to Report to the shareholders that the Financial Statements are free from all material miss statements. i. Whether or not they have obtained all information and explanations as required by them; ii. Whether or not the Balance Sheet and Profit & Loss Accounts exhibits a true and fair review of the state of affairs of the company; iii. Whether or not proper books of Accounts have been maintained; iv. Whether or not the Balance Sheet and Profit and Loss Account are in agreement with the books of Accounts kept by the company; If any answer is in the negative the Auditor should disclose the fact and quantified. The auditors shall have exercised such competence and skill as required and as may be desirable from them as auditor to deter any non business expenditure are included in the business. If they fail to detect and if it is material, the auditors will definitely be held liable.
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109. "The Act has given a perpetual right of office of Auditors often against the common shareholders but not the stake owners in management" - What are your views? [Nov-Dec02] Perpetual right of Auditors As per Companies Act auditors are not easily changeable. For changing auditors a special notice is to be given U/s 211 of the Companies Act but as per section 210 (Ga) no such decision for changes of auditors can be taken other than their death, incapability, dishonesty, disqualification etc. This section provides the auditor their perpetual rights of the auditors. The management has no right to terminate auditors intentionally for their personal ground. The SEC regulations over ruled the section. As per SEC regulations the Auditor should be changed after 3 consecutive years. However it is convention for the auditor to hold their office for at least 3 years. But this right is absent for the stake holders on the management in the Companies Act. But I think this right also reestablished by the SEC regulation under many ways by adopting the main aspects of Corporate Governance. 110. Section 103 lays down about "Directors Loan" - Rewrite the contents in your way [Nov-Dec02]. Loan of Directors: Section 103 (1) of CA 1994 states that no company, other than a lending company mentioned below shall make any loan or give any guaranty or any security in connection with a loan made by third party toa) Any Director of the lending company ; b) Any firm in which any Director of the lending company is a partner; c) Any private company of which any Director of the lending company is a Director or Member; d) Any public company, the Managing agent, Manager or Director where of this accustomed to act in accordance with the directions of any Director of the lending Company; However the loan may be given in case of banking company or the loan is approved by the Board and AGM. 111. Explain floating charges and fixed charges. When does a floating charge crystallize? What is a debenture? Point out the differences between shareholders and debenture holders. Enumerate the remedies available to debenture holders. [Nov-Dec02] Floating Charge and fixed charge A charge on property is created when it is made liable for the payment of the" money. A charge may be fixed or floating. A fixed charge in one which creates legal interest of a specific property of the company or all the property of the company. Thus a fixed charge is equivalent to a mortgage. The company can sell, lease, etc. of the property subject to the right of the charge holder. The floating charge does not amount to mortgage. The owner of such a property can deal with it and the transferee gets it, free of charge.
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Meaning of Debenture: Debenture is a security instrument. When the capital of the company is not sufficient to meet the needs of business of the company, it can raise' fund in the form of issuing Debenture. Actually Debenture represents loan of the company. Debenture is usually issued in Bonds by a company and is offered by means of prospectus like issuance of share. Shareholders Owner Right to Creditor Rights Fixed Profit Yes Dividend / Loss No Equity owner No fixed dividend Dividend is part of profit after tax Debenture holders No Interest Yes Lender Interest is fixed Interest charged in P&L Accounts
Remedies available o the debenture holder when his debenture is in "jeopardy" Any of the following measures can be taken by the Debenture holder: i. He may file a suit for the recovery of the money by sale of the assets which were charged for the payment of the money; ii. He may file an application for appointment of a receiver to the court; iii. He may present petition to the court for winding up of the company; and iv. He may sale the charged properties as per the terms of the debenture. 112. What purposes an extra-ordinary resolution can be used for? [Nov-Dec02] Extra-ordinary resolution (Section-87(i) This is passed by such majority as is required for the passing of a special resolution at a meeting of which 14 days notice has been given. The notice must specify the intention to propose the resolution as an extra-ordinary resolution [Section-87(i)]. Such resolution is necessary when a company is sought to be wound-up voluntarily on the ground that it cannot continue its business on account of its liabilities and also for a number of other reasons. (Sec- 87) 113. What are the three possible positions of promoters of a company? [May-June02] A promoter may have three possible positions: 1. He may be a promoter to acquire the property for the company, in which case, all the rules of agency would apply. Any profit he makes will belong to the company. 2. He may acquire the property himself and then decide to form a company and sell the property to it, in which case no question of agency or trusteeship arises. He can make what bargain he chooses without begin under any obligation to disclose the profits. 3. He may acquire the property with a view to re sell it to the company which he intends to promote, in which case he becomes bound by the fiduciary obligation and if he make a profit he must disclose it to the company.
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114. What are the facts available in Solomon V. Solomon & Co. Ltd. Case (1897) and what was held by the Court in that case? [May-June02] Solomon vs. Solomon and co. Ltd. (1897) The essential distinction between a company and its member was established by the decision of the House of Lords in Solomon Vs. Solomon and co. Ltd. (1897) the facts were as follows: Mr. Solomon had for 30 years carried on successful business as sole trader in the manufacture of boots and shoes. In 1892 he formed a company, in those days the minimum number of shareholders was 7 and he had one share issued to himself, his wife and five for-his children. His wife held share as his nominees. He then transferred his business to the company a value of over pound 39,000, this price was very much in excess of the true value but as Solomon owned the company no on was there by deprived. He took the price partly in 2000 nos. of share at pound 1 share, partly in cash withdrawn from the business in the course of transfer, and partly in a pound 10,000 debenture issued by the company and secured by floating charge on its assets. The effect was that whoever held the debenture had a claim to the assets (to the extent of S 10,000) in priority of the claims of any other creditors of the company. So Solomon becomes the secured creditors of the company. The business of the company did not prosper. Solomon pledged his debenture to the bordered who lent him 5000 in cash which Solomon in turn paid over the company. Eventually the company became insolvent, if the debenture were repaid in full there will be nothing left for the other creditors. In the confused law suit which followed, the creditors advanced to main arguments: a) The sale transaction was sham and do Solomon was still the owner of the business and liable for its debts; b) The company was irregularly formed because 6 of the 7 share holders were mere nominees of Solomon. Argument; a) Prevailed in the high court but was rejected by the court of appeal which up held argument b) The House of Lords turned down argument (b) also and held that Solomon and his company were two separate people with the result that: A. The business was owned by and its debts were liabilities of the company not of Solomon personally; and B. Although Solomon owned beneficiary all the issued shares of the company he (and broderip as his successor) could also be a secured creditor with enforceable rights against the company in that capacity. 115. What are the documents required to be delivered to the Registrar of Joint Stock Companies by foreign companies carrying on business in Bangladesh? [May-June02] Documents to be delivered to the registrar for registration foreign companies: As contained in Section-379 a foreign company which establishes a place of business within Bangladesh shall, within one month of the establishment of the place of business, deliver to the Registrar for registration the following documents:
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a) a certified copy of the charter or statutes or memorandum and articles of the company or other instrument constituting or defining the constitution of the company; and if the instrument is not written in Bengali or English languages a certified Bengali or English translation thereof; b) he full address of the registration or principal office of the company; c) a list of the directors and secretary if any, of the company; d) the name and address or the name and addresses of one or more persons resident in Bangladesh, authorized to accept on behalf of the company service of process and any notice or other document required to be served on the company; e) the full address of the office of the company in Bangladesh, which is to be deemed its principal place of business in Bangladesh. 116. State the obligation of a foreign company regarding stating of its name. [May-June02] Obligation to state name of foreign company: a) In every prospectus inviting subscription in Bangladesh for its share or debenture, state the country in which the company is incorporated; b) Conspicuously exhibit on the outside of every office or place where it carries on business in Bangladesh, the name of the company and the country in which it is incorporated , in the letters easily legible in Bengali or English character. c) Cause the name of the company and of the country in which the company is incorporated, to be stated in legible in Bengali or English characters in all bills head and letters papers, and in all notices and other official publications of the company. 117. What is Prospectus? What are its main contents? Is it obligatory on a company to issue prospectus? What are the rights of a shareholder against the company and its directors and promoters for untrue and misleading statements in the prospectus? [May-June02] Prospectus, Information to be included in Prospectus as per SEC listing regulation: A prospectus is an invitation by the offer or company to the public to purchase shares or debenture of that company. In other words a prospectus may be defined as any document that includes any notices, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any share or debentures of a body corporate. As per SEC listing regulation following documents is to be included in the prospectus: Information to be included in the prospectus: 1. Cover page: a) Name of the company b) The amount and type securities being issue c) The offering price of securities d) The amount of commission' being paid e) The name and address of underwriters f) The date of prospectus g) Consent clause in bold type 2. Table of Contents (in side cover page) 3. Risk factors 4. Use of proceeds 5. Description of business
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6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18.
Description of property Plant of operation and discussion of financial condition Director and officers Involvement of officers and directors in certain legal proceedings Certain relationship and related transactions Executive compositions Option granted to officers, directors and employees Transaction with promoters Ownership of the companies securities Determination of offering price Plan of distribution Market for securities being offered Financial statements requirements etc.
