An incorporated company is an artificial being & is totally different entity from its members
An artificial being of a company means company activities like a man but which is artificial. The principle characteristics of an incorporated company can be summarized as follows:
Registration: A company comes into existence only after registration under the companies Act. But a Statutory Corporations is formed and commence business as notified or stated in the Act and as passed in the Legislature. In case of partnership, registration is not compulsory.
Voluntary Association: A company is an association of many persons on a voluntary basis. Therefore a company is formed by the choice and consent of the members.
Legal personality: A company is regarded by law as single person. It has a legal personality. This rule applies even in the case of “One-man Company”. Salomon v. Salomon Co. Ltd.
Contractual capacity: A shareholder of a company, in its individual capacity, cannot bind the company in any way. The shareholder of a company can enter into a contract with the company and can be an employee of the company.
Management: A company is managed by the Board of Directors, whole time Directors, Managing Director or Manager. These persons are selected in the manner provided by the Act and the Articles of the Association of the company. A shareholder, as such, cannot participate in the management.
Capital: A company must have a capital; otherwise it cannot participate in the Management
Permanent existence: The Company has Perpetual Succession. The death or insolvency of a shareholder does not affect its existence. A company comes into end only when it is liquidated.
Registered Office: A company must have a registered office.
Common Seal: A company must have a Common Seal.
Limited Liability: The liabilities of shareholder of a company are usually limited. The creditors of a shareholder of individual shareholders and decree obtained against a company cannot be executed against any shareholders.
Transferability: The shareholder of a company can transfer its share and ordinarily the transferee becomes a member of the company.
Statutory Obligations: A company is required to comply with various statutory obligations regarding management, e.g.; filing balance sheets, maintaining proper account books and registers etc.
Not a citizen: A company is an artificial person, not a natural person. Therefore a company is not a Citizen, although it may have a Domicile. State Trading Corporation of India v. C.T.O. Divisional Forest Officer v. Bishwanath Tea Co. Ltd
Residence: A company has a residence for taxation and other purpose. A company does not possess any fundamental rights. Tata E & L Co Ltd. v. State of Bihar
No fundamental rights: Though a company has no fundamental rights, it can challenge a law as void if the law happens to violate fundamental rights of citizens. In order to succeed the company must prove that the impugned law is expropriatory of a citizen’s property. Prithvi Cotton Mills v. Broach Borough Municipality.
It is true that the Statement newspaper being a Company has no fundamental right. But the fundamental rights of the shareholders of the Company as citizens are not lost when they associate to form a company. The shareholders rights are equally and necessarily affected if the rights of the Company are affected”- Statesman Ltd and others v. Fact finding Committee and others
Social Objective: The present view of regard the legal nature of Company Law is that the Company is a social institution having duties and responsibilities toward the community, its workers, the national economy and progress. Centrally Administration: The administration of Company Law is entrusted to the Central Government.
Lifting the veil of the company: An Incorporated Company has a legal personality. But a company, as a legal person, can be distinguished from the individual persons who own the shares of the company. A company may be used in lawful activities. On the other hand, the owners and the managers of the company can use it as a clock a fraudulent activities. The human agency which works a company can use it as a device or as a veil or as a stratagem for illegal and unsocial activities.
It is sometimes necessary to find out the ownership of the shares. It is also necessary to find the persons who control the company. This is called, “Lifting or piercing of the corporate veil”. It can be done by the courts.
Relationship: The relationship between holding company and its subsidiaries can be investigated. According to Section 212. Of the Companies Act the balance sheet of a holding company includes the particulars of subsidiaries.
Reduction of membership: If the number of membership is reduced to below seven in a public company and below two in a private company, the remaining members become liable to the creditors of the company to an unlimited extent (Section 222). The number of membership and their names can be investigated.
Ownership: It is sometimes necessary to find out the ownership of the shares and the extent of the controlling power or interest in a company relating to taxes. The court to power to disregard the corporate personality if it is used for tax evasion or to dodge tax obligation. Apthorpe v. Peter Schenhofen Brewing Co. Ltd.’ “Though a company has a separate juristic personality, income-Tax authorities and Courts are entitled to lift the veil of corporate entity of a company and pay regard to economic realities behind legal facade”. Commissioner of Income Tax, Madras v. Sri: tfeenakhsi Mills.2
Illegality: If a company is formed for an improper or unlawful object, the Court can lift the veil of the corporate entity so that the guilty person can be punished. Jones v. Lipman
Abuse of power: A court can enquire into abuse of power by controlling interest in a company under sec 395.
Trading with enemies: A company can be investigate if it is carrying on trade with enemy aliens. Daimler & Co. Ltd. v. Continent Tyre and Rubber Co
Monopoly: A company can be investigated if it was creating a monopoly.
