Escolar Documentos
Profissional Documentos
Cultura Documentos
DRECTORS
1. (b) Discuss the qualification and disqualification of a director of a company. How directors
are appointed? Can share warrant form the share qualification for directorship? M 06
Ans:
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 the 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 time
as may be specified in the Articles whichever 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 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 Directors 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-94)
-
Share warrant is not taken into consideration for qualification of share of director.
Page 1 of 43
4(b) State the provisions of Companies Act, 1994 as to appointment of Managing Director.
N 05
Ans: Appointment of the Managing Director:
The Managing Director is normally appointed by the Board of Directors amongst the members of the
Board and consent of the shareholders is to be taken in the general meeting of the Company. 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 year at a time.
2.(a)
M 05
M 05
Criminal liability:
For certain breaches of duty the Companies Act imposes criminal liabilities u0070to Directors such
as:
1. Untrue statements in prospectus, failing to keep certain register, falsification of books and
reports etc.
Page 3 of 43
N 04
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.
4.
M 04
banker; or
6. If he absents himself from three consecutive meeting of the Directors or from all meetings of the
Directors for a continuous 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.
(c)
M 04
Section 103 lays down about directors loan - rewrite the contents in you way.
N 02
How ever the loan may be given in case of banking company or the loan is approved by the board
and AGM.
Page 5 of 43
PROSPECTUS
1(b) What is prospectus? Do all the companies issue it ?
N 05
N 05
Page 8 of 43
FOREIGN COMPANY
1. 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.
N 06
Ans: 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.
(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)
(c)
(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 to be its
principal place of business in Bangladesh.
Page 9 of 43
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.
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 of the office of the Environmen1is to be obtained by paying adequate fees
along with complying to 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.
Registration, permission, approval, license will also be required from the regulatory authorities
related to the nature of business of the Foreign Company.
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 tax exemption period for 10 years. .No Income Tax will be
Page 10 of 43
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. But if the company sells its products locally it
will pay VAT as per 1991and 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.
Page 11 of 43
Page 12 of 43
This is passed in extra ordinary 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 give before the date of the meeting [Section 87 (2)]
Special resolutions are necessary for the following purposed:
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.
3.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 utilizine: 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.
N 05
Ans: Notice of the Annual General Meeting:
Notice is hereby given that the 1211A1nnual General Meeting of the Shareholders of TPL Company
Ltd. will held at 10.00 am on Wednesday, the 20th December, 2007 at the BDR Darbar Hall,
Pilkhana Dhaka to transact the following business.
AGENDA
l.
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.
3.
To appoint Auditors for the year 2007-2008 and to fix their remuneration.
Page 13 of 43
4.
To elect Directors.
5.
To transact any other business which may be transacted at an ordinary general meeting with
the permission of the chair.
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.
3(b)Differentiate between ordinary resolution, special resolution and extra ordinary resolution.
M 05
Ans: Ordinary Resolution:
This is passed by the majority vote 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.
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;
Page 14 of 43
5(a) What are the different type of resolutions laid down in the companies act, 1994? Please
write down the purposes of the resolutions.
M 04
Purpose of resolution
1. Ordinary resolution
- Passing of Accounts
- Appointment of Directors
- Declaration Dividend
2. Special resolution
3. Extra-ordinary resolution
3 (c) Prepare a hypothetical company's' Report from the Chairman of the Board of Directors
to the shareholders for the ensuing Annual General Meeting.
N 03
Ans: 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.
Expansion program:
Introduction of 10 show rooms for enhance the distribution net work of our product to the customers.
Page 15 of 43
Financial aspects:
-
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 emp10yees for
their tireless efforts, to the suppliers for their quality goods, to, the fellow shareholders and most
honored shareholders for' their 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.
3(b) How do you distinguish between Statutory Meeting and Extra Ordinary Meeting?
N 01
Page 16 of 43
COMPANY FORMATION
3(a) State the steps involved in the formation of a company under the Companies Act 1994?
M 06
Ans: 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
-
an unlimited Company.
Page 17 of 43
WINDING UP
3. (b) Who are authorized to make an application to the court for the winding up of a
company? How does the winding up affect the position of servants and the Directors of the
company? Tabulate the difference between the winding up of a company / company limited by
shares and the dissolution of a partnership.
M 06
Ans: Application to the Court for winding-up:
According to Section 239, the winding-up of a Company may be done in anyone 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:
1.
2.
3.
The regulatory authority in case of default in filing the statutory meeting, report, etc.;
4.
Pont of
Differences
01
Meaning
winding
up/dissolution
02
Related Laws
03
Liability
owner
04
Distribution
assets
Page 18 of 43
of
Winding up of a company
of The activities of the company is ended
CA 1994
the Liability is limited
of As per CA 1994
Dissolution of
partnership firm
Dissolution of partnership
among all partners
Partnership ACT 1932
Liability is unlimited
As per partnership deed
shakil & mannan
05
2 (a) Discuss the circumstances on which the court orders for winding up of a Company on
"just and equitable" ground.
