What is a prospectus? Do all the companies issue it? What could be an alternative to prospectus? Write a few lines about it.

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.

No, all the companies do not issue a prospectus. Only the Public Limited Companies having permission from the Securities and Exchange Commission may issue a prospectus.

Alternative to a prospectus:

 
As per Section-141 a Public Limited Company having a share capital and not issuing prospectus must at least 31 days before the first allotment of shares or debentures, file with the Registrar for registration a statement in lieu of prospectus. The statement must be in the form prescribed in schedule - IV of the Companies Act-1994. Every private limited company which is converted to a public limited company shall also a statement in lieu of Prospectus as per Schedule-V.

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What contracts are required to be made under the Seal of a company?

Use of common seal: 

 
The common seal of the company shall not be affixed to any instrument except by the authority of resolution of the Board of Directors, and in the presence of at least two Directors and of the secretary or such other person as the directors may appoint for the purpose, and those two directors and secretary or other person as aforesaid shall sign every instrument to which the seal of the company is so affixed in the their presence.

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Describe the legal positions of pre-incorporation contracts. What are the exceptions to those contracts?

Pr-incorporation contract: 

 
A company cannot be bound by a contract which was made on its behalf by any person and excluding a promoter before the company itself had been formed. The company cannot ratify any pre-incorporation contract and the promoters will be personally liable.

In these circumstances, the simplest and safest course for promoter is to bring the negotiation to the point of agreement but to postpone any binding contract until the company is formed and can enter into the contract for itself. In this regard a fresh contract can be accorded by the company after the incorporation.

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Discuss the provisions of section 150 of the Act about the Restriction on Commencement of Business.

Certificate of commencement of business: (Section 150)

A company (Public Limited) shall not commence any business or exercise any borrowing powers unless:

a) Shares held subject to the payment of whole amount thereof in cash have been allotted to an
amount not less than the minimum subscription;

b) Every Director of the company paid in cash each of the share held;

c) A certificate of compliance by the Company Secretary or a Director that above formalities have
been complied;

d) A statement in lieu of prospectus has been submitted where no prospectus is issued for invitation to subscribe the share to the public.

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Describe the provisions of the section 211 of the Companies Act concerning appointment and termination of auditors.

Special notice shall be required for a resolution at an annual general meeting appointing as auditor a person other than a retiring auditor, or providing expressly that a retiring auditor shall not be reappointed.

On receipt of such notice the company shall forthwith send a copy thereof to the retiring auditor.

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What is the tenure of an auditor duly approved in an AGM of a limited company?

Every company shall appoint an auditor or auditors to hold office from the conclusion of annual general meeting until the next annual general meeting and shall within seven days of the appointment, give intimation thereof to every auditor so appointed.

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What do you understand by the pre-emptive rights of shareholders in respect of further issue of shares?

Where the directors decided to increase the subscribed capital of the company by issue of further shares within the limit of the authorized capital, such further shares shall be offered to the members in
proportion, to the capital paid up on the existing share held by such member, irrespective of class, at the date of the offer. This is the per-emptive rights of shareholders to get such offer.

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What are the pre-conditions of reduction of share capital of a Company?

Reduction of share capital:

As contained in section 59 of the companies Act 1994, any company limited by share if it is authorized by its articles, by passing a special resolution, having approval from the Court can reduce the share capital as follows:

1. By reducing or extinguishing the liability on any shares not paid-up;

2.Cancel any paid-up share capital which is lost or not represented on the assets;
3.  Repay the capital, which is in excess of the wants of the company;
4. Reduce the share capital and shares as required by alteration of memorandum.

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Discuss the provisions of the Companies Act, 1994 as to the issue of shares at a discount

Following rules relates to the issuance of shares at a Discount:

1.It should be an existing company which has issued share earlier;
2.Court permission must be taken and to be confirmed at Annual General Meeting;
3.Maximum rate would be 107, which is to be confirmed at Annual General Meeting;
4.The Company shall not issue share at a discount within one year from the date of commencement of business;
5.The shares to be issued within 6 months from the date of the approval of the Court to issue share at a discount.

