Important sections of Companies Act-1994

» Subject to the confirmation by the Court u/s 64, a company limited by shares if so authorized by
the Articles, may by passing a special resolution reduce its share capital. Sec-59

» Where company has passed a special resolution to reduce share capital, it shall apply by petition
to the Court for an order confirming the reduction. Sec-60

» Every company limited by shares and every company limited by a guarantee and having share
capital is required to hold a statutory meeting of the members of the company within a period of
6 (six) months and not less 01 (one) month has from the date of on which the company becomes
entitled to commence its business. Sec -83(1) not applicable for private Ltd. Company.

» If default is made in holding AGM in accordance with Sec-81, the company and every officer of
the company who was in the default shall be punishable with fine which may extend to Tk.10,000
and in case continuous default, with a further fine which may extend Tk. 200 for every day after
the first day during which the default continues. Sec-82

» Statutory Report must be certified by at least 2 directors. The members of the company present at
the statutory meeting shall be at liberty to discuss any matters relating to the formation of the
company or arising out of the statutory report. Penalty for not holding statutory meeting- Tk.5,000
(every director and officer) Sec-83 may also be wound up u/s 235.

» All meetings of the shareholders other than the Annual General Meeting or those provided for in
the Articles are known as Extra ordinary General Meetings .These meetings may be called by the
Directors either suo moto or on the requisition of not less than 1/10th shareholders. Clause- ,
Schedule-I

» A director may and secretary on the requisition of a director shall at any time summon a meeting
of directors. Clause-88, schedule-I

- Notice required for meetings –

- Statutory meeting - 21 days
- Annual general meeting -14 days
- Extra ordinary general meeting -21 days (1/10th majority)
- Meeting to pass special resolution -21 days (3/4th majority)
- Board meeting - No limit
- Meeting to pass extra ordinary resolution -14 days (3/4th majority)

» Quorum at General Meeting-

- Private limited Company : 3 members (if more than 6 members)

: 2 members (if less than 6 members)
- Others : 5 members personally present

(Section- 85 and Clause-5, schedule-I)

» Resolution-
- Ordinary Resolution: Passed by majority of members in a General meeting. Such a
resolution is passed in the ordinary way and deals with ordinary businesses, such as
passing of accounts, appointing directors, auditors and declaration of dividend etc.

- Special resolution: Special resolution of a company is passed by the 3/4th majority of

the members presented in person or by proxy. Special resolution is passed for the
following purposes-
 To change the name of the company; (with the consent of the Registrar)
 To alter the Memorandum of the company (object clause-with the leave of the
Court)
 To alter the Articles;
 To reduce share capital; (with the leave of the Court)
 To convert any portion of the uncalled capital into Reserve Capital;
 To appoint inspectors to investigate the affairs of the company;
 For winding up of a company voluntary;
 To pay interest out of capital for raising money to meet the expenses of
construction work;
 To convert public limited company into private;
 Removal of auditor before the expiration of his term.

- Extra ordinary resolution: Extra ordinary resolution is passed by such majority as is

required for passing special resolution at a meeting of which 14 days’ notice has to be
given. Such resolution is required for –
 Removal of directors before expiration of his tenure;
 When a company seeks to wind up voluntarily on the ground that due loss it is
not possible to continue the business.

» The directors may decline to register any transfer of shares not being fully paid up to a person
of whom they do not approve, and may also decline to register any transfer of shares on which
the company has a lien. The directors may also suspend the registration of transfer during the
14 days immediately preceding the AGM each year.

If the directors refuse to register a transfer of shares, they shall within 02 months after the date
of lodgment of transfer send to the transferee and transferor notice of such refusal. (Clause
20, Schedule I)

» A meeting of BODs shall be held at least 01 (one) in every 3 months and at least 04 (four)
such meetings shall be held in every year. Sec-96

» The directors determine the period for which the Chairman shall hold office. Clause 91 of
Schedule-I

» Every director shall within 60 days or shorter time specified in articles after his appointment
obtain his qualification share. Fine per day Tk.200 in case of continuous default. Sec-97
Number of qualification share is specified in the articles. Share warrant is not taken into
consideration for qualification share of a director.
» Only public limited company issue prospectus (having permission from the SEC).A public
company having share capital does not issue prospectus shall at least 30 days……..

» The company may by extra ordinary resolution remove any shareholder director before the
expiration of his period of office and may by ordinary resolution appoint another person in his
stead. A director so removed shall not be reappointed a director by BODs. Sec-106

» No public company and no private company which is a subsidiary of public company shall
appoint any person as MD, if he is a MD or manager of another company. Sec-109
» Exception – If Govt. feels necessary and permits such appointment.