M 05
Ass: Just and equitable ground
If 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;
(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;
(5) When the company was formed to carry out fraudulent or illegal business;
(6) When the company is a mere bubble and does not carryon any business.
(b) When 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
M 05
Ans: 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. 5,000.00 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.
Page 19 of 43
2(b)
2(b)
M 03
What is a contributory?
M 03
Ans: 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:
-
Page 20 of 43
(b)To what extent are the different types of contributories liable on the winding up of a
company?
M 03
Ans: 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 purchase 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;
v) In case of a company limited by guarantee, no contribution shall be required from exceeding the
amount of under taken to be contributed by him in the event of winding up;
5 (c) 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.
M 02
Ans: 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.
5(a)
What are the grounds on which a company may be compulsorily wound up?
N 01
Page 21 of 43
AUDITOR
3(a)
Discuss the provisions of the Companies Act, 1994 relating to auditors as to:- M 05
(i) appointment;
(ii) qualifications;
(Hi) rights, and;
(iv) duties
(v) termination
Ans: Appointment and Remuneration of Auditors, Section-210. .
The SEC regulation imposed some additional qualifications for appointment 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.
Security given against loan and advances whether it is secured or not and whether the terms
are 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.
Page 22 of 43
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;
i. Whether or not the Balance Sheet and Profit & Loss Accounts exhibits a true and fair review
of the state of affairs of the company;
ii. Whether or not proper books. of Accounts have been maintained;
iii. Whether or not the Balance Sheet and Profit and Loss Account are in agreement with the
books of Accounts kept by the company;
iv. If any answer is in the negative the Auditor should disclose the fact and report to the
shareholders.
Termination of Auditor
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 unless their death, incapability, dishonesty, disqualification etc.
1(a) "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?
N 02
Ans : Responsibility of Auditors
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
are 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 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.
Page 23 of 43
Any share issued in cash whether the cash actually received or not and whether the
presentation in the Balal1ceSheet 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.
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 quantified.
The auditors shall have exercised such competence and skill as required and as may be desirable
from them as auditor to dated any non business expenditure are included in the business. If they fall
to detect and if it is material, the auditors will definitely be held liable.
(c)
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?
N 02
Ans: 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.
Page 24 of 43
MA & AA
1. (a) State the points of difference between the Memorandum of Association and the Articles
of association of a Limited Company.
M 06
Ans: The differences between the Memorandum and Article of Association are as follows:
Sl. No.
Memorandum
Articles
The
memorandum
is
the The Articles are rules regarding internal
fundamental constitution of the Management:
Company
determining
its
objectives.
Memorandum is the main guideline Any rules in the articles contrary to the
of the company/articles
memorandum are invalid.
2(a) 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
Artic1es? Can such regulations be included now in the Articles of Association and, if so, how
and what will be the status of such addition?
N 05
Ans: 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-I."
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.
Page 25 of 43
3. What is the purpose of stating the "object clause" of a company in its memorandum? Can it
be altered? How?
N 04
Ans: 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 carryon 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 carryon some operation which will be more advantageous for the interest of the company.
5. To restrict, abandon any of its objects.
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.
Page 26 of 43
BOOK of ACCOUNTS
3(a) what documents, register apd books are to be maintained in a company's registered
office
M 04
Ans: Books of Accounts, Documents Registers are to be maintained
As per Section - 181 following books of Accounts, records are to be kept by the Company:
Records relating to:
1.
2.
3.
4.
5.
A register of members
A register of minutes
(b) Who can inspect all those documents and books and take copies thereof? What do you
know about time limit, if any, in this regard? What purpose an extra ordinary resolution can
be used?
M 04
Ans: Inspection of books of accounts etc, of companies, Section - 182
The books of account, records and papers of every company shall be kept open for inspection during
business hours by the Registrar or by such other Government officer as may be authorized by the
Government in this behalf.
The inspecting person may, during the course of inspection made or cause to be made copies of
books of account and other books as he deems to be required.
There is no time limit for such inspection other than only the inspection is to be made or the books of
accounts to be kept open during business hours.
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)
Page 27 of 43
2 (c) Critically comment on the books of accounts and the access of Registrar to the books as
the shareholders are the owners of the Company.
N 01
Ans : 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.
Page 28 of 43
State the provisions for conversion of a Private Ltd. Company to a Public Ltd.
Company as laid down in section231of the Companies Act 1994.
N 01
Ans: 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.
(c)
Sl. No
What' are the differences between a Private and a Public Ltd. Company
Pont of Differences
Private Limited
N 01
Public Ltd.