A company, formed and registered under the Companies Act, is regarded by law as a single person, having specified rights and obligations. The law confers on a company a distinct legal personality, with perpetual succession and a common seal. Therefore a company is different from its members and the individuals composing it. Suppose that, A, B, C and 50 other persons form a company called XY & Co. The Company, XY & Co. is a legal person quite separate from A, B, C and others. Therefore, A, B, C etc. can enter into contracts with XY & Co.
This principle is illustrated in the case Salomon v. Salomon & Co. Ltd. 1 Salomon had a business in boot manufacture. He formed a company called Salomon & Co. (with himself, his wife, daughter and 4 sons as shareholders) and transferred to it his business. As consideration for the transfer he received the major portion of the shares of the company and debentures for f 10,000. Later on, the company went into liquidation. Salomon, as a debenture holder, claimed to be a secured creditor and demanded priority in the payment of £.10,000, out of the assets of the company. The unsecured creditors of the company objected on the ground that the business really belonged to Salomon and heshould not be allowed to claim as a secured creditor. It was held that Salomon as an individual, was quite distinct from Salomon & Co. and he could therefore be a secured creditor of the company, even though he happened to hold the majority of the shares.
In the above discussion, it is proved that though company is not a person but it has an artificial personality.
State the rules relating to conversation of a private company into a public company.
Public Limited Company enjoys a number of privileges over Private Limited Company, which must operate through a number of restrictions. Further, because of limited number of members, private company may face capital shortage to support business expansion. Consequently, private company may be converted into public company in accordance with the rules of the Companies Act.
1994 Company Act Section 231(1) said that the method of converting the private company into public company, which are as follows-
“If a company being a private company having a least seven members after its articles such manner that they no longer include the provisions which under clause of sub-section (1) of section 2 of this Act are required to be included in the articles of a company in order to constitute it a private company the company-
Shall as on the date of the alteration cease to be a private company; and
shall within a period of this thirty days after the said date file with Registrar either a prospectus or a statement in lieu of prospectus containing the particular set out in Part I and the report specified in Part II of schedule V and the said Part I and II shall have effect subject to the provisions contained in Part III of that Schedule.”
So, in case of alteration of Article of Association by upper section the following rules will be applied.
(2) If default is made in complying with sub-section (1) the company; and also every officer of the company who is in default, shall be punishable with imprisonment for a term which may extend to two years or with fine which may extend to five thousand taka or with both.
(3) Where any prospectus or statement in lieu of prospectus filed under this section includes any untrue statement, any person who authorized the filing of such prospectus or statement shall be punishable with imprisonment for- a term which may extend to two years, or with fine which may extend to five thousand taka, or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did up to the time of the filing of the prospectus or statement believe that the statement was true.
(4) For the purposes of this section
(a) a statement included in a prospectus or a statement in lieu of prospectus shall be deemed to be untrue if it is misleading in the form and context in which it is included; or
(b) Where the omission from prospectus or a statement in lieu of prospectus of any matter is calculated to mislead, the prospectus or statement in lieu of prospectus shall be deemed, in respect of such omission, to be a prospectus or a statement in lieu of prospectus in which an untrue statement is included.
(5) For the purposes of sub-section (3) and clause (a) of sub-section (4) the expression “included” when used with reference to a prospectus or statement in lieu of prospectus, means included in the prospectus or statement in lieu of prospectus itself or contained in any report or memorandum appearing on the face thereof, or by reference incorporated therein.
232. Amendment of articles for conversion of a public company into private company- (1) 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) If the company has secured creditors, their written consent shall have to be obtained before passing a resolution as per provision of subsection (1) and the shares enlisted with the stock Exchange shall have, to be delisted.
What are the provisions relating to Foreign Companies functioning in Bangladesh?
FOREIGN COMPANIES’ REGISTRATION, ETC:
378. Application of sections 379 to 387 to foreign companies—- Sections 379 to 387 shall apply to fall foreign companies, that is to say, companies falling under the following two classes namely:-
Companies incorporated outside Bangladesh which, after the commencement of this Act, establishes a place of business with Bangladesh.
Companies incorporated outside Bangladesh with have, before the commencement of this Act, establish a place of business within Bangladesh and continued to have an established place of business within Bangladesh, at the commencement of this Act.
379. Documents etc delivered to Registrar by foreign companies carrying on business in Bangladesh—- (1) 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 to the Registrar for registration- a certified copy of the charter or status or memorandum and articles of association the full address of the registered or principle office of the company.
A list of the directors and secretary, if any, of the company;
The name or address or the name of the addresses resident in Bangladesh, authorized to accept on behalf of the company service process and any notice or other document required to be served on the company.
(2) Foreign companies other than those mentioned in sub-section (1), shall, if they have not delivered to the Registrar before the commencement of this Act the documents and particulars specified in the sub-section (1) and section 277 of the Companies Act, shall continue to be subject to the obligation to deliver those documents and particulars in accordance with this Act.