» No company shall appoint an individual as MD for a term exceeding 5 years Sec-110

» No prospectus shall be issued 90 days after the date on which a copy thereof has been
delivered to the Registrar for registration. If a prospectus is issued without delivering a copy
to the Registrar, the company and every person knowingly involved in the issue, shall be
punishable with fine which may extend to Tk.5,000 Sec-138

» Penalty for untrue statement in the prospectus –Any person who authorized .Imprisonment up
to 2 years or fine extended up to Tk. 5,000 or both. Unless it is proved that the statement was
immaterial, or he had reasonable ground to believe so. Sec-146

» Civil liability for misstatement in the prospectus Sec-145

» Fraudulently induce others to by share (Sec-147)

» Every company shall within 30 days after the AGM, file with the registrar 3 copies of its B/S,
P&L Account or Income & expenditure Account as the case may be. If a company makes
default, shall be liable to a fine not exceeding Tk.100 for each day during which the defaults
continue and every officer who knowingly authorizes/permits such defaults shall be liable to
the like penalty. [sec-190]
» Private company shall file separately B/S and P&L Account to the Registrar. Sec-190

» Notwithstanding anything contained in the Articles of a company other than a private

company, 1/3rd of the directors shall retire from office at the ordinary meeting in every year.
Sec-91(2) at first AGM of the company the whole of the directors shall retire from the office.
(Clause 79 of Schedule-I). A retiring director shall be eligible for reappointment. (Clause 81
of Schedule-I).

» If at any time the member of members of company falls below the minimum requirement, and
continues for more than 6 months, the member shall be individually liable for the debts of the
company contracted during that time. Sec-222

» Winding up order by the Court executed as a dismissal or discharge of the servant of the
company except when the business of the company is continued. Sec-252(3)
Such discharge relives the servant from all obligations under his contract of service .The
power of directors is also usually ceases on the winding up of a company.
» If any director absents himself from 03 (three) consecutive meetings of directors or from all
meetings of the directors for a continuous period of 03 (three) months, whichever is longer,
without leave of absence from BODs, his office will be vacated. Sec-108

» Where a company having share capital makes any allotment of its shares, shall within 60 days
after the allotment, file with the Registrar a return of allotment. Sec-151

» As per Clause 12(2) of Listing Regulations a company shall complete share transfer and have
ready for delivery the share certificates lodged for registration of transfer of within 45 days of
the application for such transfer and its registration.

» The company in General meeting may declare dividends, but no dividend shall exceed the
amount recommended by Directors. When a dividend is declared it shall be paid within 2
months from the date of its declaration. Clause-96, Schedule-I

» No dividend shall be paid otherwise than out profits of the year or any other undistributed
profits. Clause-96, Schedule-I

» In event of the winding up continuing for more than 1 year, the liquidator shall summon a
General Meeting of the company at the end of the first year and of each succeeding year
within 90 days of the close of the year. If the liquidator fails to comply with this section shall
be liable to a fine not exceeding Tk 500. The liquidator shall send the accounts of the
company within 1 week after the AGM. (Sec-295)

» AGM shall be held by the listed security issuers within 45 days from the record date or
completion of book closure period, as the case may be. (Sec-2CC, SECO 1969)

» The financial Statements of a listed issuer shall be audited by a partnership firm of Chartered
Accountants within the meaning of Bangladesh Chartered Accountants Order 1972(P.O No.2)
within 120 days from the date on which the issuer’s financial year ends and a copy of audited
financial statements shall be submitted within 14days thereof to the SEC and stock
exchanges. (Rule-12, SEC Rules 1987)

» No public company and no private limited company subsidiary of a public company shall not
appoint any person as a Managing Director, if he is a Managing Director or manager of any
other company. Managing Director is appointed in AGM. But Govt. may by order permit any
person to be a Managing Director of more than one company. (Sec-109)

» No company shall appoint/employ any person as its MD for a term exceeding 5 years at a
time. But reemployment/extension of period not exceeding 5 years on each occasion is not
prohibited. Such reemployment/extension shall be made with the consent of the company in
AGM. (Sec-110)

» Every Director shall hold qualification shares specified in the Articles, if he has not taken
qualification share before appointment he has to take such share within 60 days of his
appointment or such shorter period as is specified in the Articles. In case of default fine of
Tk.200 will be imposed each day after expiration of such period (Sec-97)
 » After alteration of Memorandum u/s-12, a certified copy of the order confirming the alteration
along with the altered memorandum shall be submitted to the Registrar within 90 days from
the date of the order. (Sec-15)