Do all the companies issue a prospectus? All the companies do not issue a prospectus. Only the Public Limited Companies having permission from the Securities and Exchange Commission may issue a prospectus. A public limited company which does not issue a prospectus, it shall issue a statement in lieu of prospectus. As per Scction-141 a Public Limited Company having a share capital and not issuing prospectus must at least 31 days before the first allotment of shares or debentures, file with the Registrar for registration a statement in lieu of prospectus. The statement must be in the form prescribed in schedule - IV of the Companies Act-1994. In case of untrue and misleading information furnished in the prospectus its promoters and directors will be held liable. The shareholders may claim to refund the value of shares allotted and the Shareholders, may claim demurrage for any losses incurred for such misstatement furnished in the prospectus. But they cannot retain the share and claim the demurrage simultaneously. 118. State the requirement of a liquidator to call general meeting at the end of each year according to section 295 of the Companies Act, 1994. [May-June02] Liquidator to call General Meeting As per section 295, in the event of the winding up of company continuing for more than one year, the liquidator shall summon a general meeting of the company at the end of the first year from the commencement of the winding up and of each succeeding year, or as soon thereafter as may be convenient within ninety days, of the close of the year, and shall lay before the meeting an account of his acts and dealings. If the liquidator fails to comply with this section, he shall be liable to a fine not exceeding five hundred taka. 119. State the provisions for conversion of a Private Ltd. Company to a Public Ltd. Company as laid down in section 231 of the Companies Act 1994 [Nov-Dec01]. Conversion of a private limited company to a public limited company A private limited company having at least seven members can be converted into a public limited company by altering its articles in such manner that they no longer include the provisions which, under clause of subsection (1) of section 2 of the companies Act 1994, are required to be included in the articles of a company in order to constitute it a private company. From the date of such alteration the
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company ceases to be a private limited company and is required to be submitted with the register a prospectus or a statement in lieu of prospectus within a period of 30 days (section 231) 120. It is also possible to convert a Public Ltd. Company into a Private Ltd. Company. Narrate the procedures. [Nov-Dec01] Conversion of a public limited company to a private limited company According to section 232, A public limited company, having not more than 50 member of members at the time of conversion, may be converted into a private limited company by altering its articles by passing a special resolution so as to exclude provisions if any, in the articles of association applicable to public company and include therein provisions applicable to a private company. If the company has secured creditors, their written consent shall have to be obtained before passing such resolutions. If the shares are listed with stock exchange(s), are to be de listed. 121. What are the differences between a Private and a Public Ltd. Company? [Nov-Dec01] Difference between public limited company and a private limited company: Point of Differences Minimum nos. of members Maximum Numbers of Members Issuance of share in the public Transfer of share Listing SEC regulations Public Ltd. company 7 Un-limited Shares can be issued Transferable Can be listed with stock Exchanges Are required to be complied Private Ltd. Company 2 50 Prohibited Restricted to transfer Cannot be listed Compliances are minimum
122. Critically comment on the books of accounts and the access of Registrar to the books as the shareholders arc the owners of the Company. [Nov-Dec01] As contained in Section-194, the Registrar may make an application to the first class magistrate having jurisdiction for an order for the seizure of such books and papers. The magistrate may consider the application of registrar and order as necessary after hearing. 123. How does the Act provide for holding first Annual General Meeting (AGM) and subsequent AGMs? [Nov-Dec01] As per section 81 the 1st AGM of a company is to be held within 18 months from the date of its incorporation and thereafter once at least in every calendar year. The period during which the subsequent meeting should be held is 15 months from the previous general meeting,
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124. How do you distinguish between Statutory Meeting and Extra Ordinary Meeting? [Nov-Dec01] Statutory Meeting: Every company limited by shares and every company limited by a guarantee and having a share capital is required to hold a statutory meeting of the members of the company within a period of six months and not less than one month from the date on which the company becomes entitled to commence its business (section - 83) Extraordinary Meeting: All meetings of the shareholders other than the annual meeting or those provided for in the articles are known as extraordinary general meetings. These meetings may he called by the Directors either "suomoto" or on the requisition of not less than 1/10th shareholders. 125. What do you know about Extra Ordinary and Special Resolutions? Narrate the provisions of the Act for filing these resolutions with the Registrar. [Nov-Dec01] Special resolution: This is passed in a meeting by a three-fourths majority of the members present in person or by proxy, provided, notices for such a meeting specifying the intention to propose the resolution at least twentyone days before the date of the meeting has been given. Special resolutions are necessary for: a) to change the name of the company; b) to alter the memorandum; c) to alter the articles. Extra Ordinary resolution: This is passed by three-fourth majority vote at general meeting of which 14 days notice has been given. The notice must specify the intention to propose the resolution as an extra-ordinary resolution (Section87(i). Such resolution is necessary when a company is sought to be wound-up voluntarily on the ground that it cannot continue its business on account of its liabilities and also for a number of other reasons. (Sec- 87) Copy of such resolution is to be filed with the register within 15 days from the date of such meeting. (Section-88) 126. Narrate the provisions of the Companies Act, 1994 about appointment of Directors of a Company. [Nov-Dec01] Appointment of Directors (Section-91): a) The subscriber of memorandum shall be deemed to be the first Director of the company; b) The Directors are appointed by the shareholders in the General Meeting; c) The existing Directors may appoint any person as Director in case of any casual vacancy. One third of the Directors shall retire by rotation in each year. 127. Discuss the Disqualifications of Directors as laid down in section 94 of the Companies Act, 1994 [Nov-Dec01].
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Disqualification of Directors (Section- 94): Following persons shall not be eligible for appointment as Director: An unsound mind, declared by a competent court; An insolvent or an un-discharged insolvent; Any person fails to pay his shares money after it is called up and 180 days are elapsed; A minor; Any other person/persons as may be prescribed in the article. 128. What are the grounds on which a company may be compulsorily wound up? [Nov-Dec01] As per section 241 a company shall be wound up if the company: i. Passed a special resolution for winding up of the company by court; ii. Fails to furnish statutory report or fails to hold statutory meeting; iii. Suspend its business operation for one year or fails to commence business within one year of its incorporation. iv. Members reduced to less than 2, 7 for Private &.Public Limited Company respectively. v. Unable to pay its debt. vi. Court is satisfied that it is just and equitable to wind-up the company. 129. Who are authorized to make an application to the court for the winding up of a company? [NovDec01] According to Section 239, the winding-up of a company may be done in any one of the following three ways: i. Compulsory winding up by court; ii. Voluntary winding up by the members or by creditors; and iii. Voluntary winding up under the supervision of the court. In above all cases winding may be made by the application of: i. Any member of the company with the special resolution; ii. Any member of the company with the extra-ordinary resolution; iii. The regulatory authority, in case of default in filing the statutory meeting, statutory report; iv. Any creditors/members, if the company is unable to pay its debts.
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The Securities and Exchange Commission Act, Rules and Ordinance

1. What do you mean by "securities" as outlined in the SEC Order, 1969? [Nov-Dec08]
"Securities" means any of the following instruments issued or to be issued by or for the benefit of a company, whether incorporated in Bangladesh or not, namely i. any Govt. security as defined in the Securities Act, 1920 (X of 1920), and ii. other instruments creating a charge or lien on the assets of the company; and iii. instruments acknowledging loan to or indebtedness of the company and guaranteed by a third party or entered into jointly with a third party, and includes any Stock, transferable share, script, note, debenture, debentures stock, bond, investment contract and pre-organization certificate or subscription, and, in general, any, interest or instrument commonly known as a "Security". 2. What are some specific examples of a companys affairs or market conditions typically requiring disclosure? [Nov-Dec08]
The following events, while not comprising a complete list of all the situations which may require disclosure are particularly likely to require prompt announcement: a) a joint venture, mergers, acquisitions or takeover; b) the declaration or omission of dividends or the determination of earnings; c) the acquisition or loss of a significant contract; d) a significant new product or discovery; e) a change in control or a significant change in management; f) a call of securities for redemption; g) the borrowing of a significant amount of funds; h) the public private sale of significant amount of additional securities; i) significant litigation; j) the purchase or sale of significant assets; k) a significant change in capital investment plans; l) a significant labor dispute with sub-contractors or suppliers; m) a tender offer for another companys securities; n) an event of default on interest and/or principal payment in respect of loans. 3. State the regulations as to holding of AGM by a listed company of DSE in addition to provisions of Companies Act. [Nov-Dec08]
In exercise of the power conferred by section 2CC of the Securities and Exchange Ordinance, 1969, the Securities and Exchange Commission imposes the condition that Annual General Meeting (AGM) shall be held by the listed security issuers within 45 (forty-five) working days from the record date or completion of book closure period, as the case may be.
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4.
What are the reasons for which a listed company may be delisted or suspended by the DSE as per its listing regulations in force [May-June10, Nov-Dec08, May-June07, May-June05].
Delisting and suspension Section 31 A listed Company may be de-listed or suspended for any of the following reasons: (a) If its securities are quoted below 50% of face value for a continuous period of 3 calendar years. (b) Failed to declare dividend or Bonus: For 5 years from last dividend. For 5 years from commencement of Business For 5 years from the date of commercial operation. (c) Failed to hold Annual General Meeting for a continuous period of 3 years. (d) Gone into liquidation. (e) Failed to pay listing fees or Penalty for two years. (f) Failed to comply any provision of the regulations. 5. What is the impact in shares of a listed company are not traded for a continuous period 180 days at the stock exchange? [May-June10, May-June08, May-June05]
Where no trading took place in the Exchange of the securities of a listed Company for a continuous period of 180 days, the Exchange, if it is satisfied that the prices quoted are not in accordance with the market realities, the Exchange may declare it as not traded or as an inactive stock, until such time as a subsequent trade takes place and a price is ascertained. 6. As envisaged in the Public Issue Rules, 2006, as amended up to date, mention the various risk factors to be described in the Prospectus by an IPO aspiring public limited company and use of the proceeds of the IPO funds [May-June10, May-June08, May-June05].
Public issue rules 2006, risk factors As contained in the Public issue rules 1998 the following risk factors are to be described in the prospectus: a) No recent receipt of revenues; b) Poor financial conditions; c) Industry risks; d) Currency risks; e) Market and technology related risks; f) Potential or existing government regulations; g) Potential changes in global or national policies; h) No operating history. Use of Proceeds: a) The prospectus shall also reflect how the net proceeds of the offering shall be used; indicate the amount to be used for each purpose. b) The prospectus shall include a schedule mentioning the stages of implementation and the utilization of funds received through initial public offering, mentioning about the appropriate date of completion of the project and the projected date of full commercial production.
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c) If there are contracts covering any of the activities of the company for which the proceeds of sale of shares are to be used, such as contracts for the purchase of land or contracts for the construction of buildings, the prospectus shall disclose the terms of such contracts, and copies of the contracts shall be filed with the commission as annexure to the prospectus. 7. Discuss the provisions of Appeals as provided in the SEC Act, 1993 [May-June10, May-June08, May-June06, May-June05, Nov-Dec01].
Appeal, Section-21, SEC Act 1993 i. If anyone is aggrieved with any order of any members or officers of the Securities and Exchange Commission (SEC) on any matter, may appeal to Securities and Exchange Commission on any matter under this Act within the stipulated time as framed under the rules. The decision of the commission on the said appeal shall be final; No appeal shall be accepted after the stipulated time but the commission may accept any appeal where there were adequate reasons for such delay; The appeal, in question, shall be made in prescribed form with prescribed fees along with the copy of the order against which appeal is to be made; The decision of the appeal shall be final according to the laid down rules. No decision of the appeal shall be final without giving a reasonable opportunity of hearing; The commission at its own discretion or with the application from any one may reconsider any appeal. The decision of the commission shall be final. Discuss the provisions for submission of annual reports under the SEC rules, 1987 [MayJune08].
ii. iii. iv. v. 8.