(3)If any alteration is made or occurs in-
(a) The charter, statutes or memorandum and articles of a foreign company or other instrument constituting or defining the constitution of a foreign company, or
(b) The registered or principle office of a foreign company, or
(c) The directors or secretary, if any, of a foreign company
380. Accounts of foreign company- (1) every foreign company shall, in every calendar year-
make out a balance sheet and profit and loss account or in the case of a company not trading for profit, an income and expenditure account it the company is a holding company, group accounts, in such form, and containing such particulars and including such documents , as under the provisions of this Act it would, if it had been company within the meaning of this Act, have been required to make out and lay before the company in general meeting; and deliver three copies of those documents to the Registrar.
If any such document as is mentioned in sub-section (1) is not written Bengali or English language, there shall be annexed to it a certified translation thereof.
381. Obligation tom state name, etc of foreign company—every foreign company shall-
In every prospectus inviting subscription in Bangladesh for its share or debentures, state the country in which the company is incorporated;
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,
Cause the name of the company and of the country in which the company is incorporated, to be stated in legible Bengali or English characters in all bills heads and letter paper, and in all notice s and other official publications of the company.
382. Service on foreign company- Any process notice, or other document required to be served on a foreign company shall be deemed to be sufficiently served, if address to any person mentioned in section 379(1) (d) and left at, or sent by the most to the address which has been so delivered under that section to the Registration.
Where any such company make a default in delivering to the registrar, in pursuance of that section the name and address of a person, or if at any time all the persons whose names and address have been delivered to the Registrar are dead, or ceased or have ceased so to reside at those addresses, or refused to accept on behalf of the company any process, notice or other document, or, those cannot be served or sent for any other reason, such document may be served on the company by leaving it at, or sending it by post to, any place of business established by the company in Bangladesh.
383. Notice of ceasing place of business of a company- If any foreign company ceases to have a place of business in a Bangladesh, it shall; forthwith give notice of the fact to the Registrar, and as from the date on which notice is so given, the obligation to the company o deliver any document to the Registrar shall ceases, provided it has no other place of business in Bangladesh.
384. Penalties- If any foreign company fails to company with any of the foregoing provisions of this Part, the company shall punishable with fine which may extended to one thousand taka, or, in the case of a containing offence, with an additional fine of five hundred taka for every day after the first day during which the default continues; and every officer agent of the company who is knowing willingly, makes such default, shall be punishable with the same fine.
385. Company’s failure to comply with this part not to affect its liability under contracts- Any failure by a foreign company to comply with any of the foregoing provisions of this Part shall not affect the validity of any contract dealing or transaction entered into by the company or its liability to be sued in respect thereof; but the company shall not be entitled to bring any suit, claim any set off, make any counter claim or institute any legal proceeding in respect of any such contract, dealing or transaction until it has complied with the provisions of this Part.
386. Fees for registration of documents under this Part- There shall; be paid to the Registrar for registering any document required by the foregoing provisions of this part such fess as specified in Schedule II
387. Interpretation- For the purposes of the foregoing provisions of this Part- the expression “director” includes any person occupying the position of director by whatever name called the expression “prospectus” has the same meaning as when used in relation to a company incur[orated under this Act; the expression “place of business” includes a share transfer or share registration office; the expression “secretary” includes any person occupying the position of secretary, by whatever name called and the expression “certified” means certified in the prescribed manner to be true copy or a correct translation
388. Restriction on sale and offer for sale of shares-(1) It shall not be lawful any person-
to issue, circulate or distribute in Bangladesh any prospectus offering to the public for subscription to shares in or debentures of a company incorporated or to be incorporated outside in Bangladesh whether the company has or has not established, or when formed will not will not establish, a place of business in Bangladesh, unless-
(i) before the issue, circulation or distribution of the prospectus in Bangladesh a copy thereof, certified by the chairman and two other directors of the company as having been approved by resolution of the managing body, has been delivered for registration to the Registrar;
(ii) the prospectus state on the face of it that the copy has been so delivered;
(iii) the prospectus is dated
(b) To issue to any person any Bangladesh a form of application for shares in or debentures of such a company or intended company as aforesaid unless the form is issued with a prospectus which complies the requirements of this part:
Provided that this clause shall not apply if it is shown that the form of application of issued in connection with a bonafide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures.
This section shall not apply to the issue to existing members or debentures holders of a company of a prospectus or form of application relating to shares or debentures of the company, whether in an applicant for shares or debenture swill not have the right to renounce in favor of other persons, but, subject as aforesaid. This section shall apply to a prospectus or form of application whether issued or with reference to the formation of a company or subsequently.
