Dated: September 22, 2007
46, Kawran Bazar C. A.
Dhaka – 1215
RE: Legal Opinion on the draft Share Subscription Agreement to be signed between Bank 2 & Bank 1 regarding the issuance of preference shares.
We refer to your letter dated 13 September 2007 on the above subject.
The Income Tax payable on all Dividend Income is at present governed by The Finance Act 2007 which came into force on 1 July 2007. Therefore, in accordance with the said Act, the Income Tax payable on the Dividend Income from preference shares is at present 15% of that income.
We have perused the draft Share Subscription Agreement (“the Agreement”) to be signed between Bank 2(“BANK 2”) and Bank 1 (“ONE Bank”) regarding the issuance of preference shares by BANK 2. Our Comments on the Agreement are given below:
In the third line of Clause 3.2, we suggest you to delete “many” and replace it with “may”.
After Clause 4.2.2 (ii), we suggest you to add the following new sub-clauses:
“(iii) The Company shall within sixty (60) Business Days of the allotment of Preference Shares file the returns of allotment with the Registrar of Joint Stock Companies and Firms and provide a copy of such filing with the delivery receipt to each of the Subscribers for their record.
(iv) The Company shall within 14 (fourteen) Business Days shall deliver to each of the Subscribers the duly sealed and executed share certificates for the Preference Shares subscribed by such Subscriber.”
In the first line of Clause 5.2.1, after “The Subscriber is” we suggest you to add the words “a banking company or a”.
It is general practice in relation to issuance of preference shares to include a clause in the share subscription agreement which will ensure that the net dividend amount received by the subscribers is always constant notwithstanding any changes in the laws of taxation of the country. In the present Agreement, Clause 6.4 is that Tax Change Clause. The provisions contained in Clause 6.4 are viable and maintainable under the laws of Bangladesh. However, in the 4th and 5th line of clause 6.4.2, we suggest you to delete the words “provided that any such upward adjustment shall not become effective until the Dividend Received,” because these words have been repeated twice in the clause.
In the 3rd line of clause 7.2, we suggest you to delete “reach” and replace it with “breach”.
In the 8th line of Clause 9.5, we suggest you to delete “form” and replace it with “from” and in the 9th line delete “nay” and replace it with “any”.
We suggest you to delete Article 2(iv) of Schedule II of the Agreement and replace it with the following:
“Each holder of Preference Shares shall in respect of each Preference Share have no voting right in the General Meeting except in decisions/resolutions taken regarding the interest of the holders of the preference shareholders and winding up of the Company.”
Apart from our above observations, the draft Agreement referred to us appears to the in order.
Please note that, generally in the issuance of preference shares, in order to protect the interest of the Subscribers, a Put Option Agreement is also executed under which the subscribers have the right to exercise an option to sell their entire holdings of preference shares to the sponsors and/or selected concerns/individuals in case of non-payment of dividends and/or redemption amount for any year during the term of the preference shares.
All documents referred to us are returned herewith.
The Lawyers & Jurists
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