Discuss the provisions of the Companies Act, 1994 relating to auditors as to: 1. appointment; 2. qualifications; 3. rights, and; 4. duties.

Appointment and Remuneration of Auditors:

1. Auditors are appointed in the Annual General Meeting by the Shareholders;
2. First Auditors of the Company is appointed by the Directors;
3. The Directors may appoint Auditors in case of casual vacancy;
4. The Govt. may appoint an Auditor if the above authorities fail to appoint an Auditor;
5. Auditor's remuneration is to be fixed by the authority of appointing the Auditor.

Qualification of Auditors:
The auditor shall be a Chartered Accountant as per P.O. 2 of 1973. Following persons are not eligible for appointment as Auditor of the Company: 

1. Officers and staff of the Company.
2. Any partner, staff or officers of the officers and staff of the Company.
3. Any person indebted to the Company for more than Tk.1,000 or indebted by any Guarantee for the above amount.
4. Any Director, Partner, Member of Managing Agent firm

The SEC regulation imposed some additional qualifications for appointment of Auditors.

Rights and duties of Auditor:
1. The Auditors have right to access any books of accounts, information, voucher, statement as required to perform the audit work.

2. The auditors may require any information explanation from any officers, staff of the Company for the audit.

 They should investigate the followings:

1.  Security given against the loan and advances whether it is secured or not and whether the terms are detrimental to the interest of the company.
2.  The transactions, which have been shown in the books of accounts, whether they are detrimental to the interest of the company.
3.  Whether or not any assets, shares, debenture or any other securities have been sold lower than the purchase price (other than banking);
4.  Any loan and advances have duly been shown or not by the company.
5. Whether or not any personal expenditure has been shown in the revenue account;
6. Any share issued in cash whether the cash actually received or not and whether the presentation in the Balance Sheet for the same is misleading or not. 

 The auditors will enclose the audit Report with the Accounts and their report shall include:

1. Whether or not they have obtained all information and explanations as required by them;
2. Whether or not the Balance Sheet and Profit & Loss Accounts exhibits a true and fair review of
   the state of affairs of the company;
3. Whether or not proper books of Accounts have been maintained ;
4. Whether or not the Balance Sheet and Profit and Loss Account are in agreement with the books
   of Accounts kept by the company;

If any answer is in the negative the Auditor should disclose the fact and report to the shareholders.

Read More

Discuss the position, powers and liabilities of directors.

Legal position of Directors:

 
There are different views about the legal position of Directors. They have been described sometimes as trustees of the company and sometimes as its agents. Neither view is wholly correct but both contain elements of truth.

Fiduciary Position:

 
It is generally agreed that the Directors occupy a fiduciary position in relation to the Company. They
must make full disclosure of all material facts of the Company.
 

Officers:

 
The Section 2(i) (o) of the Companies Act provides that a Director is an officer of the Company.

Power of Directors:

 
Directors derive their power and authority from two sources (i) the Articles of Association of the Company and (ii) the Companies Act.
 

The articles of association generally contain a list of the powers, which may be exercised by Directors and the limitation on those powers. All acts and things done by the Board of Directors, within the powers given to it by the articles, are valid and binding on the company. It may be noted that a Director individually has no authority over the affairs of the Company except as regards matters, which have been specifically delegated to him by the Board.

Liabilities of Directors:

 
The liabilities of Directors may be analyzed with reference to liability of Directors to third parties, liability to the company, liability for breach of statutory duties and liability for acts of his Co-Directors. Directors' liability may be civil liability, criminal liability and unlimited liability.

Civil Liability:

 
The directors may, under certain circumstances, be liable to pay compensation to the Company and to
outsiders, such as:
1. Untrue statements in the prospectus.
2. Ultra vires acts.

Criminal liability:

 
For certain breaches of duty the Companies Act imposes criminal liabilities upon Directors such as: Untrue statements in prospectus, failing to keep certain register, falsification of books and reports etc.

Read More

How does the winding up affect the position of officers of the company?

Winding up affecting the position of officers

As per Section - 252(3), a winding-up order by the court executed as a dismissal or discharge of the servant of the Company. Such discharge relieves the servant from all obligations under his contract of
service. The powers of the directors are also usually ceased on the winding-up of a Company.

(a) Misfeasance: Under section 331, if any promoter, director, liquidator or officer of the Company has misapplied or retained money or property of the Company or has been guilty of misfeasance or breach of trust, the court may, on the application of the liquidator or of any creditor or contributory, examine into his conduct and order him to repay or restore money or property or to pay compensation.

(b) Criminal Liability: Section-332 provides punishment for falsification, or fraudulent secretion of any of the books, papers of securities of the Company which is being wound-up.

Read More

Discuss the procedures of issuing shares at a premium. How does the Companies Act provide for application of 'Receipts' from premium?

Issuance of a share at a premium

 
A Company can issue share at a premium having permission from the Securities and Exchange Commission. A share premium account is to be opened and the amount of premium to be transferred to the share premium account

Application of premium received on issue of shares:

A share premium account is to be opened which can be used for the following:
i. Un-issued share capital to be issued to the member as fully paid Bonus share.
ii. To write off preliminary expenses.
iii. To write off discount, commission and expenses on issue of share or debenture of the company.
iv. To pay premium payable on redemption of redeemable preference share or debenture of the company.

Read More

What are illegal associations?