Where any document by which any shares in or debentures of a company incorporated outside Bangladesh are offered for sale to the public would, if the company concerned had been a company within the meaning of this Act, have been deemed by virtue of section 142 to be a prospectus issued by the company, that document shall be deemed to be, for the purposes of this section, a prospectus issued by the company
An offer of share or debentures for subscription or sale to any person whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, shall not be deemed on offer to the purposes of this section.
389. Requirements as to prospectus- In order to comply with this Part a prospectus, in addition to complying with the provisions of sub-clauses (ii) and (iii) of clause (a) of sub-section (1) of section 388, must-
Contain particulars with respect to the following matters, namely-
(i) the objects of the company;
(ii) the instrument constituting or defining the constitution of the company;
(iii) The enactments, or provisions having the force of an enactment, by or under which the corporation of the company was effected.
Subject to the provisions of this section, state the matters specified in sub-section (1) of section 135 and set out the reports specified in that section:
where any prospectus in published as a newspaper advisement, it shall be a sufficient compliance with the requirements that the prospectus must specify the objects of the company if the advertisement specified the primary objects with which the company was formed; and in section 135 of this Act, a reference to the article of the company shall be deemed, to be a reference to the constitution of the company.
(2) Any condition requiring or binding any application for shares or debenture shall be void, if the acceptance thereof has the affect of-
(a) Waiving compliance with any requirements of this section; or
(b) Serving him with notice of any contract, document or matter not specifically referred to in the prospectus.
In the event of non-compliance with or conversation of any of the requirements , of this section, a director or other person responsible for the prospectus shall not incur any liability or reason of the non-compliance or contravention, if as regards any matter not disclosed, he proves that he was not cognizant thereof; or he proves that the non-compliance or contravention arose from an honest mistake of fact on his part
Nothing in this section limit or diminish any liability which any person may incur under the general law or this Act, apart from this section.
390. Restriction on canvassing for sale of shares-(1) It shall be an offence of any person goes from house to house of the public or any member of public offering shares of a company incorporated outside Bangladesh for subscription to or sale of such shares.
(2) In this subscription the expression house shall not include an office used for business purposes.
391. Provisions regarding charge- The provisions of section 159 to 168 both inclusive and 171 to 176, both inclusive , shall extend to charge on properties in Bangladesh which are created and to charges on property in Bangladesh which is acquired, by a company incorporated outside Bangladesh which has an established place of business in Bangladesh.
Provided that, were a charge is created outside Bangladesh or the completion of the requisition of property takes place outside Bangladesh, sub clause (1) of the proviso to sub-section (1) of section 159 and the proviso to sub-section (1) 0f section 160 shall apply as if the property whenever situated were situated side Bangladesh
392. Notice of appointment of receiver etc- (1) The provisions of section 169 and 170 share apply to the case of all companies incorporated outside Bangladesh but having an established place of business in Bangladesh.
(2) The provisions of section 181 shall apply to such companies to the extent of requiring them to keep at their principle place of business in Bangladesh the books of account required by that section with respect to money received and expended, sales and purchase made, and assets and liabilities in relation to its business in Bangladesh.
What is a Memorandum of Association? What are it contents? State the rules for the alteration of the various clauses of the Memorandum of Association.
Definition of Memorandum of Association
The Memorandum of Association is a document which contains the fundamental rules regarding the constitution and activities of a company. It is the basic document which lays down how the company is to be constituted and what work it shall undertake. The purpose of the memorandum is to enable the members of the company, its creditors and the public to know what is powers are and what is the range of its activities. The memorandum contains rules regarding the capital structure, the liability of the members, the objective of the company and all other important matters relating to the company. The memorandum is altered only after certain formalities are observed.
1. Reference: Section 5 of Companies Act 1994
Definition: “Any seven or more persons or, where the company to be formed will be a private company, any two or more persons association for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise with the requirements of this Act in respect or registration from an incorporated company, with or without limited liability.”
Writer: Lord Cairns
Definition: “The memorandum of association of a company is its charter and defines its limitation of the power of the company established under the act”
Above all memorandum was defined as a document, which sets out the constitution of a company, and as such it is really the foundation on which the outside world and the scope of its activities depend.
Contents of the Memorandum
Memorandum of Association is the main document of the company. As the company is the creature of law, legal formalities must be maintained while preparing the Memorandum of Association. The Memorandum of Association of a company must include the following contents:
The name of the company with the word limited at the end of the name of a public company and the words private limited at the end of the name of a private company.