As per Rule 12 of the Securities and Exchange Rules, 1987: i. The annual report shall be furnished by an issuer of a listed security include a balance sheet and profit and loss account and cash flow statements, and notes to the accounts, collectively herein after referred to as financial statements; ii. The financial statements of an issuer of a listed security shall be prepared in accordance with requirements laid down in the schedule and the International Accounting Standards a adopted by the Institute of Chartered Accountants of Bangladesh; iii. The financial statements of on issuer of a listed security shall be audited by a partnership firm of chartered accountants within the meaning of Bangladesh Chartered Accountants Order (P.O. 2 of 1973); iv. The financial statements shall be audited within one hundred and twenty days from the date on which the issuers financial year ends and a copy of such audited financial statements shall be submitted to the Commission and the Stock Exchange within 14 days thereof. 9. What are the restrictions on dealing in securities? [Nov-Dec07, May-June04, Nov-Dec02]
Restriction on dealings in securities The restrictions in dealing in securities have been imposed by the SEC ordinance 1969 under various sections which are as follows: As per section 2A no company in shall make an issue of capital in Bangladesh or make in Bangladesh any public offer of securities for sale without consent of SEC.
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10.
As per section 2b consent of the commission must be taken before issuance of any prospectus. As per section 2c no person shall accept or give any consideration for any securities for which consent of the commission has been accorded to such issue of capital. As per section 3 no stock exchange shall operate or carry on its functions and no persons shall use the stock exchange unless it is registered under the SEC ordinance. Enumerate the provisions about listing of securities in the DSE [Nov-Dec07, May-June04, NovDec02].
Listing of securities: Application for listing shall be made by the applicant company or on behalf of security in the prescribed form and will be accompanied by the fees, specified in the regulations. Following documents, papers are to be submitted to the Exchange for listing of any securities: i) ii) iii) iv) v) vi) vii) viii) ix) x) 11. Application for listing in prescribed form as per Form-I Memorandum and articles of association A copy of certificate of incorporation A copy of certificate of commencement of business A copy of feasibility report Registration of the Board of Investment Copies of material contract with suppliers, Foreigners, financial institutions Copies of L/cs for plant and machinery Draft prospectus Auditors certificate for the amount subscribed by the promoters
Describe the powers and functions of the SEC commission as provided in the SEC Act, 1993. Do you consider its provision adequate to regulate the stock exchange? [Nov-Dec10, May-June09, Nov-Dec07, May-June06, Nov-Dec05, May-June05, Nov-Dec03, Nov-Dec02, May-June02, Nov-Dec01]
Power and function of the commission, Section-8, SEC Act, 1993. It shall be the responsibility and duty of the commission to ensure the proper issuance of Securities, to protect the interest of the investors in securities and to promote the development and to regulate the Capital and Securities market in Bangladesh. In particular and without prejudice to the provision of Section 8(1), the duties and functions of the Commission may include the following: (a) Regulating the business of the Stock Exchanges or any other market of Securities; (b) Registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers and manager to the issue, trust deeds, registrars to an issue, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with securities market in any manner whatsoever; (c) Registering regulating and monitoring the working of any form of collective investment scheme including all forms of mutual funds;
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(d) Promoting, monitoring and regulating all authorized self-regulatory organizations in the securities market; (e) Prohibiting fraudulent and unfair trade practices relating to securities or in any securities market; (f) Promoting investors education and training of all intermediaries of securities market; (g) Prohibiting insiders trading in Securities; (h) Regulating substantial acquisition of share or stock and takeover of Companies; (i) Calling for information from, undertaking investigation and inspection, conducting inquiries and audit of any issuer or dealer of securities, the Stock Exchange and intermediaries and any selfregulatory organization in the Securities market; (j) Compiling, analyzing and publishing indices on the financial performance of any issuer of Securities; (k) Levying fees or other charges for carrying out the purpose of this section; (l) Conducting research and publishing information for the above purpose; and (m) Performing such other functions and duties as may be prescribed for fulfilling the objectives of this Act. 12. Discuss about the additional requirements to directors report apart from those of Company Act 1994: (1) Under the listing rules of stock exchange of BD, (2) Notifications of SEC. [Nov-Dec10, May-June09, May-June07, May-June04, May-June02]
Information to be included in the Directors report: As per clause 37(4) of DSE listing regulations following information are to be contained in the Directors report in addition to the requirement of companies Act 1994: (i) (ii) (iii) (iv) (v) (vi) 13. Name of the persons who were directors in the financial year The principal activities of the company Significant changes in the company Information relating to issuance of share, If any share is issued during the financial year A statement of each director whether or not he had an interest in any other body corporate within the group Any contribution made to the government exceeding Tk. 50,000.00
Under what circumstance SEC can impose penalty under SEC Ordinance, 1969? What is the amount of such penalty? [Nov-Dec09]
Section 24 of the Securities and Exchange Ordinance, 1969 lays down the provision for imposition of penalty for doing fraudulent act in the following manner: 1. If any person does any fraudulent act in mentioned in section 17, then he shall be punishable with imprisonment for a period of maximum 5 years or may be fined for Tk.5 lac or both. 2. Where the said person is a company or a body corporate, then every director, manager or other officers shall be penalized in the aforeside manner.
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14.
Describe the silent features of the IPO rules, 2006 promulgated by the SEC [May-June09, NovDec06, Nov-Dec03, Nov-Dec01].
Salient features of Initial public offering rules IPO rues are also referred to as the Public Issue Rules 2006. Some important sections of which are described below: Rule-3: Application for consent to an issue of capital: For obtaining consent to an issue of capital, an issuer shall apply to the SEC with some documents such as three copies of prospectus duly completed and signed. Rule-4: Publication of prospectus and opening of subscription: The Prospectus shall be published in two national daily newspapers within 10 days from the date of receipts of such consent from SEC. Rules- 7: Format and contents of prospectus: A) All material information and disclosures are to be included to enable investors to make an informed assessment of the company and its position. Information to be included in the prospectus Cover page: Following information shall give on the from cover page: a) Name of the company; b) The amount and type securities being issued; c) The offering price of securities; d) The amount of commission being paid; e) The name and address of underwriters; f) The date of prospectus; and g) Consent clause in bold type 1. Table of Contents (in side cover page): Information relating to the following matters are to be given in details with a comprehensive manner: i. Risk factors: Such as industry risk, Currency risk, market risk etc. 2. Use of proceeds 3. Description of business: Date from which the company was organized, date of commencement of operation, principal product of the company, Distribution of products, source of Gas, Electricity and water etc. 4. Description of property: i. Plant of operation and discussion of financial condition ii. Director and officers iii. involvement of officers and directors in certain legal proceedings iv. Certain relationship and related transactions v. Executive compositions
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vi. Option granted to officers, directors and employees vii. Transaction with promoters viii. Ownership of the companies securities ix. Determination of offering price x. Plan of distribution xi. Market for securities being offered xii. Description of such Securities xiii. Financial statements requirements etc.: a summary of earnings, Profit and loss account, cash flows statements etc. for last five years, Rule-10: refund of over subscription Rule: 11: Subscription and refund by or to NRB Rule-12: Availability of securities: 10% shall be kept reserve for NRB, 10% for Mutual Fund and 80% for general public Rule-14: Issue manager Rule-15: Underwriter 15. What are the various documents required to be furnished to the DSE for listing of securities by a company? [Nov-Dec09, Nov-Dec06, May-June03, Nov-Dec03, Nov-Dec01]
The following particulars and authenticated documents shall be annexed to the listing application, namely: 1. Memorandum and Articles of Association and, in case of Participatory Redeemable Capital, a copy of the trust deed; 2. Copies of prospectus issued by the company in respect of any security already listed on the Stock Exchange; 3. Copies of balance sheets and audited accounts for the last five completed years or for a shorter number of years if the Company has been in existence only for such shorter years/period; 4. A brief history of the company since incorporation giving details of its activities including any reorganization changes in its capital structure and borrowings; 5. A statement showing: a) Dividends and cash bonus and/or bonus shares or right shares issued during a last 10 years or such shorter period as the company may have been in existence; b) Dividends or interest in arrears, if any. 6. Certified copies of agreements or other documents relating to arrangements with or between: a) Vendor and/or promoters; b) Underwriters; c) Brokers. 7. Certified copies of agreements with; a) Managing agents; b) Selling agents;
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8.
9. 10.
11. 12.
c) Managing director and technical directors. 8. A statement containing particulars, dates of and parties to all material contracts, agreements (including agreements for technical advice and collaboration), concessions and similar other documents except those entered into in the normal course of the companys business or intended business together with a brief descriptions of the terms of such agreements or contracts. Certified copies of the agreements with the BSB, BSRS, ICB and any other financial institutions. Names and address of the directors and persons holding ten percent or more of any class of equity security as on the date of application together with the number of shares of debentures held by each. Particulars of security for which listing is sought. Additional/information/documents that may be called by the Exchange.
The following documents and particulars duly certified by the company or the Company or authorized representative presenting the security shall be submitted to the Exchange at the time of application for listing or any time on demand by the Exchange. 1. Application for listing as per Form I; 2. Memorandum & Articles of Association; 3. Copy of the Certificate of incorporation; 4. Copy of the Certificate of Commencement of Business; 5. Copy of the Feasibility Report, in case of a new project; 6. Copy of the certificate of registration of the industrial Units issued by the Council of Investment or any other competent authority; 7. Copies of all material contracts and agreements entered into or exchanged with foreign participants, machinery suppliers and any other financial institutions; 8. Copies of Letter (s) of Credit established in favour of Machinery Suppliers, if linked with the public issue; 9. Copy of Consent order issued by the Commission; 10. Names of Directors along with directorship of other companies listed on the Exchange; 11. Draft prospectus/Offer for sale; 12. Auditors Certificate for the amount subscribed by the promoters/directors/ subsidiaries/associates; 13. Copies of the agreements relation to issue to securities for consideration other than cash, if any; 14. Copy of underwriting agreement (if any); 15. Statement of audited accounts for the last 5 years or for a shorter number of years if the company is in operation only for such shorter period; 16. Statement showing the cost of project and means of finance; 17. Copies of the approval of tax-holiday application under Ordinance, 1984; 18. Copies of the consent Letters from Bankers or Financial Institution to the Issues; 19. Application for submission of Under of Undertaking and payment of fees as per Form II; 20. Copy of approval of prospectus/offer for sale from Commission; and
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21. Any other documents/material contract and such other particulars as may be required by the Exchange or by the Council and/or by the Commission; 16. What are the provisions for appeal by a person aggrieved by an order of a member or an officer of the commission? [Nov-Dec05, Nov-Dec04]
Appeal, Section-21, SEC Act 1993: 1. If anyone is aggrieved with any order of any members or officers of the Securities and Exchange Commission (SEC) on any matter, may appeal to Securities and Exchange Commission on any matter under this Act within the stipulated time as framed under the rules. The decision of the commission on the said appeal shall be final; No appeal shall be accepted after the stipulated time but the commission may accept any appeal where there were adequate reasons for such delay; The appeal, in question, shall be made in prescribed form with prescribed fees along with the copy of the order against which appeal is to be made; The decision of the appeal shall be final according to the laid down rules. No decision of the appeal shall be final without giving a reasonable opportunity of hearing; The commission at its own discretion or with the application from any one may reconsider any appeal. The decision of the commission shall be final. Draft a plan of operation and the financial conditions to be incorporated in the Prospectus by a public limited company according to Public Issue Rules, 2006 [May-June05].
