Legal Opinion regarding operation of Bank Account A/C Company 1.

Mr. Z


Dear Sir,

Re:      Legal Opinion regarding operation of Bank Account A/C Company 1.

We refer to your letter dated October 11, 2007 and October 27, 2007 and our letter dated October 20, 2007 on the above subject.

On perusal of your letter, it appears that Bank 1 (the Bank) upon receiving our legal opinion, has sent a letter to Company 1 (the Company) to clarify their position and suspended the operation of the bank account of the Company. Mr. x, C.E.O. of the Company vide letter dated 27 October 2007 requested the Bank to resume the operation of the bank account and enclosed a legal opinion of a lawyer.

In these circumstances, you have requested us to provide our legal opinion whether the Bank can permit the new signatories to operate the account as per Memorandum and Article of Association of the Company.


It appears from the legal opinion obtained by the Company that the lawyer is of the opinion that the resolution passed regarding the operation and maintenance is a valid resolution of a duly constituted meeting and is binding upon the Company. He based his opinion on the Article 121 of the Articles of Association (Article 121), which provides inter alia “a director during an absence of not less than three months from the place in which meetings of the directors are ordinarily held, may with the approval of the Directors, appoint any person to be an alternate director during such absence…”

By interpreting Article 121 the lawyer stated that Article 121 expressly require “approval of the Directors” and does not provide any formal method of taking approval of Directors. Since in the Articles of Association the word “Directors” and the word “Board” have different meaning, he construed that no formal meeting of the Directors is required to give such approval of the appointment of the alternate directors.

Thus he concludes that acknowledgement given in the meeting of the Board of Directors dated 02 August 2007 suffices as the “approval” needed to appoint alternate directors as per Article 121 even though the meeting did not have the necessary quorum. When requirement of approval was fulfilled, attendance of the two alternate Directors fulfilled the number of Directors for the quorum to hold Board Meeting and therefore the decisions taken in that meeting is binding on the Company.

However we still maintain our previous opinion in this regard.

We draw you attention to Section 101 of the Companies Act, 1994.

Article 121 of the Articles of Association of the Company must be read with Section 101 of the Companies Act 1994 (Section 101) which provides as follows:

“101. The Board of Directors of a company may, if so authorised by its articles or by a resolution passed by the company in general meeting, appoint an alternate director, to act for a director hereinafter in this section called the original director during his absence for a continuous period of not less than three months from Bangladesh.”

Therefore, provided that the articles of association authorises the appointment of an alternate director or authorisation to such appointment is given by the company in the general meeting, appointment of an alternative director may only be made by the Board of Directors of a company. Please note that the law (Section 101 of the Companies 1994) will prevail over any articles of association of any company. All related definitions in a memorandum and articles of association of a company shall be required to be read and interpreted in accordance to the provisions of the Companies Act, 1994 and not contradict the law.

When Article 121 is read with Section 101, “Directors” in Article 121 means “Board of Directors”.

If for arguments sake we assume that, “Directors” in Article 121 does not provide for any formal method for taking approval of directors, then Article 121 shall be in conflict with Section 101. As reiterated statues prevail over articles of association of a company, Section 101 shall apply over Article 121.

According to the second paragraph of the minutes of the 35th Meeting of the Board, it is apparent that only 3 (three) directors were present in the said meeting. The said minutes was signed by Mr. X, Chairman. According to Article 135 of the Articles of Association of the Company, “any such minutes of any meeting of the Directors or of any committee of the company, if purporting to be signed by the Chairman of such meeting or next succeeding meeting shall be receivable as prima facie evidence of the matters stated in such minutes.” Therefore, according to the minutes of the said meeting it is apparent that the necessary quorum i.e. 5 (five) directors, were not present in that meeting.

Since in the 35th meeting of the Board of Directors the necessary quorum was not present, the approval given by the directors present is not binding on the Company.

Therefore we are of the opinion that since the resolution passed in the said meeting is not binding, the new signatories do not have the proper authorizations to operate the account of the Company. However please note that since the resolution did not take away the powers of the previous signatories, there is no dispute regarding the authority of the previous signatories. Therefore the Bank can allow the previous signatories to operate the bank account.

If you have any further inquiries please do not hesitate to contact us.

Thanking you.

Yours faithfully,


For: “The Lawyers & Jurists”