“A company shall not be registered by a name identical with that by which a company in existence, or so nearly resembling the name that there is likelihood of using the name to deceive, except where the company in existence is in the course of being dissolved and signifies its written consent in such manner as the Registrar requires”- Section 11 ( 1 )
“Except with the previous consent in writing of the government, no company shall be registered by a name which is declared by the Government by the notification in the official Gazette, as undesirable:
Provided that nothing in this sub-section shall apply to companies registered before the commencement of this Act”- Section 11 ( 4 )
No company shall be registered by a name containing in any from the name or any attribution of the name of the United Nations or of the World Health Organization unless the company has obtained the previous authorization in writing of the Secretary General in the case of the United nations or the subsidiary body as aforesaid or of the Director General of the World Health Organization in the case of that Organization”—Section 11 ( 5 )
Situation & Address Clause:
The name of the State in which the registered office of the company is to be situated.
It includes the nature and type of business the company is supposed to be engaged in future. The main objects and other objects must be stated clearly and separately in the Memorandum of Association.
Area of Operation clause:
Except in the case of trading corporations, the State or States to whose territories the objects extend.
The nature of the liability of the members, whether limited by shares or by guarantee or unlimited.
“The memorandum shall state the amount of share capital with which the company proposes to be registered, and the divisions thereof into shares of a fixed amount.” Section- 6 ( a-v )
Here the signatories of the Memorandum of Association declare that they will buy the proposed number of shares in the capital of the company set opposite our respective names and form the company as per the condition laid down in the Memorandum of Association.
Alteration of Memorandum of Association
Any clause in the Memorandum of Association may be altered by following the procedure laid down in the Companies Act.
10. Restriction on alteration of memorandum.-(1) A company shall not alter the conditions on coal aimed in its memorandum except in Vi-, case and case and the mode and to the extent for which express provisions is made in the Act.
(2) Only those provisions which by any other specific provision contained in this Act, are required to be stated in the memorandum of the company concerned shall be deemed to be the conditions contained in its memorandum.
(3) Other provisions contained in the memorandum, including those relating to the appointment of a director, managing agent or manager may be altered in the same manner as the articles of the company, but if there is any express provision in this Act permitting the alteration of such provisions in any other manner, they may also be altered in such other manner.
(4) All references to the articles of a company in this Act shall be construed as including references to the other provisions contained in its memorandum as referred to in subsection (3).
11. Name of company and change of name-(1) A company shall not be registered by a name identical with that by which a company in existence is already registered, or so nearly resembling the name that there is likelihood of using the name to deceive, except where the company in existence is in the course of being dissolved and signifies its written consent in such manner as the Registrar requires.
(2) If a company, through inadvertence or otherwise, is, without tile consent referred to in sub-section (I), registered by a name identical with that by which a company in existence is previously registered, or so nearly resembling the name that there is likelihood of using the name to deceive, the first mentioned company shall, on the direction of the Registrar, change its name within a period of one hundred and twenty days.
(3) If a company makes a default in complying with the direction made under sub-section
(2), the company shall be punishable with fine of five hundred taka for every day during which the default continues and every officer who is in default shall be punishable with fine of one hundred taka for every day during which the default continues.
(4) Except with the previous consent in writing of the Government, no company shall be registered by a name which is declared by the Government by notification in the official Gazette, as undesirable:
Provided that nothing in this subsection shall apply to companies registered before the commencement of this Act.
(5) No company shall be registered by a name containing in any form the name or any abbreviation of the name of the United Nations or of any subsidiary body set up by the United Nations or of the World Health Organization unless the company has obtained the previous authorization in writing of the Secretary General in the case of the United Nations or tile subsidiary body as aforesaid or of the Director General of the World Health Organization in the case of that Organization.
(6) Any company may, by special resolution and subject to tile approval of the Registrar signified in writing, change its name.
(7) Were a company changes its name, the Registrar shall enter the new name on the register in place of the former name, and shall issued a certificate of incorporation in its new name to meet the circumstances of the case and on the issue of such a certificate, the change of name shall be complete.
(8) The change of name shall not change any rights or obligations of the company, or render defective any legal proceedings by or against Tile Company; and any legal proceedings that might have been continued or commenced against it by its former name may be continued or commenced against it by its new name.
(9) A company may, on payment of such fee as may be prescribed, apply to the Registrar for information whether any company is registered or proposed to be registered by a name specified in the application and the Registrar shall furnish the required information within a period of thirty days from the date of Receipt of the application.
12. Alteration of memorandum .-(1) Subject to the provisions of this Act, a company may, by special resolution , alter the provisions of its memorandum with respect to the objects of the company, so far as may be required to enable it
(a) To carry on its business more economically or more efficiently ;or (b) to attain its main purpose by new or improved means ; or
(b) To enlarge or change the local area of its operations; or
(c) To carry on some business which, under the existing circumstances, may conveniently or advantageously be combined with the business of the company; or ,
(d) To restrict or abandon any of the objects specified in the memorandum; or
(f) To sell or dispose of the whole or any part of the undertaking of the company; or
(g) To amalgamate with any other company or body of persons.
(2) The alteration shall not take effect until and except in so far it is confirmed by the Court on petition.