2. 3. 4.
5.
17.
Plan of operation and Discussion of Financial Condition to be incorporated: a) If the company had no revenues from operations in each of the last two years, the company's plan of operations for the next twelve months shall be described in the prospectus which shall, among others include: 1. a discussion of its cash requirement; 2. a summary of any product research and developments; 3. any expected purchase or sale of land; 4. any expected change in the number of employees; b) If the Company had revenue from operations in above period it shall include the following: 1. Resources of cash; 2. Expected capital expenditure; 3. Cause of changes of income, cost, operating expenses and net profit; 4. Seasonal aspects of business; 5. Loan taken by the company; 6. Taxation yet to be paid; 7. Operating and finance lease; 8. Payment to manager to the issue, underwriter.
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18.
What are the requirements of presenting financial statements by an IPO aspiring public limited company? [May-June05]
Presentation of financial statement in the prospectus for IPO has some requirements. These are: 1. The prospectus shall include a financial statement and a report thereon as required by Companies Act 1994. 2. The audited accounts and it should be as per BAS & BSA respectively. The financial statements shall include: a) Summary of earnings for 5 years or existence periods whichever is higher; b) A consolidated Balance Sheet to be submitted to the SEC for the above period. c) A profit and loss account, cash flow statements for the above periods to be submitted to the SEC. 19. Draft an 'Auditors' Report of a listed company in the form prescribed by Securities and Exchange Rules, 1987 [Nov-Dec03].
Auditors' Report as per Securities and Exchange Rules 1987: We have audited (he annexed Balance Sheet of Ltd. as at -and its profit and loss Account for the year ended as on that date together with accompanying cash How statement and notes thereto as prepared by the company in due conformance with generally accepted accounting principles, produced to us by it for our examination in due conformance with applicable international standard on Auditing and we report that: i. We have conducted the audit as per applicable International standards on Auditing (ISA); ii. Our examination, and checking of records relevant books of accounts, registers, schedules and financial statements were sufficient to enable us to for an informed and assessed opinion on the authenticity and accuracy of the accounts and financial statements; iii. We have obtained all the information, explanation and documents as required by us; iv. The company Management has followed relevant provisions of law and rules in managing the affairs the of the company and the proper books of the accounts, records and other statutory books have been properly maintained; v. The balance sheet and profit and loss account are in agreement with the said books of accounts maintained by the company and prepared as per requirement of International Accounting Standards( IAS) vi. The expenditure incurred and payments make were for the purpose of the company's business for the year. And in our opinion the annexed Balance Sheet and profit and loss Accounts represent in true and fair view of the stale of the company's affairs as at and of the profit earned for the year ended on that date and that these financial statements have been drawn up in accordance with requirements of applicable laws and rules and the International accounting Standards as applicable in Bangladesh
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20.
Who are insiders? What is insider information? What do you mean insider trading? Suggest your company some steps to be taken for preventing insiders trading [May-June03, May-June02].
Insiders: All persons who came into possession of material inside information before its public release are considered insiders for the purpose of the exchanges disclosure policies. Such persons include controlling shareholders, Directors, officers, attorneys, auditors, advisors, consultant, contractors, bankers etc. The husbands, wives and immediate family members of the above insiders are also considered as insiders. Insider information: Insider information is that which has not been publicly released and which is intended for use solely for a corporate purpose and not for any personal use and which the company withholds. Insider trading: Insider trading refers not only to the purchase or sale of company securities but also to the purchase or sale of options with respect to such securities. Such trading in deemed to be done by an insider whenever he has any beneficial interest, directly or indirectly in such securities or options regardless of whether they are actually held in his name. Prevention of insider trading: Issuing notice to the concerned persons; Penal provision in the Companys rules, and Awareness of related SEC laws, rules. 21. Discuss about the requirements as to cash flows statement annexed to the SEC Rules, 1987 [May-June03].
Requirements of Cash flows in SEC rules: As per SEC rules 1987 the cash flows statement shall be so made out as to disclose clearly the cash flows of the company from its operation, investing and financing activities. The major classes of cash receipts and cash payments should be disclosed using Direct Method. Interest payments, long term loan repayments /receipts, dividend receipts and payments, etc. are to be disclosed clearly. Net Operating Cash flows per share is to be disclosed. 22. Do all the companies issue a prospectus?
All the companies do not issue a prospectus. Only the Public Limited Companies having permission from the Securities and Exchange Commission may issue a prospectus. A public limited company which does not issue a prospectus, it shall issue a statement in lieu of prospectus. As per Section-141 a Public Limited Company having a share capital and not issuing prospectus must at least 31 days before the first allotment of shares or debentures, file with the Registrar for registration a statement in lieu of prospectus. The statement must be in the form prescribed in schedule IV of the Companies Act-1994. In case of untrue and misleading information furnished in the prospectus its promoters and directors will be held liable. The shareholders may claim the value of shares allotted. The Shareholders may claim demurrage for any losses incurred for such misstatement furnished in the prospectus.
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23.
What do you know about Price Sensitive Information of a listed Stock in a Stock Exchange? [Nov-Dec09]
Price Sensitive Information: It means any such information which, if published may influence market price of the concerned security and includes the following information: i. Report in respect of financial condition of the company or any basic information in respect thereof; ii. Information relating to dividend; iii. decision of giving right, bonus shares to the shareholders; iv. decision of buying or selling any immoveable asset; v. decision of BMRE, New unit of the Company; vi. Basic change of activities of the company; vii. Any others as determined by the Commission. 24. What is prospectus? What is the procedure for registration of prospectus?
Prospectus: A prospectus is an invitation to the public to purchase shares or debenture of a company. In other words, a prospectus may be defined as any document that includes any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any share or debentures of a body corporate. Prospectus has the following characteristics: 1. It is a document described or issued as a prospectus; 2. It includes any notice, circular, advertisement to the public for sale of securities; 3. It is an invitation to the public; 4. The public is invited to subscribe the shares or debentures of a Company. Registration of Prospectus Before publication of a prospectus inviting people to subscribe shares or debentures of a Company, a copy of the prospectus must be delivered to the Registrar for registration on or before the date of publication. It should be signed by the Directors or proposed Directors of the Company or by their agent. On the face of the prospectus delivered to the Registrar for registration, it should be stated that a copy has been delivered for registration; and must contain a list of statements included in the prospectus. The registrar shall not register a prospectus unless the prospectus contains all the required elements as per Companies Act 1994, Public Issue Rules 2006, and other SEC regulations and the prospectus is accompanied by the consent in writing of the person if any, named therein as the auditor, legal adviser, attorney, solicitor, banker or broker of the Company to act in that capacity. No prospectus shall be issued more than ninety days after the date on which a copy thereof is delivered for registration. If a prospectus is issued without delivering a copy thereof to the Registrar, the Company and every person from those who have knowing been a party to the issue of the prospectus shall be punishable with the fine which may extend to five thousand taka (Section 138)
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The Banking Companies Act, 1991

1. Discuss the provision of the Bank Companies Act 1991 relating to paid up capital and reserve capital of a bank. [May-June09, May-June08, May-June07, May-June04, May-June03, NovDec02, Nov-Dec01]
Bangladesh Bank being empowered by the proviso under section 13(2) of the Bank Companies Act 1991 fixes the minimum paid-up capital and reserve fund of banking companies shall be BDT 400 crores, of which the paid up capital shall be not less than BDT 200 crore or the amount equivalent to the risk based capital as determined from time to time by the Bangladesh Bank, whichever is higher. To raise paid-up capital and reserve fund, banks shall have to follow the following instructions: 2. Capital shortfall will have to meet by 11 August 2011. Having shortfall of required capital and reserves banks will not pay or declare cash dividend. May merge with other banks and/or NBFI to ensure the required capital by 11 August 2011. Shall take necessary measures to amend the MEMART. May raise the reserve by keeping profit after tax by issuing right share or IPO, if applicable. Discuss the restrictions for bank companies with regard to appointment of Directors and Managing Directors. [May-June08]
Restriction to appointment of Managing Director: No banking company shall employ anyone as managing director: who is, or at any time has been adjudicated insolvent; who is, or has suspended payment, or has compounded with his creditors,; who has been convicted by a criminal court of an offence involving moral turpitude; Restriction to appointment of Director: The conditions imposed upon the Bank Company with regard to appointment of Directors are as follows: a) The Board of Directors of the Bank Companies shall be constituted of maximum 13 (thirteen) directors. However, the directors of the banks, where the number of directors is more than this number, shall be allowed to complete their present tenure of office. b) Bangladesh Bank may appoint not more than 2 (two) directors in the Board of Directors amongst the depositors as per Appointment of directors from Depositors of Banking Companies Rules, 2008. Directors appointed from the depositors shall be in addition to 13 (thirteen) members of board of Directors under the sub-clause 15(6) of the Banking Companies Act, 1991. c) Bangladesh Bank from time to time provided guidelines to the appointment of Directors from Shareholder and Directors from the Depositors of Banking Companies as "Fir and Proper Test" criteria which also the restrictions with regard to appointment of Directors. 3. Narrate the circumstances when Bangladesh Bank can dissolve the Board of Directors. [NovDec10, May-June09, Nov-Dec08, Nov-Dec07, May-June06, Nov-Dec03, May-June03]
As per section 47 of the Banking Companies Act 1991, power of the Bangladesh Bank to dismiss the Board of Directors of a banking company 1. Where the Bangladesh Bank is satisfied-
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a) that the Board of Directors of a banking company, by whatever name it be called, conducts its affairs in a manner detrimental or prejudicial to the interest of the banking company or its depositors; or b) that, for any or all of the reasons mentioned in 46 (1), it is necessary to dismiss that Board of Directors, it may, after committing its reasons to writing, dismiss that Board of Directors by a direction; and the direction to dismiss that Board shall come into effect from such date and be in force for such period as, is mentioned therein. 2. The Bangladesh Bank may extend, from time to time, the period of a direction issued under subsection (1), provided that the total period shall not exceed two years, all extensions included. 3. A Board of Directors being dismissed, the person appointed in this behalf from time to time by the Bangladesh Bank shall have all the powers and functions, and accomplish all the duties of the Board. 4. The provisions of subsection (2), (3), (4) and (5) of section 46 including their necessary modifications shall be applicable to a direction issued under this section. 4. Discuss the procedure to be followed by Bangladesh Bank to disqualify an auditor. OR Can Bangladesh Bank declare an auditor disqualified to audit any banking company? [Nov-Dec10, May-June09, May-June08, May-June03]
As per section-39(B) of the Bank Companies Act 1991, Where the Bangladesh Bank has reasonable grounds to believe that any auditor appointed of a banking company neglects his duties or fails to discharge the duties entrusted upon him, it may, on the basis of the information and recommendation' of the committee established In this behalf by the Bangladesh Bank: declare such auditor to be unfit to audit any banking company, for no more than two years; Provided that, before making such a declaration, the auditor concerned shall be given reasonable opportunity to show his reasons. Any person aggrieved by a declaration of the Bangladesh Bank may, within fifteen days after a declaration of being unfit, submit an appeal to the managing board of the Bangladesh Bank and the decision of the said board in this matter shall be final. 5. When can Bangladesh Bank cancel a banking license of a company? How such step would cause sufferings to depositors? [Nov-Dec10, May-June09, May-June08, Nov-Dec03]
As per section 31(5)of the Bank Companies Act 1991, The Bangladesh Bank may cancel a license granted to a banking company on account of the following reasons namely:a) if the company ceases to carry on banking business in Bangladesh; b) if the company at any time fails to comply with any of the conditions imposed upon it under subsection (2) of 31; c) if at any time that company fails to fulfill any of the conditions referred to in subsection (4) of 31 Provided that before cancelling a license under clause (b) and (c), if Bangladesh Bank, unless it is of opinion that the delay will be prejudicial to the interests of the company's depositors or the public, shall grant to the company on such terms as it may specify, an opportunity of taking the necessary steps for complying with or fulfillment of the provisions of those clauses.