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Under what circumstances may a company limited by shares write off preliminary expenses?

The writing off of preliminary expenses is the discretion of the company. The company may amortize the preliminary expenses over several according periods as may be determined in the Article of association or as per the decision of the Board of Directors meeting.

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Under what circumstances may a company limited by shares pay interest out of capital.

Power of company to pay interest out of capital

Power of company to pay interest out of capital in certain cases where any shares of a company are issued for the purpose of raising money to defray the expenses of the construction of any works or building or the provision of any plant which cannot be made profitable for a lengthened period, the company may pay interest on so much of that share capital as is for the time being paid up for the period and subject to the conditions and restrictions in this and may charge the same to capital as part of the cost of construction of the work or building or the provision of plant.

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Distinguish between member's voluntary winding up and creditor's voluntary winding up.

Members' voluntary winding up: When the company is solvent and is able to pay its debts in full, in which case it is not necessary to consult the creditors or call their meeting, then the company in general meeting must appoint one or more liquidators for winding up the affairs of the company and fix his or other remuneration. On such appointment, all the powers of the directors of the company come to an end except in so far as the company in general meeting, or the liquidator, sanctions the continuance thereof (Section 292).

Creditors' voluntary winding up: In the case of the creditors' voluntary winding up, the company is obliged to convene a meeting of the creditors on the day on which the meeting for passing the resolution for winding up is to be held. The company must send the notices of such meeting to the creditors simultaneously with the notice of the company's meeting. The duty of the creditors of the company is to cause a full statement of the position of the company's affairs, together with a list of the creditors of the company and the estimated amount of their claims, to be laid before the creditors' meeting to be held as aforesaid. They must also appoint one of their members to preside at the meeting. At the same meeting, the creditors and the company may respectively nominate a person to be a liquidator or the purpose of the winding up. lf they each nominate a different person, the one nominated by the creditors shall be the liquidator unless, on an application of any director, member or creditor of the company made within seven days after the date of the nomination by the creditors, the Court orders that the person nominated by the company shall be the liquidator instead of or jointly with the one nominated by the creditors (Section - 299).

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What is meant by the term "ultra Vires"?

Meaning of the term "ultra Vires":

Any transaction, activity or business done by the Company beyond the power of the Memorandum and Articles of Association is "ultra vires" i.e. void. The Company cannot do anything outside the memorandum of association.

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What are the effects of irregular allotment of shares?

(1) An allotment made by a company to an applicant shall be voidable at the instance of the applicant within one month after the holding of the statutory meeting of the company and not later or, in any case where the company is not required to hold a statutory meeting or where the allotment is made after the holding of the statutory meeting, within one month after the date of the allotment and not later, and shall be so voidable notwithstanding that the company is in the course of being wound up.

(2) If any director of a company knowingly contravenes or permits or authorizes with respect to allotment, he shall be liable to compensate the company and the allottee for any loss, damages or costs which the company or the allottee may have sustained or incurred thereby:

Provided that Proceedings to recover any such loss, damages or costs shall not be commenced after the expiration of two years from the date of the allotment.

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What is the effect of carrying on business by a Company with less than the legal minimum number of members?

If at any time the number of members of a company is reduced, in the case of a private company, below two or, in the case of any other company, below seven and it carries on business for more than six months, while the number is so reduced every person who is a member of the company during the time that it so carries or business during that periods and is cognizant of the fact that it is carrying on
business with fewer than two members or seven members, as the case may be, shall be individually liable for the payment of the whole debts of the company contracted during that time and may be used for the same without joinder in the suit of any other member.

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What is the purpose of stating the "object clause" of a company in its memorandum? Can it be altered? How?

