The object of the Companies Act is to adjust the rights of the management vis-a-vis the Shareholders and other concerned persons. Explain and illustrate.

Topic:- The object of the Companies Act is to adjust the rights of the management vis-a-vis the Shareholders and other concerned persons. Explain and illustrate.


It is obvious that the management of the company is supposed to act in the best interest of the company and they are answerable to the shareholders and other concerned persons. The main objective of the management of the company is to maximize the shareholder’s wealth. By doing a good corporate government and best uses of resources management can enrich the company value which is ultimately increase the value of shareholders. As an owner of the company the shareholder give the rights to the management to run the business on behalf of them. A company is also liable to creditors and investors. So meeting with shareholders and other concerned persons is a part of Companies Act and also a part of the managing the company. From meeting creditors, investors, shareholders and management of the company take major decision about the company. The object of the Companies Act is to adjust the right of the management, shareholders and other concerned persons. Company organizes types meeting for vis-à-vis (face to face) interaction with management and shareholders. It’s the part of the Companies Act to organize meeting where management and shareholder can implements their own rights. In the component part IV of Companies Act states obligations, rights and obligations, powerfulness, incumbency, loans to and from a company, and their human relationship with the directors, and bring offing agents of a company.

Companies Act 1994

Companies act[1] 1994 (act 18 of 1994) governs company law in Bangladesh. It received the assent of the president of the people’s republic of Bangladesh on 11 Sep 1994 and was printed in the Bangladesh gazette[2], extra, 12 Sep 1994. Company law was governed by the Companies Act 1913 which was amended in 1915, 1920, 1926, 1930, 1932, 1936, 1938, 1949 and 1969, 1973 and 1984, before its enactment in 1994.[3]

‘The Companies Act 1994 consist 11 parts. Component part-I contains the preliminary aspects of the act including the short statute title of the act, commencement and portion I contains the preliminary aspects of the act including the short title of the act, commencement. Part-II is concerned with incorporation and formulation of companies, including bank companies, and articles of association, associations not for earnings, and companies limited by guarantee and memo of association for various types of companies, articles of association, general provision for enrollment of memo. Part-III mainly narrates the limited liability of directors and the rules for share capital, enrollment of unlimited company as limited. This component part states the rules and procedures for distribution of share capital of companies and the commissariat for reduction of share capital.

Part-IV states the framework for regulating the management and administration of companies, the requirements for having a registered office of a company with a distinct name at a specific place, the provisions for penalties for non-disclosure of name, and the way to show the authorized, subscribed and paid up capital of companies. It contains the procedures and rules for provisions and procedures for appointment of company directors, their responsibilities, rights and obligations, powers, tenure, loans to and from a company, holding meetings of companies, and their relationship with the managers, and managing agents of a company.

It includes the rules and conditions for power of companies to use their seal abroad, rules regarding company prospectus, appointment of managing agent, commissions and discounts and to allocate and issue additional shares, the provision for contracts and execution of deeds, the powers of a company to pay interests, the provisions for information and procedure as to mortgage and other unregistered charges. Redemption of debentures, appointment of receivers, and their submission of come backs and enrollment of charges are also the concerns of this component part and issuance. It also provides preparation and submission of balance sheets, other statements and records, requirements and rules to keep proper accounts, as well as provisions for penalty for not keeping proper books of accounts.

Part-V of the act provides details of the procedures and options of winding up, liabilities of contributors and their successors, mode and methods of winding up, settlement of debts of companies and transfer and distribution of assets and liabilities, appointment of official liquidator and their powers and duties, extraordinary and ordinary power of courts to be involved in the winding up process.

Part-VI deals in matters relating to the payment of registration fees and submission of returns and documents to registrar by the companies, registered office/s of companies; appointment of registrar/s by the government; their powers and responsibilities. Part-VII states the rules of application of the act to companies formed and registered under former Companies Acts. Part-VIII defines and identifies and the power to substitute memorandum and articles for deed of settlement and the various aspects required for registration, the companies capable of being registered.

