Explain the provision of the Companies Act 1994 relating to appointment of the auditors of a company.

There are the following rules as per the Companies Act 1994 dealing with the appointment of auditor:

A. Every company shall appoint auditors at each AGM and the auditor will hold office until the next
AGM. Provided that, no person can be appointed as auditor unless his written consent has been obtained prior to his appointment or re-appointment.

B.  Every auditor will inform to the registrar in writing his acceptance or refusal within 30 (thirty) days from the date of receipt of appointment.

C. A retiring auditor shall have right to be re-appointed at AGM, unless:

D. He is not qualified for re-appointment.

E. He has given written notice for his unwillingness.

F. A resolution has been passed at that meeting appointing somebody instead of him.

Read More

What are the consequences of the failure by a company to hold its Annual General Meeting?

If default is made in holding annual general meeting of the company in accordance with section 81, the company and every officer of the company who is in default, shall be punishable with fine which may extend to ten thousand taka and in case of a continuing default, with a further fine which may extend to two hundred fifty taka for every day after the first day during which such default continues.

Read More

Explain how the share capital of a company can be increased?

(1) Where a company having a share capital, has increased its share capital, beyond the registered capital, 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 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

Read More

Define prospectus. State the contents of a 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 deposits from the public or inviting offers from the public for the subscription or purchase of any share in, or debentures of a body corporate. 

Prospectus has the following characteristics:

A. It is a document described or issued as a Prospectus.

B. It includes any notice, circular, advertisement inviting deposits from the public.

C. It is an invitation to the Public.

D. The public is invited to subscribe the shares or debentures of a company.

Contents of the Prospectus:-
Every prospectus issued by or on behalf of a company shall state the matters specified in Part- I of schedule 111 of the Companies Act 1994. According to the Part I of Schedule III, the following items are to be included in the Prospectus:

1. The names, addresses, descriptions and occupations of the signatories to the memorandum and the number of shares subscribed for them;

2. The number and classes of shares and the nature and extent of interest of holders in the property and profits of the company;

3. The number of redeemable preference shares intended to be issued with the date of redemption;

4. The rights in respect of capital and dividend attached to different classes of shares;

5. The number of shares fixed by the articles as the qualification of director;

6. Particulars regarding directors, managing agents, manager, secretaries and treasures etc;

7. Remuneration of the directors;

8. The minimum amount of subscription and amount payable on application;

9. Time of opening of subscription list;

10. Preliminary expenses incurred;

11. Particulars regarding purchase of property;

12. Details of any premium or under-writing commissions paid;

13. Particulars of reserves including reserve capital;

14. Nature and extent of interest of every director and promoter;

15. Names and addresses of the auditors of the company;

16. The nature and extent of restrictions upon members at company meetings;

17. Restrictions upon Powers of the directors; and

18. Voting rights, capitalization of reserves and surplus of revaluation.

Read More

State the points of difference between the Memorandum of Association and the Articles of Association of a Limited Company

The differences between the Memorandum and Article of Association are as follows:

Read More

What is a Memorandum of Association? State the contents of the Memorandum of Association.

The memorandum of association is the charter /constitution of the company. It is the written documents containing the object and power of the company upon which the company is incorporated
and the company cannot go beyond the limitation/contained in the M/A. It cannot change without the consent of the court / Govt. The memorandum shall be:

1. Printed
2. It shall be divided into paragraphs and numbered consecutively, and
3. It shall be signed by each subscribed (giving his address and description) in the presence of at least one witness who shall attest his signature.

Contents of Memorandum of association:-

1. Name clause: The memorandum shall state the name of the company with “limited” as the last word in its name. It signature that the liability of the shareholders is limited. The liability may Limited by shares or by guarantee.

2. Registered office situate clause: After the name the M/A usually state the name of the place where the registered office of the company. The reasons why the place of its registered office is stated in the
M/A

a)  It fixed the domicile of the company and determines jurisdiction of the court with regard to the
company
b) It provides some definite places at which notice and other processes may be served on it.
c) It also determines where the records of the company are to be kept
d) Changes the register office

3. Object clause: The third requirement of the M/A is object clause. It determines:
a) The power of the company and
b) It restricts the power of the company

4. Liability clause: The fourth particular in an M/A is a statement that the company’s liability is limited. In case of a company limited by shares is wound up the members of company will not be liable to contribute more than the amount up paid on their shares But if the number of members is reduced in case of Pvt. Limited co below two and in case of public limited co. below seven and the business carried on more than 6 months thereafter, then the member are personally liable irrespective of limited liability for all debts contracts during the period (U/S 222).