Objective Clause:

 
Objective clause is one of the important elements of Memorandum of Association. The main objects of the company are disclosed clearly in the objective clause. The Companies Act 1994 requires disclosing the main ' objectives relating to form a company under his Act. The main objects and objects incidental are identified in the objective clause to enable the members of the company, its creditors and the public to know the range of activities of the company. Without stating objective clause no company can be registered under this Act.

A company can change the objective clause under the following circumstances (Section 12):

1. To carry on its business more economically and efficiently;
2. To attain its business operation by new and improved way;
3. To enlarge the area of operation;
4. To carry on some operation which will be more advantageous for the interest of the company;
5. To restrict, abandon any of its objects; and
6. To amalgamate with any other company or body.

Objective clause can be changed by passing a special resolution and having permission of the court.

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Distinguish between a Private Ltd. Company and a Public Ltd. Company

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Discuss about the remedies available to a debenture holder when his/her debentures are in jeopardy

If the company fails to pay interest or principal on the due date or fails to comply with any of the terms and conditions under which the debenture was issued, the debenture holder can adopt any of the following remedial measures:

1. He may file a suit for the recovery of money by sale of the assets which were charged for the payment of the money.

2. He may file an application for the appointment of a receiver by the court.

3. He may himself appoint a receiver if the terms of the debenture entitled him to do so.

4. The trustees may sell the properties charged, if such a Power is given to them under the terms of the debenture.

5. He may apply to the court for the foreclosure of the company's right to redeem the properties charged for the Payment of the money.

6. He may present Petition for the winding up of the company.

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What are the liabilities of contributories as present and past members in case of winding-up of a company

Section 235 of Companies Act states that

 
1. In the event of a company being wound up, every present and past member shall be liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities and the costs, charges and expenses of the winding up, and for the adjustment of the rights of the contributories among themselves, with the qualifications following, that is to say:-

i. A past member shall not be liable to contribute if he has ceased to be a member for one year or upwards before the commencement of the winding up;

ii. A past member shall not be liable to contribute in respect of any debt or liability of the company contracted after he ceased to be a member;

iii. A past member shall not be liable to contribute unless it appears to the Court that the existing members are unable to satisfy the contributions required to be made by them in pursuance of this Act;

iv. In the case of a company limited by shares, no contribution shall be required from any member exceeding the amount, if any, unpaid on the shares in respect to which he is liable as a present or past member;

v. In the case of a company limited by guarantee, no contribution shall be required from any member exceeding the amount undertaken to be contributed by him to the assets of the company in the event of its being wound up;

vi. Nothing in this Act shall invalidate any provision contained in any policy of insurance or other contract whereby the liability of individual members on the policy or contract is restricted or whereby the funds of the company are alone made liable in respect of the policy or contract;

vii. A sum due to any member of a company in his character of a member, by way of dividends, profits or otherwise, shall not be deemed to be a debt of the company payable to that member in a case of competition between himself and any other creditor who is not a member of the company.

2. In the winding up of a company limited by guarantee which has a share capital, every member thereof shall be liable to pay the following amounts namely:

(a) The amount undertaken to be contributed by him to the assets of the company in the event of its being wound up; and

(b) An amount to the extent of any sums unpaid on any shares held by him.

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What remedies are available to an applicant who has been induced to buy shares of a company by a material mis-representation of facts in a prospectus?

Remedies available to the shareholders for untrue statement in the prospectus:

In case of untrue and misleading information furnished in the prospectus its promoters and directors will be held liable. The shareholders may claim to refund the value of shares allotted and the Shareholders may claim demurrage for any losses incurred for such misstatement furnished in the prospectus. But they cannot retain the Ave and claim the demurrage simultaneously.

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State the provisions of the Companies Act, 1994 as to appointment, terms and remuneration of Managing Directors

The managing director is a director who is “entrusted with any substantial power of Management”
 

The appointment of managing director:

The appointment of a managing director or of a whole time director can be made by any of the methods:

1. An agreement with the company
2. A clause in a memorandum or articles of the company
3. A resolution passed by a company in its general meeting
4. Resolution of the board of director
 

No company shall, after the commencement of this Act, appoint or employ any individual as its managing director for a term exceeding five years at a time.