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6.
Prepare a checklist featuring points in presentation of financial statements of a Bank Company in line with BRPD circulars and in compliance to IAS. [May-June09, Nov-Dec07, May-June06, May-June09]
Financial statements of Banking Companies: a) The financial statements shall be prepared in accordance with BRPD Circular # 14 dated 25 June 2003; b) The financial statements will be signed by the Managing Director/CEO and by 3 (three) Directors of the Company; c) All relevant Bangladesh Accounting Standards (BAS) should be complied with; d) All Banking Company shall maintain out of its profit taking at least 20% of profit each year as statutory reserve fund until the fund together with the share premium account (if any) is equal to its paid up capital; e) All Banking Company shall maintain minimum paid-up capital and reserve fund of banking companies shall be BDT 400 crores, of which the paid up capital shall be not less than BDT 200 crore or the amount equivalent to the risk based capital as determined from time to time by the Bangladesh Bank, whichever is higher. Capital shortfall will have to meet by 11 August 2011 f) Necessary provision to be made on classified/ non-performing loan as per guideline of Bangladesh Bank g) Cash Reserve Ratio (CRR) shall be maintained at the rate of 6% on their total demand and time liabilities on bi-weekly average basis subject to the condition that the rate of CRR should not be less than 5.5% in any day (As per BRPD Circular No 01 dated 12 January 2009); h) Banking Companies having Merchant Banking Division (MBD) had been advised to operate merchant banking activities by constituting a separate legal entity i.e., subsidiary company to protect the interest of the depositors (As per BRPD Circular # 12 dated 14 October 2009) i) Copies of financial statement are to be sent to the Bangladesh Bank and to other regulatory authorities as required. 7. What is the single most distinguishing factor between the business activities that a banking company can undertake as compared to a non-banking financial institution? [Nov-Dec08, NovDec05]
The single most distinguishing factor between the business activities that a Banking Company and Non Banking Financial Institution is that the Bank Company can take deposits from public through Current Account and Saving Account that a Non Banking Financial Institution. 8. List the broad business activities that an NBFI can undertake and state the licensing requirements for an existing investment bank which also intends to do business besides investment banking, leasing and house finance service. [Nov-Dec05]
The activities of an NBFI are all or any of the followings: Lease financing Term loan Home loan Consumer credit Car loan Term deposit
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Loan against lien on securities Investment in securities Portfolio management Underwriting management Issue management Factoring Merchant banking
An existing investment bank shall obtain license from Bangladesh Bank upon satisfactory consent in writing of the following subjects: 1. Financial condition 2. Management characteristics 3. Capital and earning adequacy 4. The objectives specified in the Memorandum of Associations 5. Public interest. 9. What are the restrictions imposed upon the Bank Company with regard to appointment of Directors? [Nov-Dec05, May-June08]
The conditions imposed upon the Bank Company with regard to appointment of Directors are as follows: d) The Board of Directors of the Bank Companies shall be constituted of maximum 13 (thirteen) directors. However, the directors of the banks, where the number of directors is more than this number, shall be allowed to complete their present tenure of office. e) Bangladesh Bank may appoint not more than 2 (two) directors in the Board of Directors amongst the depositors as per Appointment of directors from Depositors of Banking Companies Rules, 2008. Directors appointed from the depositors shall be in addition to 13 (thirteen) members of board of Directors under the sub-clause 15(6) of the Banking Companies Act, 1991. f) Bangladesh Bank from time to time provided guidelines to the appointment of Directors from Shareholder and Directors from the Depositors of Banking Companies as "Fir and Proper Test" criteria which also the restrictions with regard to appointment of Directors. 10. What restrictions are imposed on Banking Companies as regard loans and advances as provided under section 27of the Bank Company Act 1991? [May-June08, May-June03, Nov-Dec02]
As per section 27of the Bank Company Act 1991: 1. No banking companya) shall make any loans or advances on the security of its own shares; b) shall, without security, make any loan or advance to any of the following persons or institutions, or make any loan or advance in cases where those persons or institutions are guarantors- _. i. any of its directors; ii. any member of the family of any of its directors; iii. any commercial institution or private company in which the banking company itself, or any of its directors or any member of the family of any of its directors is involved as director, owner or shareholder; iv. any public limited company which is in some way or other controlled by the company itself, or any Of its directors or any member of the family of any of its
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directors, or the shares of which are held by any of the said persons to such an extent as to give it control of no less than twenty per cent of the voting rights. 2. No banking company shall give to any of the following persons or institutions any loan or advance without the approval of the majority of the directors, 'excluding the director concerned, a) any of its directors; or b) any person, commercial institution or company in which any of the directors of the said banking company is interested as partner, director or guarantor. 3. No banking company shall, without the previous permission in writing of the Bangladesh Bank, give to any person or institution, directly or indirectly, any benefit the aggregate value of which exceedsa) 15 per cent of the total capital of the said banking company; or b) 25 per cent of the total capital of the said banking company where the security of the said benefits has been provided by such financial securities as might be easily put on the market for sale. 11. State the requirement of maintaining SLR and CRR under Bank Company Act 1991. What are the consequences for failure of maintaining appropriate ratios? [May-June08]
The conditions imposed upon the Bank Company with regard to maintaining SLR and CRR are as follows: a) Cash Reserve Requirement (CRR) shall be maintained at the rate of 6% on their total demand and time liabilities on 'bi-weekly average basis subject to the condition that the rate of CRR should not be less than 5.5% in any day (As per MPD Circular No 04 dated 01 December 2010); b) Statutory Liquidity Reserve (SLR) shall be maintained at the rate of 19% on their total demand and time liabilities of which 6% shall be CRR on bi-weekly average basis. For Islamic Banking, the ratio will be 11.5% instead of 19% but the CRR ratio will be the same. Consequences for failure of maintaining appropriate ratios: If CRR fall below 5.5% in any day of the month, penal interest shall be charged for that day at the rate of 5%+ Bank rate; If CRR fall below 6% in any day of the month of bi-weekly basis, penal interest shall be charged for a day at the rate of 5%+ Bank rate; CRR short fall has found in first biweekly which was also continue in first day of second bi week as per DOS circular no.3 dated 1 June 2010 and section 36(5)a of Bangladesh Bank Order 1972 if such shortfall occurs then "every director and officer of scheduled bank, who is knowingly and willfully a party of default, shall by order of the Bank be punishable with fine which may extend to Taka one lakh and with a further fine which may extend to one lakh for each subsequent day on which the default continues." 12. State the powers of Bangladesh Bank to regulate advances by the Bank Companies. [NovDec10, Nov-Dec07, May-June05]
Powers of Bangladesh Bank to regulate advances by the Bank Companies as per Section 29 of the Bank Companies Act 1991: 1. Bangladesh Bank may determine the policy relating to advances in the public interest that all the banking companies are bound to follow it.
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2. Bangladesh Bank may give direction to any banking company in the following matters: a) Maximum limit of the loan to be given; b) Ratio to be maintained between the total amount of an advance and loans of little amount or of other kind; c) Purposes for which advances mayor may not be given; d) Maximum limit of advances to be given to any banking company or any group of banking companies or person or assembly of persons; e) Limit of interests on secured advances and advances; and f) Rate of interest to be charged on advances. 3. If any Bank fails to comply with abovementioned guidelines, Bangladesh Bank may order to deposit such amount to Bangladesh Bank. 4. The amount deposited to Bangladesh Bank may be released conditionally or unconditionally as Bangladesh Bank may determine. 13. What is the limitation for submission of financial statements to the Bangladesh Bank by a Bank Company? Who should give sign over such financial statements? [Nov-Dec07, May-June05]
As per Section 40 of the Bank Companies Act 1991: Financial statements as referred u/s-38 of the said Act together with auditor's report duly approved by the Board of Directors or shareholders as the case may be which is to be placed in AGM shall be published in prescribed manner. 3 (three) copies of the said statements shall be submitted to ' Bangladesh Bank within 3 (three) months of the close of financial period. The financial statements will be signed by the Managing Director/CEO and by 3 (three) Directors of the Bank Company. 14. What are the restrictions as to payment of dividend by a Bank Company? [May-June07, MayJune05, Nov-Dec09]
As per section 22 of the Bank Companies Act 1991: 1. No banking company except new and special banks shall pay any dividend on its shares, unless a) all its capitalized expenses including preliminary expenses, organization expenses, commission for share selling and brokerage, losses and other items have been completely written off, or b) it manages to maintain paid up capital and reserve fund as per 'Section - 13. 2. Notwithstanding anything to the contrary contained in subsection (I) or in the Companies Act, any banking company may pay dividends on its shares without writing off under the following circumstances: a) in any case where the depreciation of its investments in approved securities has not actually been capitalized or otherwise accounted for as a loss, b) in any case where adequate provision for the depreciation in the value of its investments in shares, debentures or bonds (other than approved securities) has been made to the satisfaction of the auditor of the banking company, c) in any case where adequate provision for bad debt has been made to the satisfaction of the auditor of the banking company.