The major concern of Part-IX of the companies act is the method for winding up of unregistered companies. This part explains the meaning of unregistered company; contributors in winding up of unregistered companies; power to stay or restrain proceedings; restrictions on commencing etc. of suit after winding up order; courts directions as to property in certain cases; and provisions of this part cumulative. The contents of Part-X include notice for closure of foreign companies in Bangladesh; the requirements for launching foreign companies in Bangladesh, rules for regulating them, maintenance, preparation, audit and submission of their accounts to the host country regulators; and restrictions on offer for sale and sales of shares. Last Part-XI of the companies act states offences, supplemental and relates legal proceedings. The subject matters elaborated in it are power to require limited company to give security for costs, penalty for wrongful withholding of property, application of fines, and cognizance of offences.’[4]

The objective of the Companies Act

The Companies Act is the framework under which all company pursuits are undertaken. There are two direct objectives for the enactment of this Companies Act. They are a) ‘to inject discipline in the management’[5], and b) ‘to protect the interest of the investors’[6]. Companies Act takes into account the proper management system in organization. The rules and regulation of the Act bound the   management to work in organized manner. By this Company Act management make sure the total discipline among the employees. This company act force the management to impose such regulations that employees maintain proper discipline.

Right of the Management

The Act  restored  and codified the  primary   widespread   regulation  and equitable  obligations  of  controllers,  but it does not purport to  supply  an exhaustive  declaration  of their  obligations,  and so it is  probable  that the  widespread   regulation   obligations   endure  in a  decreased  form. Traditional widespread   regulation notions of corporate benefit have been cleared away, and the new focus is on corporate communal responsibility. ‘The seven codified obligations are as follows:

1.      S171 to proceed inside their powers – to abide by the periods of the company’s memorandum and items of association and conclusions made by the shareholders.

2.      S173 to workout unaligned judgment – controllers should not fetter their discretion to proceed, other than pursuant to an agreement went into by the business or in a way authorized by the company’s articles.

3.      S175 to bypass conflicts of interest – procedures for authorizing such confrontations by either board or shareholder acceptance are furthermore to be introduced.

4.      S172 to encourage the achievement of the company – controllers should extend to proceed in a way that advantages the shareholders as a entire, but there is now an added register of non-exhaustive components to which the controllers should have regard. This was one of the most contentious facets of the new legislation at the drawing up stage. These components are:

1. the long period penalties of decisions

2. the concerns of employees

3. the require to foster the company’s enterprise connections with suppliers, clients and others

4. the influence on the community and the environment

5. the yearn to sustain a status for high measures of enterprise conduct

6. The require to proceed equitably as between members’[7]

Right of the Shareholder

Although ownership of 50% of shares does  outcome   within  50% ownership of a  corporate,  it does not  grant  the  investor  the right  towards   consume  a company’s  constructing,   machinery,   substances,  or  else  property. This is because the corporate is conceived a legal fellow,   hence it owns everybody its assets itself. This  matters   within  areas such as insurance, which  ought  be  within  the name of the  corporate  and not the  primary  shareholder.

In most countries, boards of directors and corporate executives possess a fiduciary duty towards operate the corporate within the interests of its stockholders. Nonetheless, as Martin Whitman writes:

‘…it can safely be reported that there does not exist any publicly marketed corporate whereas management works exclusively within the greatest interests of OPMI [Outside Passive Minority Investor] stockholders. Instead, there are both “communities of interest” and “conflicts of interest” between stockholders (principal) and management (agent). This fight is mentioned towards as the principal/agent problem. It would be childlike towards think that any management would forgo management payment, and management entrenchment, just because a number of these management favors powers be listened as granting escalate towards a fight of interest with OPMIs’.[8]

Even although the panel of directors operates the corporate, the investor has a number of impacts onto the company’s policy, as the shareholders elect the panel of directors. Each investor typically has a percentage of votes equal towards the percentage of shares he or she owns. So during the shareholders concede that the management (agent) are doing unfavorably they can elect a novel panel of directors which can otherwise lend a novel management team. In tradition, however, genuinely challenged panel elections are rare. Board candidates are habitually tabled via insiders or via the panel of the directors themselves and an extensive allowance of stock is held or voted via insiders.