Power and duties of a managing director:

 
The power and duties of a managing director are specified in

1. the agreement with the company by which he is appointed

2. in the memorandum or articles of the company

3. in a resolution passed by the company in general meeting

4.a resolution by its board of director

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Who can inspect mendatory documents and books and take copies thereof of a company?

The books of account and other books and papers of every company shall be open to inspection during business hours by the registrar or by such other Government officer as may be authorized by theGovernment in this behalf-

1. It shall be the duty of every director or other officer of the company to produce to the person making inspection.

2. It shall also be the duty of every director and other officer of the company to give to the inspection person all assistance in connection with the inspection, which the company may be reasonable, expected to give.

3. Where an inspection of the books of account and other books and papers of the company has been made under this section the inspecting person shall make a report to the Government.

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What documents, registers and books are maintained in a company’s registered office?

Books:

Statutory Books: The companies Act requires every company to keep the following books:

a) Register of members:

1. Name & address & occupation
2. Respective shares,
3. Date of registration as member,
4. Date at which any person ceased to be a member

b) Register of Directors:

1. In case of individual director- name, address, nationality, occupation & particulars of directorship,
2. In case of a corporation- corporate name, principal office and name, address & nationality of each of its directors,
3. In case of a firm- name, address & nationality of each partner and the date on which each became a partner.

c) Register of qualifying share of directors,
d) Register of debenture holders,
e) Register of mortgages and enter there in specific description,
f) Minutes of meetings,
g) Register of contracts,
h) Books of accounts:
i) Statement of receipts & payments,
j) Statement of sales & purchases,
k) Statement of assets &liabilities,
l) Cost records, if applicable.

Statistical books: (Sec. 36)

1. Share application & allotment,
2. Addition of shareholder,
3. Share transfer,
4. Dividend,
5. Interest on dividend.

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Discuss the requirements of law relating to filing of accounts of companies operating in Bangladesh but incorporated outside Bangladesh

(1) Every foreign company shall, in every calendar year-

(a) make out a balance sheet and profit and loss account or in the case of a company not trading for profit, and income and expenditure account it the company is handling company, group accounts in such form and consigning such particulars and including such documents, and under the provision of this Act it would, if it had been accompany within the meaning of this Act, have been required to make out and lay before the company in general meeting; and

(b) Deliver three copies of those documents to the Registrar: Provided that the Government may by notification in the official Gazette direct that in the case of a foraging company or class of foreign Combines the requirements of clause (a) shall not apply, or shall apply subject to such exceptions and modification as many be specified in the notification.

(2) If any such document as is mentioned in sub-section (1) is not written in Penal or English language, there shall be annexed to it a certified translating thereof.

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What are the procedures for reduction of share capital and how the same is confirmed?

Reduction of share capital
 

The power to reduce capital must be given by the articles. If no such power, the articles may be changed by a special resolution. According to section 59, the share capital may be reduced by:

a) reducing or extinguishing the liability of members for uncalled share capital; or
b) writing off lost share capital; or
c) paying off share capital which is in excess of the wants of the company; or
d) All these are to be done only by way approve by the court.
 

Procedure for Reduction of Share Capital
 

Reduction of capital is possible only by passing a special resolution and confirmation by the court. The court would inquire into the objections, if any, raised by the creditors. In this respect the court settles the list of creditors entitled to object and issues public notices (sec. 62). On hearing the objections, the court may confirm the reduction on such terms and conditions as it may dam fit (sec. 64).

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State the circumstances in which a company may be wound up by the Court.