» A private limited company should be converted into a public one after exceeding its paid up
capital Tk. 40 crore and should apply for listing after exceeding Tk. 50 crore. (SEC
Notification)

» No Managing Agent shall be appointed to hold office for a term of more than 10 years at a time
and shall not hold office for more than 20 years. (Sec-116)

» Every company shall within 90 days after the allotment of any share, debentures or debenture
stock and after registration of transfer of any share, debenture or debenture stock complete and
have ready for delivery the certificates of all shares, debentures or debenture stock
allotted/transferred. (Sec-158)

» Appointment of Auditors (Sec-210)

- Every company shall at its AGM appoint an auditor to hold office until next AGM.
- No person can be appointed as an auditor unless written consent of such person has been
obtained before appointment /reappointment.
- Every director appointed shall within 30 days of the receipt of intimation of his appointment
inform the registrar in writing about has acceptance / refusal.
- The first auditor shall be appointed by the BODs within 01 month of the date of registration
of the company.

- It an auditor is not appointed in AGM the Govt. may appoint an auditor.

- The directors may fill any casual vacancy of any auditor.

» Remuneration (Sec-210)-
- The remuneration of the auditor shall be fixed by the directors, and govt. in case of
appointment by the govt.
- The remuneration shall be fixed in the AGM.
- Any sums paid by the company in respect of the auditors’ expense shall be deemed to be
included in the remuneration.

» Qualifications of an Auditor (Sec-212)

- No person shall be appointed as an auditor of any company unless he is a Chartered Account

within the meaning of the Bangladesh C.A. order 1973 (P.o.-2)
- The following persons shall not be qualified for appointment as auditor of a company,
namely-
1. An officer /employee of the company.
2. A partner or who is in the employment of an officer / employee of the company.
3. A person indebted to the company for an amount exceeding TK.1,000; or who has
green guarantee or provided any security in connation with the indebtedness of any
third person to company for an amount exceeding TK.1,000.
 4. A person who is a director/member of a private company, or a partner of a firm,
which is the managing agent of the company.
5. A person who is a director/holder of shares, of anybody corporate exceeding 5% in
nominal value of the subscribed capital which is a managing agent of the company.
» Power and duties of auditors (sec-213)-
- Every auditor of a company shall have a right of access at all times to the books and
accounts and vouches of the company whether kept at the head office of the company or
elsewhere and shall be untilled to require any such information and explanation as the
auditor may think necessary. The auditor shall in particular inquire into following-
1. Security provided against loans and advances made by the company is secured or
not and whether terms on which they have been made are prejudicial to the
interest of the company.
2. The transactions which have been shown in the books of accounts whether they
are prejudicial to the interest of the company ;
3. Whether or not any assets, shares, debentures or any other securities of the
company (other than banking/investment company) have been sold lower than the
purchase price;
4. Any loans and advanced have duly been shown or not by the company;
5. Any personal expenditure has been shown in the Revenue Account;
6. Any share issued in cash, whether the cash has actually been received or not and
whether the presentation in the balance sheet for the same is misleading or not.

» The auditor shall make a report to be presented in the AGM of company on the accounts
examined by him, and the report shall state whether in his opinion and of the best of his
information and according to the explanation given to him, give information as required by the
Act and give a true and fair view. (Sec-213)

» The auditors’ report shall state-

- Whether he has obtained all the information and explanation which to the best of his
knowledge and belief were necessary for the purpose of his audit;
- Whether in his opinion, proper books of accounts as required by law has been kept by the
company and proper books and returns adequate for the purpose of his audit have been
received from branches not visited by him;
- Whether the balance sheet, and profit and loss account are in agreement with the books of
accounts kept by the company;
- If any answer is negative the auditor shall disclose the fact and report to the shareholders.
» Duties and functions of directors-
- Distribution of work among the staff.
- Every director must act honestly and in the interest of the company .
- A director must exercise such degree of skill and diligence as would amount to the
reasonable care.
- A director shall attend the board and other meeting and shall act according to the
division of the meeting .
- Functions-To hold the AGM.
- To maintain proper books of accounts.
- Recommendation of dividend.
- Disclosure of information as required by the Act and is required by other Acts, rules
,regulation and regulatory anthorities.