01
Two
Seven
02
Fifty
Unlimited
03
Prohibited
04
Transfer of share
Restricted to transfer
Transferable
05
Listing
06
No. of directors
Minimum 2 directors
Minimum 3 directors
07
Commencement
business
Page 29 of 43
of As
soon
registration
as
of
SHARE TRANSFER
4(a)
N 05
N 05
Ans: 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.
c)
How shares of a company are transferred / State the time limit for registration of
transfer of shares. What are the restrictions for transfer of shares?
N 05
Ans: 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 (demat) 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.
Page 30 of 43
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
Page 31 of 43
Mr. X
Chairman of the Board of Directors
Un-issued share capital to be issued to the member as fully paid Bonus share.
(ii)
(iii)
To write off discount, commission and expenses on issue of share or debenture of the
company
(iv)
1(c). Discuss the provisions ,of the Companies Act, 1994 as to the issue of shares at a discount.
M 05
Ans: 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
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 discount.
4(a)
What are the procedures of reduction of share capital and how the same is confirmed?
Page 33 of 43
PROMOTER
2(b) What are the three possible/legal positions of pre-incorporation contracts of a company?
What are the exceptions to those contracts?
N 05
Ans: 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.
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.
OTHERS
2. 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.
N 06
Ans: 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 agreement 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 registration.
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 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;
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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)
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.
4. 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. M 06
Following items are included on the agenda:
Articles. 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.
1(a) "All listed companies are public companies but not vice-versa"-Discuss the statement.N 05
Ans: 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."
2.(c) What are illegal associations? State the effect of an illegal association.
N 05
M 05
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(b)
What is the effect of an "ultra vires" transaction as far as the company and its directors
are concerned?
M 05
The company and its Director's shall do all activities within the power of Memorandum and Article
ofAssociation 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 consequential then the transaction will be valid and binding on the company.
5(a) As envisaged in the Public Issue Rules, 1998, 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.
M 05
Ans: Public issue rules 1998, risk factors
As contained in the Public .issue rules 1998 the following risk factors are to be described in the
prospectus:
a)
b)
c)
d)
e)
f)
g)
h)
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 snares 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.
(b) 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, 1998.
M 05
Ans: 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.
2.
3.
4.
(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.
c) What are the requirements of presenting financial statements by an IPO aspiring public
limited company.
M 05
Ans: Presentation of financial statement in the prospectus for IPO has some requirements. These are:
I. 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 which ever 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.
Page 38 of 43
N 04
5(b)Discuss the provisions of section 150 of the Act about the Restriction on Commencement of
Business
M 05
Ans: 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.
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(c) State the requirements for Return of allotment u/ s 151 of the companies act 1994. M 05
Ans: 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:
(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.
4. 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.
N 03
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2(c)
M 03
5. Discuss the propositions (i) that dividends must not paid out of capital; (ii) that dividends
may only be paid out of profits.
M 03
Ans: 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 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.
But dividend may be paid out of profit acquired by the company after making all adequate provision
as required by the policy, regulations etc. Generally dividends are 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.
2(c) The act seems not reasonably vocal about the interest of the minority shareholder Comment in your way.
N 02
Ans: Interest of minority shareholders:
The companies Act under section 233 the minority shareholders can either individually or jointly
apply to the court that:
i.
The affairs of the company are being conducted or power of Directors are being exercised
in a manner prejudicial to the minority share holders;
ii.
iii.
A resolution of the members, debenture holders has been passed to the effect that there
are discriminating of the interest of them.
The minority can pray for such order of the court for safe guard of their interest.
The court shall fix a date of hearing on that and after hearing can pass order for:
a) cancellation of or modification of such resolution transaction;
b) conducting the company's affairs such a manner as may be specified in the order; .
c) for amending any provision of the M/A, A/A.
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This simple section has been inserted in the Companies Act 1994. But absence of matters relating to
holding of Board meeting, AGM or major decision of the company can also be noted. This is why it
can be observed that the not as vocal as it was required.
3. 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.
N 02
Ans: 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 wit it and
the transferee gets it, free of charge.
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.
Sl. No.
01
02
03
04
05
06
Owner
Right to
Creditor
Rights
Fixed
Profit
Shareholders
Yes
Dividends/ loss
No.
Equity owner
No Fixed dividend
Dividend is a part of profit after tax
Debenture holders
No
Interest
Yes
Lender
Interest is fixed
Interest charged in PnL Accounts
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.
v.
vi.
vii.
He may sale the charged properties as per the terms of the debenture
Page 42 of 43
2(b) What are the facts available in Solomon V. Solomon & Co. Ltd. Case (1897) and what was
held by the Court in that case?
M 02
Ans: 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.(I897) 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 share holders
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 @ 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 $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 Debentures 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
was two separate person with the result that:
i) The business was owned by and its debts were liabilities of the company not of Solomon
personally; and
ii) 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.
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