Section 241 states the following circumstances under which a company may be wound up by the Court:

i. lf the company has by special resolution resolved that the company be wound up by the Court; or
ii. lf default is made in filing the statutory report or in holding the statutory meeting; or
iii. lf the company does not commence its business within a year from its incorporation, or suspends its business for a whole year; or
iv. lf the number of members is reduced, in the case of a private company below two, or, in the case of any other company, below seven; or
v. lf the company is unable to pay its debts; or
vi. If the Court is of opinion that it is just and equitable that the company should be wound up.

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Name the mortgages and charges required to be registered compulsorily with the Registrar of Joint Stock Companies. What is the effect of non-registration of such mortgages and charges?

The mortgages and charges those are required to be registered compulsorily with the Registrar of Joint Stock Companies:

a) a mortgage or charge for the purpose of securing any issue of debentures; or
b) a mortgage or charge on uncalled share capital of the company, or
c) a mortgage or charge on any immovable property wherever situated or any interest therein, or
d) a mortgage or charge on any book debts or the company, or
e) a mortgage or charge, not being a pledge on any moveable property of the company except stock-in- trade.
 

Due to non-registration of above mentioned mortgages and charges to be considered void and when a mortgage or charge becomes void, the money secured thereby shall immediately become payable.

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Discuss the procedure of calling Annual General Meeting and Extraordinary General Meeting of a company. State what businesses are transacted in an Annual General Meeting.

A general meeting shall be held (within eighteen months from the date of its incorporation and thereafter once at least in every year) at such time (not being more than fifteen months after the holding of the last preceding general meeting) and place as may be prescribed by the company in general meeting.

Proceedings at General Meeting:

1. Fourteen days' notice at least (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which notice is given) specifying the place, the day and the hour of meeting.

2. No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business If within half an hour from the time appointed for the meeting a quorum is not Present, the meeting, if called upon the requisition of members, shall be dissolved.

3. The Chairman selected among them by the Board of Directors shall preside as chairman at every general meeting of the company. Provided that the Chairman and the Managing Director shall
not be the same person.

4. lf there is no such chairman, or if at any meeting he is not present within thirty minutes after the time appointed for holding the meeting, or is unwilling to act as chairman, the members Present shall choose someone of their number of be chairman'

5.The chairman may with the consent of any meeting at which a quorum is present, adjourn the meeting from time to time and from place. 

Extra Ordinary Meeting:

All meetings of the shareholders other than the annual meetings or those provided for in the articles are known as extra ordinary meeting. These meetings may be called by the directors either ‘suo moto’ or the requisition of not less than one-tenth of the shareholders and where the directors fail to call such a meetings so requisitioned within the prescribed time limit, by the requisitions themselves.

Businesses that are transacted in an Annual General Meeting:

1. To receive, consider and adopt the Directors’ Report and the Audited Balance Sheet and the Profit and Loss Account with Auditors’ Report thereon.

2. To declare dividend.

3. To elect Director (s)

4. To appoint the auditors and fix up their remuneration.

5. To transact any other business which can be transacted by ordinary resolution, with the permission of the chair.

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Discuss the disqualifications of Directors as laid down in section 94 of the Companies Act, 1994

Disqualifications of directors as per section 94 of the Companies Act 1994:

 
(1) A person shall not be capable of being appointed director of a company, if -

(a) he has been found to be of unsound mind by a competent court and the finding is in force; or
(b) he is an undischarged insolvent; or
(c) he has applied to be adjudicated as an insolvent and his application is pending; or
(d) he has not paid any call in respect of shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; or
(e) he is a minor.

(2) A company may in its articles provide additional grounds for disqualification of a director.

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State the steps involved in the formation of a company under the Companies Act 1994.

Formation of a Company:

2 (two) or more persons (not more than 50) and 7 or more persons (unlimited) may form a Private or a Public Limited Company respectively by subscribing their signature in the Memorandum of Association.

They may form -

A. a Company limited by shares;

B. a Company limited by guarantee;

C. an unlimited Company.

There are 3 stages for formation of a company -
i. Promotion;
ii. Registration;
iii. Commencement of business.