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15.
What legal requirements are to be observed in case of Bank Company formation? [Nov-Dec04]
A bank company is formed under: The Companies Act 1994; Bank Companies Act 1991. The said bank shall follow all the guidelines of Bangladesh Bank and Securities and Exchange Commission (SEC) and other guidelines of other regulatory authorities as the case may be. Banks shall operate its business as per Section - 7 of the Bank Companies Act. One of the main legal requirements for formation of a bank company is to obtain license from Bangladesh Bank. 16. Enumerate the provision of audit u/s - 39 of the Bank Companies Act 1991. [Nov-Dec04]
Provision audit u/s 39 the Bank Companies Act 1991: 1. The financial statements of a banking company shall be audited by a person qualified under the Bangladesh Chartered Accountants Order, 1973 (P.O. No.2 of 1973), or any other law for the time being in force to be an auditor of companies and approved by the Bangladesh Bank to be qualified to audit a banking company. 2. The auditor so appointed shall have the powers and duties and shall be subject to the obligations and penalties imposed on auditors of companies by Section 213 of the Companies Act. 3. In addition to the matters which under the aforesaid Act the auditor is required to state in his report, he shall also state whether or nota) the financial statement of the company bank in the period concerned are truly reflected; b) the financial report has been correctly prepared in accordance with the usual accounting methods; c) the financial report has been made in accordance with the current rules and laws and the regulations issued by the Bangladesh Bank with regard to accounts; d) adequate provisions have been made for realization of doubtful advance or doubtful assets; e) the financial statements has been made in accordance with the standards issued by the Bangladesh Bank; f) the reports and accounts obtained from the branch offices of a banking company have been duly kept and consolidated; g) information and explanations required by the auditor have been found to be satisfactory; 4. If an auditor at the time of conducting audit finds:a) there have been found serious violation of this Act or serious irregularities have been take place; b) a criminal offence of fraud or dishonesty; c) the capital has fallen under 50% owing to the loss incurred; d) serious irregularity jeopardizing the security of the creditors in payments of debts; e) doubt whether the assets of the Company is enough to meet up demand of the creditors. Shall without delay report the matter to the Bangladesh Bank.
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17.
Discuss the powers of Bangladesh Bank for giving directions to other banking companies as provided in section 45 of the Bank Company Act 1991. [May-June04, May-June02]
Power of the Bangladesh Bank to give directions1) Where the Bangladesh Bank is satisfied that a) in the public interest, or b) to provide for the improvement of the monetary policy or banking policy, or c) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or d) to secure the proper management of any banking company, It is necessary to issue directions to banking companies generally or to any banking company in particular, it may issue such direction as it deems fit; and the banking company concerned shall be bound to comply with such direction. 2) The Bangladesh Bank may, on representation made to it or on its own motion, cancel or modify any direction issued under subsection (1); and such cancellation or modification may be subject to any condition. Discuss the provisions of Companies Act, 1994 regarding appointment of MD and compare that with relevant provisions of Bank Companies Act and Financial Institutions Act. [May-June06, Nov-Dec03, May-June02]
18.
Appointment of the Managing Director: The Managing Director is normally appointed by the shareholders in the general meeting of the Company from amongst the members of the Board of Directors. The first Managing Director is appointed by the signatories of Memorandum of Association. As per section 109 of the CA 1994 no Public Company, no Private Company which is a subsidiary of a Public Company shall after the commencement of this Act, appoint any person as a Managing Director, if he is a Managing Director or Manager of any other Company. Provided that no appointment shall be made to any person as the Managing Director of the Company without the consent of the shareholders in the General Meeting, As per Section 110 no Company shall appoint or employ any individual as its Managing Director for a term not exceeding five years at a time. As per Banking Companies Act 1991 and Financial Institution Act 1993 Managing Director is appointed as contractual employee. Any person who has at least 10 years of experiences in the line' of Bank and Financial institutions with well-conversant for Managing the Bank or Financial Institutions is eligible for appointment as the Managing Director. Following rules are to be complied with: Terms of appointment will be three years and will be eligible for re-appointment; The Managing Director shall not be a sponsor shareholder of the bank; Prior approval of Bangladesh bank should be taken for the appointment of the Managing Director. Terms and condition of appointment including salary and allowances and other benefits to be specified and to be informed to the Bangladesh Bank for approval.
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The Managing Director will not be eligible for any special bonus. J A person aged over 65 years will not be appointed as the Managing Director. 19. Describe the requirements regarding (i) Reserve Fund; (ii) Cash Reserve under the Bank Company Act, 1991 [May-June10, May-June05, Nov-Dec03, May-June02].
(i) Reserve Fund: Section - 24 Every banking company shall create a reserve fund out of balance of profit each year a sum equivalent to not less 20% of such profit till the reserve fund along with share premium account (if any) is not less than it's paid-up capital. (ii) Cash reserve Section - 25: Every banking company, not being a scheduled bank, shall maintain in Bangladesh by way of cash reserve in cash with itself or in current account opened with Bangladesh Bank or its agent or partly, in cash with itself and partly in such account or accounts a sum equivalent- to five percent of its demand . and (time liabilities) in Bangladesh. 20. Point out the difference between reserve fund and reserve capital [May-June04].
A bank Company shall maintain a statutory reserve fund by taking at least 20% of current years profit before impropriation till the reserve together with the premium amount (if any) is equal to the paid-up capital. A Bank Company may have reserve capital, which should be called up at the time of its liquidation. 21. Discuss the provisions contained in the Banking Companies Act, 1991, empowering the Bangladesh Bank to control the Banking Companies [May-June04].
Provisions empowering Bangladesh bank to control the banking companies: The Bangladesh bank as the guardian of all commercial banks is empowered by the statute under the Banking Companies Act 1991 to control the overall activities of all those Banks. The following provisions of the said Act are involved in the control of the Commercial Banks. These are 24, 25, 27, 28, 39, 39A, 45, 46, 47, 49, 55 and 77. However, further powers and function of the Bangladesh Bank under section 49 are that: i. The Bangladesh bank may a. Caution or prohibit banking companies generally or-any banking company in particular against entering into any particular transaction or class of transactions; b. Require banking companies generally, or any banking company in particular to refrain from taking such action as it may specify in relation to any matter relating to the (business) of such banking company(s) or to take such action in thereto as the Bangladesh bank thinks fit; c. On a request from the banking companies concerned and subject to the provisions of section 76 assist as intermediary or otherwise in proposals for the d. Amalgamation of such banking companies; e. During the course after the completion, of any inspection of banking company under section 44, by order in writing and on such terms and condition as may be specified therein-
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ii.
a. Require the banking company to call a meeting of its Directors for the purpose of considering any matter with an officer of BB; b. Depute its officers to observe the proceeding at any meeting of the Board of directors; c. Appoint its officer to observe the manner in which the affairs of the banking company are being conduct; d. Require the Banking Company to make within such time as may be specified in the order, such change in the management as the BB may consider necessary. The BB shall make an annual report to the Govt. on the trend and progress of banking in the country and in that report suggestion for strengthen of banking business throughout the country and steps required to be taken in that behalf shall be stated. "The bank default culture at large is due to indulgence of the Board but the respective CEO are equally responsible for connivance" - Critically discuss. [Nov-Dec02]
22.
Banks play a vital role in the financial sector and financial sector is the back bone of the economy of a country. As main player in this sector it provides various financial services to its clients. Actually Banks serve the whole nation in the country directly or indirectly. But sometimes it falls in problems in serving the nation. The main financial strength of a bank is the repayment of loan installment provided by the Banks. If the banks do not get back the money from the clients it fails to provide further loan to another client. If this defaults of repayment of bank loans increase, it will definitely demoralized the banks for further payment of loan and gradually its financial strength become weekend and naturally whole economy suffers a lot. This banks default increased in our country with a great concern. The whole development process of the economy has been tarnished. Why this type of Bank defaults increased in the country? The answer is very simple. The banks did not provide loans to the client honestly. Intentionally, it has failed to select the real clients. It has provided large amount of loan to the bad people who has no intention to repay the loan because, the loan defaulters are the rich men of our country. They have enough, fame, political support and power. The Board of Directors is the main authority to sanction loan to any person, company, etc. Without their approval no bank can disburse loan to anybody. They are the liable for sanction of loan to those bad people, entrepreneurs. But the Chief of the Executive or CEO or the Managing Director whatever named called is also liable equally as he process, review, evaluate, appraise, and recommend the proposal to the Board for approval. Without his recommendation the Board cannot execute a proposal and sanction any loan for disbursement. 23. The continuous process of interest waiver on big loans is a burden on the taxpayerjustifies your views for and against it at length. [Nov-Dec02]
Why this type of Bank defaults increased in the country? The answer is very simple. The banks did not provide loans to the client honestly. Intentionally, it has failed to select the real clients. It has provided large amount of loan to the bad people who has no intention to repay the loan because, the loan defaulters are the rich men of our country. They have enough, fame, influence political support and power. They are in the affluent class.
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Who is there to recover loan from them? The bank default became a culture in the country. No bothers to take loan from the bank and hesitates to say 'no' to the banks when the installment becomes due for repayment. There is no mechanism to recover loam from them for big loan. In case of failure to repay the loan for several installments and become classified then they request for rescheduling the loan for increasing the repayment period for a further terms. What happen then? They again fail to repay the installments. When the bank fails to recover the amount then request comes come to waiver the service charge for whole periods. At last banks has to compromise and waive to service charge i.e. interest for whole loan periods. What are the results? Result are that the banks have paid dividend, Income Tax, other employee benefits showing the net income of service charge accrued/arisen during a particular period. This became a burden on it. Moreover, the service charge waived, become income for the assessee for the year and subject to payment of Tax as per IT ordinance 1984.
