RE: Legal Opinion regarding securing of FDR as per condition of the Brokerage Agreement.
We refer to your letter no. ……………….. dated 24 April 2007 and your letter no. 29 April 2007.
From perusal of your letter, it appears that, Bank 1 (“BANK 1”) has started their merchant banking operations. In this regard BANK 1 has entered into Brokerage Agreements with four brokerage houses who have enlisted with BANK 1 to provide brokering services to carryout portfolio management functions.
One of the pre – conditions of the Brokerage Agreement dated 10 April 2007 (“the Brokerage Agreement”) is as follows:
“2 (a) To deposit Tk. 03 Crore (Taka Three Crore) only in the form of FDR with the Bank at the prevailing market rate which shall be duly discharged and kept under custody of BANK 1 as security against all claims, damages, losses and liabilities, if any, to be suffered in terms of cash or securities by the Bank resulting your actions during the tenure of contract.”
One of the broker, COMPANY 1 (“the Broker”) is a subsidiary company of another merchant banker, COMPANY 2 (“COMPANY 2”). The Broker has deposited Tk. 3.0 Crore in two deposit receipts – one FDR for Tk. 1.44 Crore in the name of the Broker and another FDR for Tk. 1.56 Crore in the name of COMPANY 2.
In these circumstances, you have requested us to give our legal opinion as to:
i. Whether FDR for Tk. 1.56 Crore in the name of COMPANY 2 is equally valid and secure as FDR for Tk. 1.44 Crore in the name of the Broker.
ii. Whether BANK 1 should accept FDR for Tk. 1.56 Crore
iii. What measures BANK 1 should take to secure their position in compliance with the pre-condition.
We have perused the Memorandum of Association of COMPANY 2. In Clause 14 of the Memorandum, COMPANY 2 has been given the power to act as guarantors and sureties. As such we are of the opinion that, COMPANY 2 has the power to provide the FDR of Tk. 1.56 Crore to BANK 1 as security on behalf of the Broker.
You have also provided a Board Resolution of COMPANY 2 dated April 10, 2007. This Board Resolution approved the discharge of the FDR of Tk. 1.56 Crore and also approved that the FDR receipt (duly discharged) shall be kept under safe custody of BANK 1 as Security against all claims during the tenure of the Brokerage Agreement. Moreover, by this board resolution COMPANY 2 authorised Mr. X, the managing director to sign related documents/agreements.
Subsequently, Mr. X, the managing director of COMPANY 2 vide his letter dated 10 April 2007 had sent the duly discharged FDR of Tk. 1.56 Crore to BANK 1 and had also acknowledged that the FDR receipt (duly discharged) shall be kept under safe custody of BANK 1 as Security against all claims, damages, losses and liabilities during the tenure of the Brokerage Agreement between BANK 1 and the Broker.
In view of the above, we are of the opinion that, the FDR for Tk. 1.56 Crore in the name of COMPANY 2 is equally valid and secure as the FDR for Tk. 1.44 Crore in the name of the Broker and BANK 1 may accept the FDR for Tk. 1.56 Crore.
If you have any further enquiry, please do not hesitate to contact us.
For: “The Lawyers & Jurists”