(3) Before confirming the alteration, the Court must be satisfied
(a) that sufficient notice has been given to every holder of debentures of the company, and to any person or class of persons whose interest will, in the option of the Court, be affected by the alteration ; and
(b) that, with respect to every creditor who in the opinion of the Court is entitled to object, and who signifies his objection in manner directed by the Court, either his consent to the alteration has been obtained or his debt or claim has been discharged or has been determined, or has been secured to the satisfaction of the Court;
Provided that the Court may, in the case of any person or class, for special reasons, dispense with the notice required by this section.
13. Power of Court when confirming alteration.-The Court may make an order confirming the alteration either wholly or in part, and on such terms and conditions as it thinks fit, and may make such order as to costs as it thinks proper.
14. Exercise of discretion by Court.-The Court shall, in exercising its discretion under sections 12 and 13, have regard to the rights and interests of the members of the company or of any class of them, as well as to the rights and interests of the creditors, and may if it thinks fit; adjourn the proceedings in order that an arrangement may be made to the satisfaction of the Court for the purchase of the interests of dissenting members; and may give such directions and make such orders as it may think expedient for facilitating or carrying into effect any such’ arrangements ; Provided that no part of the share capital of the company may be expended in any such purchase.
15. Procedure on confirmation of the alteration.-A certified copy of the order confirming the alteration, together with a printed copy of the memorandum as altered, shall be filed by the company with the Registrar within ninety days from the date of the order or within such time as may be extended by the court, and he Registrar shall register the same, and shall certify the registration under his hand, and the certificate shall be conclusive evidence that all the requirements of this Act, with respect to the alteration and the confirmation thereof, have been complied with, and henceforth the memorandum so altered shall be the memorandum of the company.
16. Effect of failure to register within extended time.-No such alteration shall have any operation until registration thereof has been duly effected in accordance with the provisions of section 15, and if such registration is not effected within the period specified in that section such alteration and the order of the Court confirming the alteration, and all proceedings connected therewith shall, at the expiration of the period specified under that section become
absolutely null and void :
Provided that the Court may, on sufficient cause shown, revive the order on application made within a further period of thirty days after the said period.
State the rules of increase or reduction of share market.
56. Notice of increase share capital or of members-(1) Where a company having a share capital, whether its shares have or have not been converted into stock, has increased its share capital beyond the registered capital, and where a company not having a share capital has increased the number. of its members beyond the registered number, 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 in the case of an increase of members within fifteen days after the increase was resolved on or took place, notice of the increase of capital or members, 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.
(3) If a company makes a default in complying with the requirements of this section, it shall be liable to a fine not exceeding two hundred taka for every day during which the default continues, and every officer of the company who knowingly and willfully authorizes or permits the default shall be liable to a like penalty.
59. Reduction of share capital— (1) Subject to confirmation by the Court, a company limited by shares, if so authorized by its articles, may be special resolution reduce its share capital in anyway any in particular this company may, as apart of this general power- extinguish or reduce the liability on any of its shares in respect of share capital not paid–up; either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost or presented by available assets. Either with or without extinguishing or reducing liability on any of its shares, pay-off any paid-up share capital which is in excess of the wants of the company; so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.
60. Application to Court for confirming order:- Where a company has passed a resolution for reducing share capital it shall apply by petition to the Court for an order confirming the reduction.
61. Addition to name of company of “and reduced”- On and from the passing by a company of a resolution for reducing share capital, or where the reduction does not involve either the diminution of any ,liability in respect of un-paid share capital or the payment to any share holder of any paid-up share capital, then on and from the making of the order by the Court confirming by the reduction the company shall add to its name, until such date as the Court may fix, the word “and reduced” as the last words in its name and those words shall until that date be deemed to be part of the name of the company:
Provided that where the reduction does not involve either the diminution of any liability in respect of unpaid share capital or the payment to any share holder of any paid-up share capital, the Court mat, if it thinks expedient dispense altogether with the addition of words “and reduced”
62. Objections by creditors and settlement of list of objecting creditors: (1) Where the proposed reduction of share capital involves either diminution of liability in respect of unpaid share capital or their payment to any shareholder of any paid-up share capital, without permission of the Court and in any other case if the Court so permits every creditor of the company, who at the date fixed by the Court is entitled to any debt or claim which if that date were he commencement of the winding up of the company would be admissible in proof against the company shall be entitled to object to the reduction.
The Court shall settle a list of creditors so entitle to object and fro that ascertain as far as possible without requiring an application form any creditor the names those creditors and the nature and amount of their debts or claims and may issue notice fixing a day or days within which creditors not entered on the list are to claim to be so entered or to be excluded from the right of objecting to the reduction; and after consideration such claims the Court shall finalize the list.