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The Financial Institution Act, 1993

1. Your client is a NBFI and the BODs of the client is contemplating to increase the borrowing power and accordingly requested your advice on the legal requirements to be followed. You are requested to draft a response letter to your client stating the legal requirements under Company Act, NBFI Act and other rules and regulations of the BB. [Nov-Dec06] Enhancement of Borrowing power of a Non- Bank financial Institution The Chairman Board of Directors Financing Company Limited Dhanmondi, Dhaka-1209 Dear Sir, Legal requirements and explanations for enhancement of borrowing power With reference to your letter dated July 29, 2007and our subsequent discussion with Managing Director, we are pleased to place our explanation before the Board of Directors of the Company relating to the legal requirements for enhancement of borrowing power of the Board as per the regulation contained in the Companies Act 1994, Financial Institutions Act 1993. Borrowing Power of Directors: As you know Directors derive their power and authority from two sources (i) the Articles of Association of the Company and (ii) the Companies Act. The Articles of Association generally contain a list of the powers, which may be exercised by Directors and the limitation on those powers. All acts and things done by the Board of Directors, within the powers given to it by the articles, are valid and binding on the Company. It may be noted that a Director individually has no authority over the affairs of the Company except as regards matters, which have been specifically delegated to him by the Board as per the regulation contained in the Articles of Association of the Company, Companies Act 1994 and the Financial Institutions Act 1993. For certain breaches of duty, the Companies Act imposes criminal liabilities upon Directors such as any act Ultra Vires ice activities done by the Directors beyond the power of the Memorandum and Articles of Association. So, the Directors are not allowed by the Articles of Association to borrow more than the borrowing power as per Articles. In this case the power if required can be enhanced by complying all the rules & regulations contained in the relevant Acts. In this case, the Clause of Articles relation to the borrowing power is to change and as per regulation contained in section 20 of the Companies Act 1994 which will require a special resolution.
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In this regard, the Board is requested to hold an Extra Ordinary General Meeting (EGM) to pass a special resolution for changing the clause of borrowing power of the Articles. A copy of the minutes of the EGM is to be submitted to the Register within 15 days. As per the regulations contained in the Financial Institutions Act 1993, no change in the Articles of the company will be valid unless it is approved by the Bangladesh Bank. After passing of the resolution in the EGM the matter is to be placed before the authority of Bangladesh Bank for approval. After permission the clause may be inserted in the Articles with particulars of the references of approvals. We think, the explanations will furnish your issues of concern. However if any further explanation is required, please do not hesitate to call us at any time. We assure of our best-service for you all the times. Thanking you, Yours sincerely
& Co. M/s Chartered Accountants 2. Explain the term financial institution as defined in the Financial Institution Act, 1993. Narrate the circumstances under which the license of a financial institution may be cancelled. [May-June08] Section 2(b) of the Financial Institution Act 1993 defines that financial institution means a non-banking institution which: i. gives loans or advances for industry, commerce, agriculture or housing, or ii. carries on business of the underwriting or acquisition of, or the investment or re-investment in, shares, stock, bonds, debentures or debenture stock or securities or marketable other securities issued by the Government or any statutory body, or iii. carries business of hire purchase transactions including leasing of machinery or equipment, or iv. finances venture capital, and includes merchant bank, investment company, mutual association, and mutual company, leasing company or building society. Cancellation of License Bangladesh Bank may cancel a license granted to a financial institution on the following conditions: a) ceasing to carry on the business for which it has been established; b) goes into liquidation or suspension of business; c) furnishing false or misleading information or document for obtaining license; d) carrying on business detrimental to the interest of depositors; e) insufficient assets to cover the liabilities of its depositors; f) carrying on business while paid up capital is less than the minimum capital; g) contravening the conditions of license; h) Conviction of the financial institution or any of its directors for any offence under this Act.
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However, section 8(2) states that no license of any financial institution shall be cancelled unless it is called upon to show cause by l5 days written notice as to why its license shall not be cancelled. 3. What is the single most distinguishing factor between the business activities that a banking company can undertake as compared to a non-banking financial institution? List the broad business activities that an NBFC can undertake and state the licensing requirements for an existing investment bank which also intends to do business besides investment banking, leasing and housing Finance services. [Nov-Dec08] The single most distinguishing factor between the business activities that a Bank Company and NonBanking Company is that the bank company can take deposits from the public through Current Account, Savings Account, which the non-bank Financial Institutions cannot do the same. The activities of nonbank financial institutions are all or any of the as followings: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Lease financing; Term loan; Housing loan; Consumers' credit; Term Deposit; Loan against lien of securities; Investment in securities; Port-folio management; Under writing Management; Issue management; Factoring; Other merchant banking (having license from the SEC).
4. Leasing in Bangladesh has been becoming increasingly popular and a large number of companies are still needed. How do you justify this voice? [May-June04] Popularity of Lease finance The financial sectors are the backbone of the economic activities of a country. The financial institutions and their diversified services are now the main factors in the process of economic development of the country. Specially, the Non-Bank financial institutions (NBFIs) play a vital role for the rapid development of the enterprises and the entrepreneurs by providing loan under lease finance. Within a shortest time the NBFIs have diversified their product and services with an especial focus on the Micro, Small and Medium enterprises (SMEs). The sector came into existence only two decades back and within a shortest period it has been established as an attractive financing sector in the country. It plays an important role in providing alternative sources of fund, capital assets and many other solutions for the entrepreneurs which also became attractive to the large scale business for its efficient & cost effective services & funds, tax benefits and emergent financing solutions in the private sectors. The NBFIs have to take more risk than banks for financial services for industrialization of the country. As the lease finance requires no additional collateral and the effective rate of interest is competitive, interest is reduced with the payment of installments and lax benefits for rental payment, it is becoming popular day by day.
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5. Lease financing is easily available, costlier and tax effective. Taking these features in mind prepare a comparative report for your MD. You are to show that lease financing is easier and better than bank finances and IPO as alternatives. [May-June04] The lease finance is easily available The lease finance is easily available and its terms and condition is simpler than bank finance. It provides a big Wastage for tax benefit. The main products of the NBFIs are the lease financing which was introduced in the country in the year 1985. Now it is a well established financial sector with an impressive increasing trend in terms of portfolios, employment generation, development of capital market and contribution to the GDP. The leasing companies expanded their activities from the traditional lease financing to the more diversified services which may be availed with a soft terms. In case of lease financing, it requires no additional collateral other than the particular assets under lease. Sale and lease hack also meet up the short term and long term finance of a company. The lease financing services are provided by 30 NBFIs through their corporate offices as well as branches throughout the country side by side the 50 number of banks very splendidly efficiently and effectively. In case of emergency requirement of fund, the lease finance is the best solution compared to IPO or bank finance.
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Insurance Act, 2010

1. What is insurable interest? State how far the rules regarding insurable interest apply to different types of insurance. Insurable Interest: In every contract of insurance the policy holder must possess an interest on the subject matter of the insurance which is known as insurable interest. Insurable interest means proprietary or monetary interest on the subject matter of the insurance. The main object of the insurance is to protect the insurable interest. If there is no insurable interest there can be no insurance. A cannot insure B's house. But if A has any interest on B's house under any way such as by way of mortgage then A can insure B's house to protect its own insurable interest. Insurable interest in case of Life Insurance: Insurable interest must exist at the time of commencement of policy. The policy holder needs no insurable interest after the policy is affected. Insurable interest in case of fire insurance: The insurable interest must exist at the time of incident. Insurable interest is not needed at the time of commencement of the policy. Insurable interest in case of marine Insurance: In case of marine insurance, insurable interest must exist at the time of commencement of policy as well as at the time of incident. 2. Does the principle of indemnity apply with equal force to all kinds of insurance contracts? Indemnity: Life insurance is a contingent contract. The money is payable on the happening of contingency (viz. death) the dale of which is uncertain. Other forms of insurance (e.g. fire or marine) arc contracts of indemnity. The insurer in these cases promises to indemnify the insured person against the consequence of fire, accident or some mischance and misfortune. The contract of insurance contained in a merit or fire policy is a contract of indemnity and of indemnity only and that this contract means that the assured, in case of a loss against which the policy has been made, shall be fully indemnified but shall never be more than fully indemnified. Castellain V. Proston. Suppose that a house is insured against fire for Tk.20,000. It is burnt down but it is found that Tk.15,000 will restore it to its original condition. The insurer is liable to pay only Tk.15,000 unless otherwise agreed under the contract of insurance. But if the contract of insurance provided for the payment of a fixed sum of money on the happening of an event (like fire, accident or burglary) the contract is not one of indemnity. Thus a fire marine or accident insurance may in particular cases, be a contingent contract. In the case of life insurance the
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insurer is liable to pay whatever sum is mentioned in the policy as being payable upon the contingency specified. Thus life insurance is always a contingent contract. 3. Enumerate the provisions of the Insurance Act, 1938 relating to - (1) Determination of premium and (2) Collection of Premium. Determination of Premium: In order to achieve the objectives of this law the Authority may form a Central Rating Committee (CRC) and in consultation with this committee the Authority shall determine the rate of premium for non-life insurance business which the insurers shall be bound to comply with. The Chairman of the Authority shall be the chairman of the central rating committee and the number of its members, functions and its management shall be determined by the Act. Collection of Premiums a) Every insurer shall declare to the Authority the total amount of premiums including agents balance if any; b) No insurer shall write off any premium without prior approval of the Authority; c) No insurer shall assume in Bangladesh any risk in respect of non-life insurance business unless and unstill the premium payable; d) Any refund of premium arising due to cancellation of policy, shall be paid directly to the insured by a crossed or order cheque or by money order. 4. Difference between re-insurance and double insurance. Double Insurance If the same risk and the same subject are insured to other insurer by the policyholder it is called double insurance. If there are double insurances of properties, the loss will be shared by all the insurers. In case of life insurance all the insurers are liable. In double insurance each insurer is liable directly to the policy holder. Double insurance is a method of assuring the benefit of insurance. In case of Life insurance the insurer may have any number of policies and for any amount. Re-Insurance Re-insurance means the transfer of the part of the risk by the insurer. In re-insurance, the re-insurer is entitled to get a proportionate part of the premium and will be liable for a proportion of part of the loss. The re-insurer is liable only to the first insurer. Re-insurance is a method of reducing the risk of the insurer.