Corporate Governance (Notification- SEC/CMRRCD/2006-158/134/Admin/44 dated 07 Aug. 2012)

» Board Size shall not be less than 05 and more than 20.
» Independent Director At least 1/5th of the BODs shall be independent. The independent
Directors shall be appointed by the Board of Directors (BODs) and be approved by the
shareholders of the company in the AGM.
» The post of independent directors shall not remain vacant for more than 90 days.
» The tenure of office of an independent director shall be for a period of 3 years, which may be
extended for 1 year only.
» The position of the Chairman of BODs and the CEO shall be filled by different individuals.
Chairman shall be elected from the directors.
» The CFO and the Company Secretary shall attend the meetings of BODs, but shall not attend that
part of the meeting which involves consideration of any Agenda item relating to their personal
matters.

» Audit Committee a subcommittee of the board, responsible to the BODs-

- Shall be composed of at least 03 members;
- BODs shall appoint the members who shall be directors of the company and shall include at
least 01 independent director;
- The vacancies in audit committee shall be filled immediately or not later than 01 month of
such vacancy;
- Company Secretary shall act as the secretary of Audit committee;
- The quorum of the committee meeting shall not constitute without at least 01 independent
director;
- BODs shall select one of the member of the committee to be the Chairman, who shall be an
independent director, and be present in the AGM also;
- The Audit committee of the holding company shall also review the financial statements of
subsidiary in particular the investments made by the subsidiary;
» If the Audit committee reported to the BODs anything which has material impact on the financial
condition and results of operations, and thereby rectification is necessary and if the committee
finds such rectification has been unreasonably ignored shall report such findings to the
Commission upon reporting such matters to the BODs for 03 times or completion of 06 months
from the date of first reporting to the BODs, whichever is earlier.

» Subsidiary Company
- At least 01 independent director on the BODs of holding company shall be a director on
the board of subsidiary company;
- The minutes of the board meeting of subsidiary company shall be placed for review at the
following Board meeting of holding company.

BANK COMPANIES ACT 1991 (amended on 2013)

» The minimum Paid up Capital and Statutory reserve of a bank company operating in Bangladesh
including the bank companies registered outside Bangladesh shall be 400 crore, of which paid up
capital shall not be less than 200 crore or the amount equivalent to Risk based Capital as
determined by Bangladesh Bank from time to time, whichever is higher. (Sec-13)
» No bank company in existence shall after expiry of 2 years from the commencement of this Act
carry on banking business in Bangladesh. Bangladesh bank may sanction 01 year more in special
cases. (Sec-13)
» Penalty for noncompliance-(after such 01 year sanctioned by Bangladesh Bank)
- Cancellation of license; or
- Prohibition on disbursement of loan; or
- Fine of Tk. 20 Lac to Tk. 01 Crore, and Tk. 50,000 per day from the second day of breach
of law. (Sec-13)
» No bank company shall sanction any loan without security to or on the guarantee of a public
company where any director/family member of a director has such share to vote at least 20% of
total voting. (Sec-27)
» Bangladesh Bank can dissolve the board of directors of a bank company for a maximum period of
02 years. (Sec-47)
» Bangladesh Bank may declare an auditor of a bank company disqualified for a period not
exceeding 2 years. Any person aggrieved by the declaration may appeal to the BB within 15
days of declaration and the decision of BB shall be fined in this behalf.(Sec-39)
» Bangladesh Bank may cancel license of a bank company if the bank ceases to carry on business in
Bangladesh, fails to comply with sec-31 (2) or 31 (4) at any time .[Sec-31 (5)]
» Any banking company dissatisfied with the decision of cancellation may within 30 days of
communication of decision appeal to the BODs of Bangladesh Bank for reconsideration of the
decision. [Sec-31(6]
» Appointment of directors-
- The BODs of a bank company shall be constituted of maximum 20 directors, including 03
independent directors;
- Bangladesh Bank may appoint not more than 2 directors in the board from the depositors
(as per, Appointment of directors from depositors in Banking Companies Rules 2008) in
addition to 20;
» No person shall be eligible to be a director, Managing director or CEO if-
- He does not have 10 years corporate/management or professional experience;
- He is/was involved in forgery, criminal case or civil case, or punished for those offences;
- He is/had been declared bankrupt at any time.
» Only 02 members from a family, including spouses, parents, children or siblings shall be eligible
for directorship in a bank company at a time;
» The tenure of directorship is 03 years and any person can stay in the board as director for 2 terms
successively;
» The directors shall qualify the Fit and Proper Test criteria.
» The Managing Director of a bank company shall not be sponsor shareholder.