63. Power to dispense with consent of creditor on security being given for his debt:-Where a creditor entered on the list of creditors whose debt or claim is not discharged or determined does not consent to the reduction, the Court may, if it thinks fit dispense with the consent of the creditor on the company securing payment of his debt or claim by the appropriate as the Court may direct the following amount that is to say-
(i) if the company admits the full amount of his debt or claim or though not admitting it is willing to provide for it then the full amount of the debt or claim;
(ii) if the company does not admit or is not willing to provide for the full amount of the debt or claim, or if the amount is contingent or not ascertained, than an amount fixed by the Court after the like inquiry and adjudication as if the company were being wound up the Court.
64. Order confirming reduction:- 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 on such terms and conditions as it thinks fit.
65. Registration of order and minutes of reduction- (1) 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;
(2) On the other registration under sub-section (1), and not before, the resolution from reducing share capital as confirmed by the order to register shall take effect.
Notice of the registration shall be published in such manner as the Court may direct.
66. Minutes to form part of memorandum-(1) The minutes when registered shall be deemed to be substituted for the corresponding part of the memorandum of the company, and shall be valid and alterable as if it had been originally contained there in, and it shall be embodied in every copy of the memorandum issued after its resignation.
(2) 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 each copy in respect of which default is made, and every officer of the company who knowingly and willfully authorizes or permits the default shall be liable to like a penalty.
69. Publication of reasons for reduction – In any case of reduction of share capital, the Court may require the company to publish, as the Court directs, the reasons for reduction or such other information in regard thereto as the Court may think expedient with a view to giving proper information to the public, and, if the Court think fit, also causes which led to the reduction.
70. Increase and reduction of share capital of a company limited by guarantee: A Company limited by guarantee and registered after the commencement of this Act may, if it has a share capital and is so authorized by its articles, increase or reduce its share capital in the same manner and subject to the same conditions in and subject to which a company limited by shares may increase or reduce its share capital under the provisions of this Act.
State the usual steps and formalities to be undertaken in the formation of a company under the company’s Act 1994.
A company is an artificial being, invisible, intangible and existing only in contemplation of law. It is a voluntary association or an organization of many persons who contribute money or monetary worth to a common stock and employee it in some trade or business who share the profit or loss arising there from.
Method of the formation of a company
The whole process of company formation may be divided into the following stages:
Promotion of idea
The process of conceiving idea and developing it into a concrete project to be done by the incorporation and floatation of a company is called promotion. The person or persons who take the necessary steps to accomplish these objectives is known as promoter. The promoters discover the opportunities to make money, investigate such propositions, assemble and finance them and thereby produce a going concern. There are four stages in the promotion of a company. These are –
Discovering of ideas
Financing the proposition
The promoters select a few suitable names in order of preference indicating as far as possible the main object of the proposed company. Then they apply to the registrar of Companies to ascertain as to which of the names selected by them is available for adoption by the company. The application form is supplied by the registers office and a fees is payable with the application. After obtaining the approval of the name, the promoters get the memorandum and articles of association drafted and printed. Thereafter they file the following documents with the registrar of companies of the country.
The Memorandum of Association
The Articles of Association signed by the promoters a statement of nominal capital. A declaration by an advocate or an attorney that all requirements of the Company Act in respect of registration have been complied with a list of the directors and their consent to act signed by each. The address of the registered office The registrar will examine the documents and when satisfied that every thing is in order, will enter the name of the company on the register of companies maintained in the office. He will issue a certificate of incorporation. The private company can start doing business as soon as it is received but the public company needs to wait for the certificate of the commencement.
The promoters of public company at this stage prepare prospectus to raise capital sufficient to commence business and carry it on satisfactorily. The company is now ready in a position to apply to the registrar for a grant of the certificate to commence business, which will be issued if all the formalities and legal requirements have been complied with. The Registrar will grant this certificate only if; The minimum subscription has been allotted The directors have taken up and paid for their qualification shares, as approved in the articles
The prospectus of the statement in lieu of prospectus has been field.
What is Prospectus? What are its contents?
When a company has been incorporated, it is ready for floatation. It has to raise capital required to commence business and carry it on satisfactory. A private company must raise the requisite amount of fund from friend and relatives by private arrangement. A public company can also raise fund by private agreement. But in practice, public company can also raise fund from the public by issuing a prospectus to the public. Document containing offer of shares or debentures for sale to be deemed to a prospectus. A prospectus as any documents described or
Issued as prospectus and includes circular, notice, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in or debentures of, a body corporate. Before issuing the prospectus, it must be submitted to the register to the joint Stock Company. It must be circulated in the local daily newspaper. The director or appropriate authorized person must sign the prospectus.
According to (Section 142) Company Act 1994 – “Document containing offer of shares or debentures for sale to be deemed a prospectus.”