5. Why a contract of insurance called a contract of indemnity? Life insurance is a contingent contract. The money is payable on the happening of a contingency viz. death the date of which is uncertain. Other forms of insurance e.g. fire or marine are contracts of indemnity. The insurer in these cases promises to indemnify the insured person against the consequence of fire, accident or some mischance and misfortune. The contract of insurance contained in a marine or fire policy is a contract of indemnity
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and of indemnity only, and that this contract means that the assured in case of a loss against which the policy has been made, shall be fully indemnified but shall never be more than fully indemnified. Castellain V. Preston. Suppose that a house is insured against fire for Tk. 20,000. It is burnt down but it is found that Tk. 15,000 will restore it to its original condition. The insurer is liable to pay only Tk. 15,000 unless otherwise agreed under the contract of insurance. 6. Define assignment and nomination. Highlight the rules relating to assignment of life policies. Assignment: In an old English case, Ashely vs. Ashley, it was observed that life insurance policies are marketable commodities which can be validly assigned, with or without consideration, to Persons who have no interest in the life insured. The principle, viz., the assignability of life insurance policies, is accepted in modern times and permitted by law. Nomination: The holder of a policy of life insurance on his own life may, when effecting the policy or at any time before the policy matures for payment, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death. This is known as Nomination by the Policy-holder. The person named is called the Nominee. Rules relating to assignment of life policies: 1. Procedure: A transfer or assignment of a policy of life insurance, may be made only by an endorsement upon the policy itself or by a separate instrument, signed in either case by the transferor or by the assignor or his duly authorized agent and attested by at least one witness. 2. Notice: The transfer or assignment shall be binding upon the insurer after a notice in writing and endorsement on the instrument or a certified copy thereof is delivered to him. 3. Priority: In case of more than one assignment the priority of the claims of the assignees shall be governed by the order in which the notice to the insurer is delivered. 4. Written acknowledgement: Upon the receipt of the notice, the insurer shall record the fact of transfer together with the date and the name of the assignee. 5. Recognition: From the date of the notice the insurer shall recognize the assignee named in the notice as the only person entitled to benefit under the policy. The assignee can, if necessary, sue without the consent of the assignor. 6. Conditional assignment: Conditional assignments are valid. There may be an assignment in favor of a person subject to the condition that it shall be inoperative or that the interest shall pass to some other person on the happening of a specified event during the lifetime of the person whose life is insured. 7. Survivorships: There may be an assignment in favor of the survivors of a number of persons. 7. Who can survey the Insurance claims? In case of disagreement with the surveyors' statement, what steps can the aggrieved party take? Surveyors licensed from the Controller of Insurance rules 1958 are entitled to conduct survey for assessing the claims of any insured. They are generally listed with controller of insurance. Section 24 of
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the Insurance rules 1958 as well as section 44 A of the Insurance Act 1938 deal with the grant of certificates to the Insurance surveyors. In case of disagreement with the surveyor's statement on the assessment of the claim of the insured, another surveyor may be developed to carry out the survey further in order to reach to a real assessment on the request of the aggrieved party which is done as per the section 44B of the insurance Act, 1938. 8. Discuss the provisions of section 11 of the Insurance Act, 1938. Section 11 of the Insurance, Act As per section 11 of the Insurance Act 1938 every insurer shall at the expiration of each calendar year prepare with reference to that year: i. In accordance with the regulations contained in part-1 of the 1st schedule, balance sheet in the form set forth in part-11 of that schedule; ii. In accordance with the regulations contained in part-1 of the 2nd schedule, a profit and loss account in the form set forth in part-11 of that schedule iii. A revenue accounts for each class of business in the form set forth in the 3rdschedule. 9. What are the books to be maintained under Section 31 of the Insurance Act? Following Books are to be maintained by the insurance company as per section 14: A register or record of policies, giving the name and address of policy holder, date when the policy was effected and a record of any transfer, assignment or nomination; A register of record of claims to be entered the date of the claim, the name and address of the claimant and the date on which the claim was discharged or in case of rejection, the date and ground thereof.
10. Distinguish between life, marine and fire insurance? Life insurance is different from other form of insurances in the sense that the subject matter on the insurance is human being. The insurer will pay a fixed amount of money at the time of death or at the expiry of certain period. Marine insurance has been defined as a contract between insurer and insured whereby the insurer undertakes to indemnify the insured in manner and to the interest thereby agreed, against marine loss incidental to marine adventure. Fire insurance has been defined as a contract between insurers and insured whereby the insurer undertakes to indemnify the insured against any loss consequent upon destruction by fire. Indemnity: Life insurance is a contingent contract. The money is payable on the happening of a contingency (viz. death) the dale of which is uncertain. Other forms of insurance (e.g. fire or marine) are contracts of indemnity. The insurer in these cases promises to indemnify the insured person against the consequence of fire, accident or some mischance
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and misfortune. 'The contract of insurance contained in a marine or fire policy is a contract of indemnity and of indemnity only, and that this contract means that the assured, in case of a loss against which the policy has been made, shall be fully indemnified but shall never be more than fully indemnified." Castellain V. Preston. Insurable interest: In every contract of insurance the policy holder must possess an interest on the subject matter of the insurance which is known as insurable interest. Insurable interest means proprietary or monetary interest on the subject matter of the insurance. The main object of the insurance is to protect the insurable interest. If there is no insurable interest there can be no insurance. A cannot insure B's house. But if A has any interest on B's house under any way such as by way of mortgage then A can insure B's house to protect the insurable interest of A. Insurable interest in case of Life Insurance: Insurable interest must exist at the time of commencement of policy. The policy holder needs no insurable interest after the policy is affected. Insurable interest in case of fire insurance: The insurable interest must exist at the time of incident. Insurable interest is not needed at the time of commencement of the policy. Insurable interest in case of marine Insurance: In case of marine insurance, insurable interest must exist at the time of commencement of policy as well as at the time of incident. 11. X an insurer, insures a building against fire for Tk.500,000. Y another insurer insures the same building for Tk.300,000. Later the building catches fire and damage is estimated at Tk.600,000. How will X and Y share the loss? Loss sharing in case of double insurance This is a case of Double Insurance. The subject matter of the insurance may be insured with more than one insurer. But the loss will be indemnified by the insurers not more than the actual loss. In this case, although the sum insured (total) is Tk.8, 00,000 but the actual loss is Tk.6,00,000. The insured will be indemnified by TK.6,00,000, equivalent the actual loss which will be shared between the insurers in proportion to the insured sum of each insurers policy. The calculation is as under: Actual Loss Tk.6,00,000 Sum insured by X Tk.5,00,000 : Sum insured by Y Tk.3,00,000 Shares of loss to be borne by X= (6,00,000 / 8,00,000) 5,00,000 = Tk.3,75,000/Shares of loss to be borne by Y= (6,00,000 / 8,00,000) 3,00,000 = Tk.2,25,000/-
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12. What can the Controller of Insurance do in the event of submission of inaccurate or defective return to him? What are the remedies open to an aggrieved insurer? If it appears to the controller of insurance that any return furnished to him under the provisions of this Act is in accurate or defective in any respect, he may a) require from the insurer such further information, as he may consider necessary to correct or supplement, such return; b) call upon the insurer to submit for his examination at the principal place of business of the insurer in Bangladesh any book of account, register or other document or to supply any statement which he may specify in a notice served on the insurer for the purpose; c) examine any officer of the insurer on oath in relation to the return; d) decline to accept any such return unless the inaccuracy has been corrected or the deficiency has been supplied before the expiry of one month (Section-21). If the controller declined to accept the return for its inaccuracy it should be treated that the insured had failed to submit the return. 13. Discuss the powers of controller of insurance to order revaluation. Power of Controller of Insurance to order revaluation: 1. If it appears to the Controller of Insurance that an investigation or valuation to which section 13 refers does not properly indicate the condition of the affairs of the insurer by reason of the faulty basis adopted the valuation, he may, after giving notice to the insurer and giving him an opportunity to be heard, cause an investigation and valuation. 2. The provisions of sub-sections (1) and (4) of section 13, and of sub-sections (1) and (2) of section 15 shall apply in relation to an investigation and valuation under this section. Provided that the abstract and statement prepared as the result of such investigation and valuation shall be furnished by such date as the Controller of Insurance may specify. 14. Discuss the provisions of section 21 of the Insurance Act about the Controller of Insurance. As per section 21 of the Insurance Act 1938 the Controller of Insurance, if it appears to him that return furnished to him is in accurate or defective , he may i. require from the insurer such further information or to correct such return or supplement return as the case may be; ii. call upon the insurer to submit his examination any books of account, register or other documents or any statement that he may specify in a notice iii. examine any officer of the insurer on oath in relation to the return decline to accept any such return unless the inaccuracy has been corrected or the deficiency has been supplied before the expiry of one month from the date on which the requisition asking for corrected of the inaccuracy or supply of the deficiency was delivered to the insurer.
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15. Define a contract of insurance. State how far it is a contract uberrimae fide and a contract of indemnity. A contract of insurance A contract of insurance is a contract between two parties whereby, one party called the insurer , agrees to pay to the other party a certain sum of money on happening of a specified contingency, or agrees to indemnify the other party from losses arising from certain specific events. The other party to the contract, called the insured, pays and agreed to pay some of money, called the premium, as consideration. Essential elements of a contract are: (i) (ii) uberrimae fide Indemnity
Uberrimae fide: A contract of insurance is a contract uberrimae fide (based on good faith). It is the duty of the insured to disclose all material facts concerning the subject matter of insurance. The disclosure must be full and fair. If a material fact is not disclosed, if there is a misrepresentation or fraud, the insurer can avoid the contract. Indemnity Life insurance is a contingent contract. The money is payable on the happening of a contingent (death) the date of which is uncertain. Other form of insurance is (fire, marine) are contracts of indemnity. The insurer in these cases promises to indemnify the insured person against the consequences of fire, accident or losses. The insurer is liable to indemnify the loss actually incurred but shall never be more than the losses. 16. Write notes on: (i) Double insurance; (ii) Over insurance and (iii) Re-insurance. Double insurance: When the same risk and same subject matter is insured with more than one insurer, there is said to be double insurance. For example, Tanmoy, owner of a house, insures it against fire for Tk. 1 million with X and Tk. 0.50 million with Y. This a double insurance. Over- insurance: When the subject matter of insurance is insured with a value beyond its real value, then it is called overinsurance. This not expected and un-usual matter but sometimes it happens. Reinsurance: Reinsurance means the transfer of a part of the risk by the insurer. Suppose that a ship has been insured for Tk. 100 million. The may feel that the risk is too heavy to be borne by him alone. If so, he can transfer a part of the risk to another insurer, this is known as Reinsurance.
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17. What do you mean by insurable interest? Do you think that the insurance and gambling are alike? Explain. Insurance and gambling was considered alike because there is uncertainty of events and payment is made when the events occur. Like gamblers the insured is unaware of the time and amount of loss. If the event occurs, the insured like the gambler gains, otherwise they are experiencing loss. But there are certain differences between the insurance contract and gambling: 1. Nature of risk: In insurance, risks are existing, they may occur at any time. In case of gambling, the risk does not exit, it is being created for game or amusement while one will suffer and another will gain. 2. In insurance contract, insurable interest is essential. Without insurable interest, it would be wagering contract. Thus, this principle clearly distinguishes the insurance contact from the gambling.
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Corporate Laws and Practice

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Corporate Laws and Practice

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Summary of Corporate Laws and Practice

Prepared By: Amitav Deb Nath Articled Student ACNABIN

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Companies Act, 1994

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Private ltd co. Minimum-02, Maximum-50

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iv. v. vi. 55.

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Dated: 19 June 2012

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6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

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The Securities and Exchange Commission Act, Rules and Ordinance

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