5. Capital clause: The amount of the nominal capital of the company and the number of the shares must be clearly stated in M/A. There is or legal limit to the amount of the capital or of each shares. Alteration of capital clause: may by usually. The article of association contains the power and procedure to alter the capital clause. Otherwise a special resolution has to be passed in a general meeting to alter the A/A in this regard. A notice in this regard shall have to be filed to the registrar within 15 days.

Read More

State the rules relating to conversion of a public company into a private company.

According to section 232-

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. lf the company has secured creditors, their written consent shall have to be obtained before passing a resolution as per provision of sub section (l) and the shares enlisted with the Stock Exchange shall have to be de-listed.

Read More

Distinguish between Holding Company and Subsidiary Company – what are the relationships between the two?

Holding Company:-

When a company acquires controlling interest in the affairs of another company or companies, it is known as the holding company. The Companies Act in its definition clause at section 2 clarifies, inter alia, that the holding of such controlling interest should take all or one of the following forms:

1. its assets may consist in whole or in part of shares in another company;
2. such shares or other interests may be held either directly or through a nominee.
3. such interest should be in the form of holding more than fifty percent of shares or voting rights in that other company.
4. such voting right gives power directly or indirectly to appoint the majority of the directors in that other company otherwise than by virtue of the provision of a trust –deed.

Subsidiary Company:-

It is a company more than fifty percent of whose issued share capital or voting power is held by another company or the majority of whose directors can be appointed by another company. A subsidiary company may be a public or private company or not even be a company at all within the meaning of the Companies Act. Where the shares of such a company are held as security by a company the ordinary business of which is lending of money or where the majority of directors can be appointed by a company by virtue of powers contained in a debenture trust-deed, the former company will not be deemed to be a subsidiary company of the latter.

Read More

Define a Company and mention its essential characteristics.

A company in ordinary non-technical sense however, means an association for attaining some common objectives which may be with or without profit.

Essential characteristic:
1. A company is regarded by law and it has a legal personality;
2. A company has perpetual succession;
3. The liability of the members of a company is limited;
4. A company is required to comply with various statutory obligations regarding management.

Read More

Define a foreign company as envisaged under Section 378 of the Companies Act, 1994. What are the documents to be delivered to the Registrar of Joint Stock Companies by foreign companies carrying on business in Bangladesh?

When a company which is incorporated outside Bangladesh but establishes business in Bangladesh with same name and nomenclature with or without a place of business in the country, it is regarded as a foreign company in Bangladesh.

Documents to be delivered According to section 379, if foreign companies establish a place of business in Bangladesh shall, within one month of the establishment of the place of business, deliver the following to the Registrar for registration:

1. 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 language, a certified Bengali or English translation thereof; 

2. The full address of the registered or principal office of the company;
3. A list of the directors and secretary, if any, of the company;
4. 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
5. 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

In which ground the Registrar of Joint Stock Company can present a petition for winding up a company?

Petition for winding up by the Registrar:

 
Under the following grounds as contained in Section - 197(b) the Registrar of Joint Stock Companies and firms can present a petition for winding up a company as per Section-204 of CA 1994:

i. That the business of the company is being conducted with intent to defraud its creditors, members, any other persons or otherwise for a fraudulent or unlawful purposes; or

ii. That the persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or

iii. That the members of the company have not been given all the information with respect to its affairs which they might reasonably expect.

Read More

Discuss the provisions of Section 233 of the Companies Act, 1994 regarding protection of interest of minority shareholders.