Contents of Prospectus
Prospectus is made to inform and encourage people about the future success of the new company. The prospectus mainly made for raising fund from the people. it should be prepared such people can know about the company and raise question about the new company. For this reason the prospectus should be prepared.
The contents of a prospectus are as follows:
Prospectus is made to inform and encourage people about the future success of the new company. The prospectus mainly made for raising fund from the people. it should be prepared such people can know about the company and raise question about the new company. For this reason the prospectus should be prepared.
The contents of a prospectus are as follows:
(i) Name of the company.
(ii) Registered office of the company.
(iii) Objectives of the company.
(iv) Clauses of the memorandum.
(v) Brief description of the Association.
(vi) Names and addresses of the promoters and subscription to the company.
(vii) Number and types of shares.
(viii) Specimen copy of the share application from.
(ix) Date of issuing prospectus.
(x) Specimen date of the submission of share application form.
(xi) Amount of capital-authorized, paid-up.
(xii) Names and addresses of the directors and their professional qualification.
(xiii) Remuneration of the director.
(xiv) Voting right of the shareholder.
(xv) Procedure of distribution of company.
(xvi) Name and addresses of the auditor.
(xvii) Name and addresses of the legal advisor of the company.
(xviii) Name and addresses of the bankers of the company.
Above all, we can say that prospectus is very important for the starting of the company but if there is any untrue, vogue information is provide in the prospectus, and it is proved then the company or the authority will be punished by 5 years imprisonment or 15000 taka fine or both. (Sec 147 of company act 1994)
8. Discuss the rules regarding the liabilities of the persons responsible for misstatements in the prospectus?
145. Civil liability for misstatement in prospectus- (1) Subject to the provisions of this section, where a prospectus invites members of the public to subscribe for shares in or debentures of a company, the following persons shall be liable to pay compensation to every person who subscribes for any shares or debentures on the faith of the prospectus for any loss or damage lie may have sustained by reason of any untrue statement included therein, that is to say-
(a) Every person who is a director of the company at the time of the issue of the prospectus;
(b) Every person who has authorized himself to be named and is named in the prospectus either as a director, or as having agreed to become a director, either immediately or after an interval of some time;
(c) Every person who is a promoter of the company; and
d) Every person who has authorized the issue of the prospectus:
Provided that where, under section 138, the consent of a person is required w the issue of a prospectus and lie has given that consent, or where the consent of a person named in a prospectus is required and he has given that consent, he shall not, by reason of having given such consent, be liable under this sub-section as a person who has, as referred to in clause (d), authorized the issue of the prospectus, except in respect of an untrue statement, if any, which is included in accordance with section 137 with the consent or under the authority of a person purporting to be an expert. (2) No person shall be liable under sub-section (1), if he proves
(a) That, having consented to become a director of the company, he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent; or
(b) that the prospectus was issued without his knowledge or consent, and that on becoming aware of its issue he forthwith gave reasonable public notice that it was issued without his knowledge or consent; or
(c) that, after the issue of the prospectus and before allotment there under, he, on becoming aware of any untrue statement therein, withdrew his consent to the prospectus and gave reasonable public notice of the withdrawal and of the reason there for; or
(d) That (i) as regards every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, he had reasonable ground to believe, and did up to the time of the allotment of the shares or debentures, as the case may be, believe that the statement was true; and
(ii) as regards every untrue statement purporting to be a statement by an expert or contained in what purports to be a copy of or an extract from a report or valuation of an expert, it was a correct and fair presentation of the statement, or a correct copy of or a correct and fair extract from, the report and valuation; and he had reasonable ground to believe, and did up to the time competent to make it and that person had given the consent required by section 137 to the issue of the prospectus and had’ not withdrawn that consent before delivery of a copy of the prospectus for registration or, to the defendant’s knowledge, before allotment there under and
(iii) As regards every untrue statement purporting to be a statement made by an official person or contained in what purports to b copy of or extract from a public official document, it was a correct and fair representation of that statement, or correct copy of or a correct and fair extract from, the document Provided that this sub-section shall not apply in the case of a person liable by reason of his having given a consent required of him by section 137 as a person who has authorized the issue of the prospectus in respect of an untrue statement purporting to be made by him as an expert consent required of him by section 137 as a person who has authorized the issue of a prospectus in respect of an untrue statement purposing to be made by him as an expert, shall not be so liable, if he proves-
(a) That having given his consent under section 137 to the issue of the prospectus, he withdrew it in writing before delivery of a copy of the prospectus for registration; or
(b) That, after delivery of a copy of the prospectus for registration and before allotment there under, he, on becoming aware of the untrue statement, withdrew his consent in writing and gave reasonable public notice of the withdrawal and of the reason there for or
That he was competent to make the statement and that he had reasonable ground to believe, and did up to the time of the allotment of the shares or debentures, believe, that the st