» Maintenance of liquid assets under Section-33

- Cash Reserve Ratio (CRR) shall be maintained @6% on their total demand and time
liabilities on biweekly basis subject to the condition that such rate shall not be less than
5.5% in any day (MPD Circular No. 04, dated 01 December 2010)
- Statutory Liquidity Ratio (SLR) shall be maintained at the rate of 19% on their total
demand and time liabilities of which 6% shall be CRR on biweekly average basis. For
Islamic Banking the rate is 11.5%, but the CRR shall be the same (6% biweekly)
- But as per MPD Circular No- 116/2013-757, dated 10 December2013 CRR and SLR
shall be maintained separately, keeping their existing requirements unchanged. Excess
over CRR shall be added to the SLR. Effective from 01 February 2014

» Consequences for failure to maintain appropriate rates-

 - If CRR falls below 5.5% in any day of the month, penal interest shall be charged for that
day at the rate of 5% plus Bank rate;
- If CRR falls below 6% in any day of the month on biweekly basis, penal interest shall be
charged for a day at the rate of 5% plus Bank rate;
- If CRR shortfall found in first two weeks which continued in first day of second two
weeks (biweekly) as per DOS Circular No. 03, dated 01 June 2010 and Sec-36(5) of
Bangladesh Bank Order 1972, every director and officer of scheduled bank who
knowingly and willfully a party of such default, shall by order of Bangladesh Bank be
punishable with fine which may extend to Tk. 01 lac, and for continuous default Tk. 01
lac for each day during which the default continues.

» A bank company shall be deemed to be unable to pay its debts, under Section- 65(4 ) if-
- It has refused to meet any lawful demand made at any of the company’s offices or
branches within 02 working days;
- Such demand is made elsewhere and if Bangladesh Bank certifies that the bank company
is unable to fulfill such demand; or
- Bangladesh certifies in black and white that the company is unable to pay its debts.

» Preparation of Financial Statements in line with BRPD circulars and in compliance with
IAS/IFRS-
- The financial statements of a bank company shall be prepared in accordance with BRPD
Circular No. 14, dated 25 June 2003;
- The financial statements shall be signed by the MD/CEO and by 03 directors of the
company;
- Detailed qualitative and quantitative disclosures are required on Capital Adequacy under
BASEL II issued through BRPD Circular No. 24, dated 03 August 2010 [Risk Based Capital
Adequacy (RBCA) for banks];
- Minimum paid Capital and Reserve shall be 400 crore, of which capital shall not be less
than 200 crore or risk based capital as determined time to time by Bangladesh Bank,
whichever is higher;
- Maintain a Capital Adequacy Ratio (CAR) at a minimum of 10% of Risk Weighted
Assets. Capital Adequacy Returns must be submitted to the Bangladesh Bank on a
quarterly basis;
- Every bank company shall create and maintain a Statutory Reserve taking out of its profit
at the rate of 20% before declaring dividend and transferring to the Govt. until the
Reserve and Share Premium Account equals to its paid up capital. (Sec-24)
- Provision on Classified loans as per BRPD Circular No. 14, dated 23 September 2012 and
BRPD Circular No. 19, dated 27 December 2012 is to be made.
- CRR shall be maintained at the rate of 6% on total demand and time liabilities on
biweekly basis subject to the condition that such rate shall not be less than 5.5% in any
day.(MPD Circular No. 04, dated 01 December2010)
- All relevant IAS/IFRS shall be complied with in preparation and presentation of financial
statements.
» Important Circulars of Bangladesh Bank-
- BRPD Circular No. 14, dated 25 June 2003 (Preparation of financial statements)
- MPD Circular No. 04, dated 01 December 2010 (about CRR)
- BRPD Circular No. 24, dated 03 August 2010 (Risk Based Capital Adequacy)
- DOS Circular No. 03, dated 01 June 2010 and Sec- 36(5) BB order 1972 (Penalty for shortfall in
CRR)
- BRPD Circular No. 14, dated 23 September 2012 (Classification of Loan)
- BRPD Circular No. 19, dated 27 December 2012 (Provision on Classification on Loan)
- MPD Circular No. 116/2013-757, dated 10 December 2013 (Separation of CRR and SLR)

» Important regulations of SEC-

- Clause-7(1): only public company can be listed with stock exchanges;
- Clauses- 12(2): Completion of transfer;
- Regulation-6 of DSE Listing Regulations 1997: Listing Requirements;
- Regulation-31 of DSE Listing Regulations 1997: Delisting of an issuer.

» Insurance Act 2010-

- Section-17: Determination of premium
- Section-18: Collection of premium
- Section-19: insurance abroad
- Section-37: Requirement of Return
- Section-38: Revaluation
- Section-43: Solvency Margin
- Section-44: Restrictions on payment of loan
- Section-56: Assignment of life insurance policy
- Section-58: Nomination of life insurance policy
- Section-88: Surrender Value

» Case Reference-