(1) Any member or debenture holder of a company may either individually or jointly bring to the notice of the court by application that-

(a) the affairs of the company are being conducted or the powers of the directors are being exercised in a manner prejudicial to one or more of its members or debenture holders; or
(b) the company is acting or is likely to act in a manner which discriminated or is likely to discriminate the interest of any member or debenture holder;
(c) a resolution of the members, debenture holders or any class of them has been passed or is likely to be passed which discriminates or is likely to discriminate the interest of one or more of the members or likely to debenture holder.

(2) The Court shall, on receipt of an application under sub-section (1) send a copy thereof to the Board and fix a date for hearing the application;

(3) If after hearing the parties present on the date so fixed, the Court is of opinion that the interest of the applicant or applicants has been or is being or is likely to be prejudicially affected for reasons specified in the application, it may make such order as prayed for or such other order as it deems fit including a direction-

(a) to cancel or modify any resolution or transaction ; or
(b) to regulate the conduct of the company's affairs in future in such manner as is specified
therein; or
(c) to amend any provision of the memorandum and articles of the company.

Read More

"Directors are trustees as well as agents of the company". Discuss

Directors are trustee and agent of the Company

Directors are trustees as well as agents of the Company. All activities, business and transactions of the Company for its developments, promotions is done by the directors for and on behalf of the Company like an agent. The articles of association empowered the Directors to do/run the Company. 

The directors can do the followings for and on behalf of the Company as contained in the articles of association:

1. To run the business of the company;
2. To recommend dividend;
3. To enter into contract;
4. To maintain reserves;
5. To issue, forfeiture of share;
6. To issue debenture;
7. To Invest fund;
8. To take, redeem loan; and
9. To appoint officers & staffs and to pay their emoluments.

The above activities are done by the directors as agent of the Company.

Directors are to do all activities as trustee of the Company. All assets resources are to be kept safety and to utilize them for the interest of the Company. Under any circumstances Directors are not allowed to use asset of the Company for their own without the approval of the Board. Directors are to maintain proper accounts as required by law and to do many other activities as trustee of the company, such as:

1. To run the Company efficiently;
2. To optimum utilization resources;
3. To save the Company from losses/damages;
4. To maintain proper books of accounts;
5. To call the AGM;
6. To maintain secrecy of the organization; and
7. To refrain from doing such activities prohibited by the act.

In the above sense it is said Directors are trustees of the Company.

Read More

Define ‘Member’ of a company

 Every subscriber of the memorandum of company shall be deemed to have agreed to become a
member of the company and on its registration shall be entered as a member in its register of
members.

 Every other person who agrees to become a member of a company, and whose name is entered
in its register of members shall be a member of the company.

Read More

INTERNATIONAL AUDITING STANDARDS: (AT A GLANCE)

ISA 200: OVERALL OBJECTIVES OF THE INDEPENDENT AUDITOR

Download Link:

ISA 210: AGREEING THE TERMS OF AUDIT ENGAGEMENTS

Download Link:

ISA 220: QUALITY CONTROL FOR AN AUDIT OF FINANCIAL STATEMENTS

Download Link:

ISA 230: AUDIT DOCUMENTATION

Download Link:

ISA 240: THE AUDITOR’S RESPONSIBILITIES RELATING TO FRAUD IN AN AUDIT OF FINANCIAL STATEMENTS

Download Link:

ISA 300: PLANNING AN AUDIT OF FINANCIAL STATEMENTS

Download Link:

ISA 315: IDENTIFYING AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT THROUGH UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT

Download Link:

ISA 320: MATERIALITY IN PLANNING AND PERFORMING AN AUDIT

Download Link:

ISA 330: THE AUDITOR’S RESPONSES TO ASSESSED RISKS

Download Link:

ISA 500: AUDIT EVIDENCE

Download Link:

ISA 501: AUDIT EVIDENCE—SPECIFIC CONSIDERATIONS FOR SELECTIVE ITEMS

Download Link:

ISA 505: EXTERNAL CONFIRMATIONS

Download Link:

ISA 510: INITIAL AUDIT ENGAGEMENTS—OPENING BALANCES

Download Link:

ISA 520: ANALYTICAL PROCEDURES

Download Link:

ISA 530: AUDIT SAMPLING

Download Link:

ISA 540: AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIR VALUE ACCOUNTING ESTIMATES, AND RELATED DISCLOSURES

Download Link:

ISA 550: RELATED PARTIES

Download Link:

ISA 560: SUBSEQUENT EVENTS

Download Link:

ISA 570: GOING CONCERN

Download Link:

ISA 580: WRITTEN REPRESENTATIONS

Download Link:

ISA 600: SPECIAL CONSIDERATIONS—AUDITS OF GROUP FINANCIAL STATEMENTS (INCLUDING THE WORK OF COMPONENT AUDITORS

Download Link:

ISA 610: USING THE WORK OF INTERNAL AUDITORS

Download Link:

ISA 620: USING THE WORK OF AN AUDITOR’S EXPERT

Download Link:

ISA 700: FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS

Download Link:

ISA 705: MODIFICATIONS TO THE OPINION IN THE INDEPENDENT AUDITOR'S REPORT

Download Link:

ISA 710: COMPARATIVE INFORMATION—CORRESPONDING FIGURES AND COMPARATIVE FINANCIAL STATEMENTS

Download Link:

ISA 720: THE AUDITOR’S RESPONSIBILITIES RELATING TO OTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FINANCIAL STATEMENTS

Download Link:

ISA 800: SPECIAL CONSIDERATIONS—AUDITS OF FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH SPECIAL PURPOSE FRAMEWORKS

Download Link:

ISA 805: SPECIAL CONSIDERATIONS—AUDITS OF SINGLE FINANCIAL STATEMENTS AND SPECIFIC ELEMENTS, ACCOUNTS OR ITEMS OF A FINANCIAL STATEMENT

Download Link:

ISA 810: ENGAGEMENTS TO REPORT ON SUMMARY FINANCIAL STATEMENTS

Download Link:

Read More

Distinguish between a floating charge and a fixed charge. When does a floating charge crystallize?

A fixed charge is one which creates legal interest of a specific property of the company or all the properties of the company. Thus a fixed charge is equivalent to mortgage. The company can sell, lease etc. of the property, subject to the right of the charge holder.

The floating charge does not amount to mortgage. The owner of such a property can deal with it and the transferee gets it, free of the charge.

The floating charge crystallize on happening of the following events-

1. Inability of the company to pay interest for 3 months.

2. When the court issues warrant for confiscation properties for 7 days

3. When the receiver of the company is appointed on application of debenture holders.

4. When the liquidation process of the company commences.

Read More

Discuss the power to alter the Articles of Association of a company. Mention the restrictions/ limitations, if any, on the nature and extent of the alterations that can be made.

Subject to the provisions of this Act and to the conditions contained in its memorandum, a company may by special resolution alter, exclude from or add to its articles: and any alteration, exclusion or addition so made shall be as valid as if originally contained in the articles, and be subject in like manner to alteration, exclusion or addition by special resolution.

Notwithstanding anything in the memorandum or articles of a company, no member of the company shall be bound by an alteration made in the memorandum or articles after the due on which he becomes, member, if and so far as the alteration requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made, or in any way increases his liability is at that date to contribute to the share capital of, or otherwise to pay money to the company.

Read More

How far contracts entered into by a company before the commencement of business are binding on the company?

A company cannot be bound by a contract which was made on its behalf by any Person (including a
promoter) before the company itself had been formed. At the time when the contract is made, the company is non-existent, it cannot after its formation ratify a contract to which it could not have been a party when the contract was made [Kenner v Baxter (1866)].

In Kenner's case goods had been ordered for the company's business before the company was formed.
But the company is not bound by a contract merely because it later performs it, e. g. by accepting the
goods or services. The company will, of course be liable if it makes a fresh contract after the company is formed; but there must be clear evidence that it intended to do so.

ln the circumstances, the simplest and safest course for a promoter is to bring the negotiations to the
point of agreement but to postpone any binding contract until the company is formed and can enter
into the contract for itself. However, if it is essential to some formula of assignment or notation to be
made after incorporation and when it does so, or if it does not do so within a specified time, he is then
to be released.

Read More

What conditions are to be fulfilled before a company commences business?