Owning shares does not mean duty for liabilities. If a corporate goes burst and has towards default onto loans, the shareholders are not liable within any way. However, everybody finance elicited via converting assets into cash shall be consumed towards repay loans and else debts former, so that shareholders cannot obtain any finance unless and until creditors possess been remunerated (often the shareholders end up with nothing). [9]

Companies Act gives the shareholders following right:

Voting rights:

The Committee’s proposals onto voting rights were everybody adopted within the novel Act. Thus, all companies may affect vote less shares and may possess lessons of shares with differences in voting rights exceeding the previous limitation of 1:10 (cf. Section 46).

A vote less share may enjoy entitlement of representation whether mentioned within the articles of association, hence enabling it towards participate within voting when a experienced majority is required. In this distance, the shares are vote less within respect of ordinary decisions but carry a vote within many meaningful decisions. Even without such right of representation, the investor retention a vote less share enjoys everybody else rights available towards other shareholders, e.g., towards put facts onto the timetable (Section 90), towards dub an extraordinary general confronting (Section 89), towards attend (Section 78), towards be portrayed at the general meeting via another fellow whom either is instructed onto how towards vote or may act at his/her own discretion (Section 80), towards vote via mail (Section 104), towards address the meeting (Section 78) and towards ask questions of management (Section 102).

Minority protection:

The Committee made few and alone   secondary   conversions   towards the already well-developed area of minority safety, and therefore the novel Act crudely persists the present regime. New rules particularly concern disclosure and notice mandated via the Directive onto Shareholders,[10] e.g., the period of notice for phoning a general confronting is now between two and four weeks and for publicly marketed companies between three and five weeks (cf. Section 94). A investor has the right towards possess facts covered in the timetable of the general confronting and the novel Act already specifies that facts submitted to the corporate at lowest six weeks ahead of the general confronting ought be covered in the agenda; alternatively, management may choose not towards incorporate them within the timetable if that powers inflict a delay within seeing the above-mentioned moment limits for phoning a general confronting (cf. Section 90). There persists towards be none limitation of the wording of the fact that is towards be covered within the timetable, but management is regarded as authorized towards earn abbreviations during the fact is portrayed moderately onto the agenda. The capital required via one or many shareholders towards dub an extraordinary general confronting within a social corporate has been decimated towards 5 per cent, whereas within a private corporate everybody shareholders can dub such a confronting (cf. Section 89).

Annual General Meeting is the ultimate interaction centre for the both management and shareholders. The Directors of the meetings may take up anything and everything of the company, which do not fall within the preview of the members meeting, for transactions. The act at places, also suggest certain cases which are to be bought before the board meeting. The decisions taken by the management generally approved here by the shareholders decisions. Voting takes place with a voice force point.


Companies Act is there to protect the interest and rights of the management, shareholders and other concern person. However Act is not always the ultimate solution. Management, shareholders and other concern person takes all the liability to uphold their rights among the conditions. Shareholders and other concern person should be aware of the Company Act and respond accordingly. The main concern of the Act is to adjust the rights of the management, the shareholders and other concerned persons. All of the parties must aware of their own rights a liabilities and act according to them. It is the shareholders and others investors who put their money on the business of the company so management must responsible to protect the investor right. On other hand investors take appropriate steps to protect the management rights.  Companies Act deals with the all right and responsibly to alter management and shareholders right.


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[1] An Act to reform company law and restate the greater part of the enactments relating to companies; to make other provision relating to companies.

[2] A regular government publication in which public service appointments, postings, and administrative orders are announced. In addition, this gazette often contains service rules and important government decisions issued by various ministries/divisions.

[3] Companies Act- Business Law, V-3 by A. A. khan ( pp.1-94)   and

[4] Companies Act 1994,

[5] Companies Act balance the right of the management s and investors and add regulation in the management.

[6] One of the main concerns of the managements is to protect the interest of the investors by maximizing the investor’s wealth.


[8] Whitman, 2004, 5

[9] Jackson, Thomas (2001). The Logic and Limits of Bankruptcy Law. Oxford Oxfordshire: Oxford University Press. p. 32. ISBN 1587981149.

[10] Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the

exercise of certain rights of shareholders in listed companies.