Promotion stages -

 
i. Promoters
ii. Clearance of name
iii. Sponsors' equity
iv. Consent of the Directors
v. Selection of objectives.

Registration:

i. Submission of Memorandum & Articles of Association.
ii. Payment of stamp duty & Registration fees.
iii. Obtaining certificate of incorporation.

Commencement of business:

 1. For a Private Limited Company, the business of the Company can be commenced after
getting the registration i.e. certificate of incorporation.

2. For a Public Limited Company, the Company shall obtain the certificate of
commencement of business from the Registrar.

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Can a director be removed? How?

As per section 106 of the Companies Act 1994 –

(1) The company may be extraordinary resolution remove any share-holder director before the expiration of his period of office and may by ordinary resolution appoint another person in his stead and the person so appointed shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected director.

(2) A director so removed shall not be re-appointed a director by the Board of Directors.

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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.

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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.

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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

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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.

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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:

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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"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.

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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.

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INTERNATIONAL AUDITING STANDARDS: (AT A GLANCE)

ISA 200: OVERALL OBJECTIVES OF THE INDEPENDENT AUDITOR

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ISA 210: AGREEING THE TERMS OF AUDIT ENGAGEMENTS

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ISA 220: QUALITY CONTROL FOR AN AUDIT OF FINANCIAL STATEMENTS

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ISA 230: AUDIT DOCUMENTATION

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

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ISA 300: PLANNING AN AUDIT OF FINANCIAL STATEMENTS

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

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ISA 320: MATERIALITY IN PLANNING AND PERFORMING AN AUDIT

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ISA 330: THE AUDITOR’S RESPONSES TO ASSESSED RISKS

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ISA 500: AUDIT EVIDENCE

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ISA 501: AUDIT EVIDENCE—SPECIFIC CONSIDERATIONS FOR SELECTIVE ITEMS

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ISA 505: EXTERNAL CONFIRMATIONS

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ISA 510: INITIAL AUDIT ENGAGEMENTS—OPENING BALANCES

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ISA 520: ANALYTICAL PROCEDURES

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ISA 530: AUDIT SAMPLING

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

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ISA 550: RELATED PARTIES

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ISA 560: SUBSEQUENT EVENTS

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ISA 570: GOING CONCERN

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ISA 580: WRITTEN REPRESENTATIONS

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

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ISA 610: USING THE WORK OF INTERNAL AUDITORS

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

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ISA 700: FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS

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

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

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

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

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

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ISA 810: ENGAGEMENTS TO REPORT ON SUMMARY FINANCIAL STATEMENTS

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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.

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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.

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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.

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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.

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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.

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List of International Accounting Standards (IAS)

List of International Accounting Standards (IAS):

1. IAS 1 Presentation of Financial Statements

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2. IAS 2 Inventories

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3. IAS 7 Statement of cash flows

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

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5. IAS 10 Events after the Reporting Period

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6. IAS 11 Construction Contracts

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7. IAS 12 Income Taxes

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8. IAS 16 Property, Plant and Equipment

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9. IAS 17 Leases

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10. IAS 18 Revenue

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11. IAS 19 Employee Benefits

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

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

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14. IAS 23 Borrowing Costs

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15. IAS 24 Related Party Disclosures

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16. IAS 26 Accounting and Reporting by Retirement Benefit Plans

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17. IAS 27 Consolidated and Separate Financial Statements

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18. IAS 28 Investments in Associates

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19. IAS 29 Financial Reporting in Hyper-inflationary Economies

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20. IAS 32 Financial Instruments Presentation

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21. IAS 33 Earnings per Share

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22. IAS 34 Interim Financial Reporting

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23. IAS 36 Impairment of Assets

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24. IAS 37 Provisions, Contingent Liabilities and Contingent Assets

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25. IAS 38 Intangible Assets

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26. IAS 39 Financial Instruments Recognition and Measurement

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27. IAS 40 Investment Property

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28. IAS 41 Agriculture

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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).

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