A public company, having a share capital and issuing a prospectus, cannot commence business until the Registrar issues a certificate known as the "Certificate of Commencement of Business". This certificate is issued after the following formalities have been complied with:

i. The minimum subscription has been raised.
ii. Every director has paid the money payable on application and an allotment for the shares taken
up by him.
iii. No money is repayable for failure to obtain stock exchange recognition for the shares, where
such recognition was promised.
iv. A duly verified declaration by a director or the secretary has been filed with the Registrar that
the above requirements have been complied with.
However, a public company having share capital but not issuing a prospectus will get the
commencement certificate if the following conditions are fulfilled:
i. A statement in lieu of prospectus has been filed with the Registrar.
ii. The directors have paid the money due from them on account of shares.
iii. A declaration by a director or the secretary has been filed with the registrar stating that
condition (b) has been satisfied.

Read More

What do you understand by certificate of incorporation of a company? What are the principal documents to be filed for the purpose of incorporation of a company?

The certificate issued by the registrar after a company is registered is called the Certificate of
incorporation. Section 25 of the Act states that the Certificate about the following matters:
1. All the requirements of the Act have been complied with respect of registration and matters
precedent and incident thereto;
2. The association is a company authorized to be registered and duly registered under the Act; and
3. The legal existence of the company begins from the date of issue of the certificate.
To obtain a certificate of incorporation the following documents need to submit:
1. Memorandum of association signed by each subscriber and dated.
2. The signature must be witnessed by a third party.
3. Articles of association signed, dated and witnessed as same subscribers.
4. A statutory declaration that all the legal formalities have been complied.
5. Notice of situation of registered office.
6. Particulars of directors, managing agent and Manager
7. A list of persons who have consented to become directors.
8. A written consent of the directors to act as such.
9. Thereafter, the proper stamp duty for registration has to be paid and the register shall enter the
name of the company on the register of the companies and issue a certificate of incorporation.

Read More

List of International Accounting Standards (IAS)

List of International Accounting Standards (IAS):

1. IAS 1 Presentation of Financial Statements

Download Link

2. IAS 2 Inventories

Download Link

3. IAS 7 Statement of cash flows

Download Link

4. IAS 8 Accounting Policies, Changes in Accounting Estimates & Errors

Download Link

5. IAS 10 Events after the Reporting Period

Download Link

6. IAS 11 Construction Contracts

Download Link

7. IAS 12 Income Taxes

Download Link

8. IAS 16 Property, Plant and Equipment

Download Link

9. IAS 17 Leases

 Download Link

10. IAS 18 Revenue

 Download Link

11. IAS 19 Employee Benefits

 Download Link

12. IAS 20 Accounting for Government Grants and Disclosure of Government Assistance

 Download Link

13. IAS 21 The Effects of Changes in Foreign Exchange Rates

 Download Link

14. IAS 23 Borrowing Costs

 Download Link

15. IAS 24 Related Party Disclosures

Download Link

16. IAS 26 Accounting and Reporting by Retirement Benefit Plans

 Download Link

17. IAS 27 Consolidated and Separate Financial Statements

 Download Link

18. IAS 28 Investments in Associates

 Download Link

19. IAS 29 Financial Reporting in Hyper-inflationary Economies

Download Link

20. IAS 32 Financial Instruments Presentation

Download Link

21. IAS 33 Earnings per Share

Download Link

22. IAS 34 Interim Financial Reporting

Download Link

23. IAS 36 Impairment of Assets

Download Link

24. IAS 37 Provisions, Contingent Liabilities and Contingent Assets

Download Link

25. IAS 38 Intangible Assets

Download Link

26. IAS 39 Financial Instruments Recognition and Measurement

Download Link

27. IAS 40 Investment Property

Download Link

28. IAS 41 Agriculture

Download Link

Read More

Stock market efficiency

Stock market efficiency:

Efficient market: prices of securities in the market should fully and quickly reflect all available information, which means that market prices should be close to intrinsic values (market in equilibrium)

Levels of market efficiency

Weak-form efficiency - stock prices already reflect all information contained in the history of past price movements (only past prices, volumes, and returns).

Semi strong-form efficiency - stock prices already reflect all publicly available information in the market (only past publicly available information).

Strong-form efficiency - stock prices already reflect all available information in the market, including inside information (all public and private information).

Read More