Illegal Association: (Section-4)

 
No company, Association, Partnership shall be formed consisting of 10 member for banking business and more than 20 members for other business unless it is registered under this Act. If any Association  is formed contravening this section it shall be an illegal association.

Read More

What are the three possible positions of pre-incorporation contracts of a company?

Pre- incorporation contract:

A company cannot be bound by a contract which was made on its behalf by any person and including a promoter before the Company itself had been formed. The Company cannot even ratify any pre-incorporation contract and the promoters will be personally liable. In this regard a fresh contract can be accorded by the Company after the incorporation.

Read More

A company was incorporated in December, 2004. Due to an error; regulations relating to the conduct of meetings of members were not included in the Articles of Association submitted by the Company to the Registrar of Joint Stock Companies for registration. How can the members' meeting would be regulated in the absence of such regulations in the company's Articles? Can such regulations be included now in the Articles of Association and, if so, how and what will be the status' of such addition?

Regulations relating to the absence of the Articles

As per Section-18 of Companies Act 1994 the Company will conduct the meeting of its member which shall be governed as per the regulation contained in the "Schedule-L" The company can change the Article of Association by passing a special resolution as contained in Section-20 subject to the limitations as specified in Section-85 and Memorandum of Association.

Read More

How a foreign company can be registered in Bangladesh? Discuss on registration procedure.

Registration of foreign Companies:

 
As contained in Section – 379, a foreign Company can be registered in Bangladesh. The 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 the following documents to the Registrar for registration:

a) A certified copy of the charter or statutes or memorandum and articles of the Company or other instrument constituting or defining the constitution of the company; and if the instrument is not written in Bengali or English languages a certified Bengali or English translation thereof;
b) The full address of the registration or principal office of the Company;
c) A list of the Directors and secretary if any of the Company;
d) The name and address or the names and addresses of one or more persons resident in Bangladesh, authorized to accept on behalf of the Company service of process and any notice or other document required to be served on the company;
e) The full address of the office of the Company in Bangladesh, which is to be deemed its principal place of business in Bangladesh.

Read More

What is prospectus? What do you know about registration of prospectus?

Prospectus:

A prospectus is an invitation to the public to purchase shares or debenture of a company. In other words, a prospectus may be defined as any document that includes any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any share or debentures of a body corporate. 

Prospectus has the following characteristics:

1. It is a document described or issued as a prospectus;
2. It includes any notice, circular, advertisement to the public for sale of securities;
3. It is an invitation to the public;
4. The public is invited to subscribe the shares or debentures of a Company.

Registration of Prospectus:

 
Before publication of a prospectus inviting people to subscribe shares or debentures of a Company, a copy of the prospectus must be delivered to the Registrar for registration on or before the date of publication. It should be signed by the Directors or proposed Directors of the Company or by their agent.
 

On the face of the prospectus delivered to the Registrar for registration, it should be stated that a copy has been delivered for registration; and must contain a list of statements included in the prospectus. The registrar shall not register a prospectus unless the prospectus contains all the required elements as per Companies Act 1994, Public Issue Rules 1998, and other SEC regulations and the prospectus is accompanied by the consent in writing of the person if any, named therein as the auditor, legal adviser, attorney, solicitor, banker or broker of the Company to act in that capacity. No prospectus shall be issued more than ninety days after the date on which a copy thereof is delivered for registration. If a prospectus is issued without delivering a copy thereof to the Registrar, the Company and every person from those who have knowingly been a party to the issue of the prospectus shall be punishable with a fine which may extend to five thousand taka (Section 138)

Read More

"All listed companies are public companies but not vice-versa" - Discuss the statement.

Listing Companies

As per listing regulations clause 7(1), only the public limited Company can be listed with the Stock Exchanges. As per Companies Act 1994, Securities of a private limited Company are prohibited for transfer and it cannot be sold publicly. So, the Stock exchanges deal with those securities which are transferable. So, no private limited Company is eligible for listing with any stock exchange but a public limited Company is not mandatory to be listed. It is the discretion of the shareholder/sponsors public limited company as to whether their Company will be placed to the Stock Exchanges for listing. So it can be said that "All listed companies are public companies but not vice-versa."

Read More

Who are authorized to make an application to the court for the winding up of a company?

Application to the Court for winding-up:

According to Section 239, the winding-up of a Company may be done in any one of the following three ways:

1. Compulsory winding up by court;
2. Voluntary winding up by the members or by creditors.
3. Voluntary winding up under the supervision of the court.

In above all cases winding up may be made by the application of:

i. Any member of the Company with the special resolution;
ii. Any member of the Company with the Extra-ordinary resolution;
iii. The regulatory authority in case of default in filing the statutory meeting, report, etc.;
iv. Any creditors/members if the Company is unable to pay its debts.

Read More

What are the difference types of resolutions envisaged in the Companies Act 1994? What are the processes of passing a special resolution?

Different type of resolutions:

i. Ordinary resolution
ii. Special resolution
iii. Extra-ordinary resolution.
 

Special resolution:

This is passed in a General meeting by the three-fourth majority of the members present in person or by proxy if proxy is allowed, Notice for which specifying the intention to propose the resolution is to be given before 21 days the date of the meeting.

Special resolutions arc necessary for the following purposes:

1. To change the name of the Company;
2. To alter the Memorandum of Association;
3. To alter the Articles of Association;
4. To reduce the share capital;
5. To convert any portion of the capital, uncalled in to reserve capital;
6. To appoint inspectors to investigate the company's own affairs;
7. For winding-up of a Company voluntarily.

Read More