Companies Act - 1994

Introduction

COMPANY

 Latin word
– Cum with
- Pains bread
 taking bread together

 Today’s Concept
 Joint Stock Companies for profit
 Statutory Companies undertaking works of
public utility
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 Companies Act - 1994
Introduction

COMPANIES ACT – 1994

 to govern the entities incorporated in Bangladesh

o creation, function and dissolution

o relationship of shareholders to company
o periodic disclosure and audit requirements
o functions of the RJSC & Firms
o jurisdiction of the courts in relation to companies

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 Companies Act - 1994
Introduction
Classification of Companies

a. Method of Incorporation
i. Statutory Companies : created by its own Act of Parliament,
e.g WASA, BPDB, DESA, REB, BCIC, BJMC, JBC and SBC
etc.
ii. Registered Companies : formed and registered under Co.’s
Act 1994 or earlier Acts.

b. Limitation of Liability of Members

i. Companies limited by shares : registered a company limited
by shares
ii. Companies limited by guarantee : liability of members
limited by guarantee
iii. Unlimited liability companies : little more than an ordinary
partnership
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 Companies Act - 1994

Introduction

Classification of Companies

c. Restricted or Wide Participation of Public

i. Private Companies : define by its article, restrict share
transfer, max member is 50, prohibit to invite public to
subscribe shares

ii. Public Companies : a company which is not private

company, open to be a member of the company by
subscribing a share, it can offer to public shares and
debentures through prospectus

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 Companies Act – 1994
Introduction
Distinction between a company and a statutory company

Company Statutory Company

In the case of a statutory

The powers of a limited
(registered) company depend
1 mostly compulsory) are limited
on the memorandum.
Shares or guarantee limits the
2 liability of the shareholders of a
registered company.
The borrowing powers of a
3 registered company are
generally unlimited.
If the memorandum allows, the
registered company can lease
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the whole or part of its
undertaking.
company, its powers (which are
by the special act, which
creates the company.
The liability of the members is
fixed by the special act.
The borrowing powers of a
statutory company are
generally limited.
A statutory company, however,
cannot lease its undertaking
without the consent of the
Parliament. 5
 Companies Act – 1994
Introduction
Distinction between private company and public company

Private Company Public Company

Minimum 2 and the maximum number Minimum 7 but there is no limit for
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of members is 50 the maximum

Restricts the right to transfer the

shares, limits the number of its
2 members to 50 and prohibits any No such restrictions
invitation to the public to subscribe for
the shares or debentures
A public company before
commencement of business must
A private company can start business
3 go through the formalities laid
immediately on incorporation
down in the Act and obtain
certificate for commencement
A private company must have 2 A public company must have at
4 6
directors least 3 directors
 Companies Act – 1994
Introduction
Distinction between private company and public company
Private Company
Director’s consent in writing to act as
such and his contract to take up
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qualification shares need not be filed
with the Registrar
Needs not to issue or to file with the
6 Registrar a prospectus or a
statement in lieu of prospectus
A private company can commence
7 allotment of shares immediately on
incorporation
Private company shall add “Private
8 Limited” after its name
Public Company
In case of public company, it is an
obligation to file these documents
Whereas a public company must
issue or file with the Registrar a
prospectus or a statement in lieu of
prospectus
A public company cannot
commence allotment before the
minimum subscription is made
Public company shall add only
“Limited” at the end of its name 7
 Companies Act – 1994
Introduction

Companies act provides privileges to a private company

 It may consist of two members only (section 5)
 Statutory meetings and connected statutory reports are not
applicable [section 83(12)]
 Two directors will suffice [section 90(2)]
 Retirement provisions not applicable [section 91(2)]
 No need to file a statement in lieu of prospectus [section 141(3)]
 No restriction on allotment of shares [section 148(13)]
 No need to obtain a certificate of commencement. [section
150(6)]
 Submission of annual accounts to members not required [section
191(5)]
 Regulation 79 to 87 of Schedule -1 on retirement and rotation of
directors are not compulsory for inclusion in the articles of
association of a private limited company 8
 Companies Act – 1994
Introduction
Distinction between companies and partnerships
Company Partnership
A partnership firm is not distinct
A company has separate legal
1 from the persons who compose
entity
it
Restrictions on powers imposed
on the company in the Restrictions on the powers of
Memorandum and Articles of particular partner, contained in
2
Association are effective against the agreement of partnership
the public because they are will not avail against outsiders
public documents
A member of a company can A partner cannot contract with
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contract with the company his firm
The liability of a shareholder of a
A liability of a partner is
4 company may be limited either by
unlimited 9
share or by guarantee
 Companies Act – 1994
Introduction
Distinction between companies and partnerships
Company Partnership
A partner cannot transfer his
Shares in company are
5 share without consent of all
transferable
partners
Partners are agents of the firm
Members of a company as such
for carrying on its business in
6 are neither its managers
the usual way and are entitled
(directors) nor its agents
to share in its management
There is no maximum number of
members of a public limited
Partnerships are subject to a
7 company, while there is general
maximum limit of 20 members
limit of 50 for private limited
company
A company must have a written There need not be a written
8 constitution, i.e. Memorandum & partnership agreement though
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Articles of Association it is usual
 Companies Act – 1994
Introduction

Distinction between companies and partnerships

Company Partnership
Capital subscribed by the
members for their shares cannot Partners may withdraw capital
9 be returned to them but they are but still liable without limit for the
not liable for its debts once they firm’s debts to its creditors
hold fully paid shares
Companies can borrow in the
Partners have unrestricted
same way as individuals but only
10 powers of borrowing in terms of
for purposes covered by their
amount and purpose
objects
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 Companies Act – 1994
Introduction

Distinction between companies and partnerships

Company Partnership
Both in their formation and in their
Partnership may be created
subsequent trading and other
informally and need not to
activities companies are subject
11 disclose any information about
to number statutory rules of
their affairs (except to the Tax
procedure and supply of
Authorities over taxable profits)
information available to the public
Partnerships can be dissolved
by mere agreement of the
The dissolution of company partners but the creditors have
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usually entails a formal liquidation first claim on the assets and
some general legal principles
apply 12
 Companies Act – 1994
Introduction

Conversion of Private Company into Public Company

 A private company having at least seven members can be

converted into a public 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, are required to be
included in the Articles of Company in order to continue it a Private
Company

 From the date of such alternation the Company ceases to be a

private Company and is required within a period of thirty days after the
said date file with the registrar either a prospectus or a statement in lieu
of prospectus (Section-231)
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 Companies Act – 1994

Introduction

Conversion of Public Company into Private Company

According to section 232

If a public company alters its articles by a special resolution so as to:

 Restrict the right of transfer shares

 Limit the number of its members to fifty

 Prohibit any invitation to the public

It ceases to be public company & becomes a private company.

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