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Background

The first sub continental act, regarding


companies was the joint stock companies act of
1850.
The act of 1850 was replaced by a new act
1857
Before liberation the act of 1956 was popularly
used which was gazette passed by the Indians.
After liberation Govt. of Bangladesh reform
the companies act of 1956 which is now known
as The Companies Act (Bangladesh) 1994.

The term company is used to describe


an association of a number of persons,
formed the common purpose and they
registered according to the law relating
to companies. Therefore a company is
different from its members and the
individuals composing it.

There are two types of company


1.Public Limited Company
2.Private Limited Company
Public Limited Company can be divided in
Four stagesLimited by Shares
Limited by Guarantee
v Unlimited Company
Statutory public Company

Company formation is a long and complex


procedure that includes various significant
steps. The process of company formation in
Bangladesh is subject to the Companies Act,
1994.
The process of company formation is also
known as incorporation which means, forming
a new corporation.
A company can be formed when a group of
person come together to form an organization
with lawful motive.

The purpose of forming a company must be lawful. Before a


company can be formed the following steps must be taken:1.
The memo and the articles must be prepared.
2.
If it is proposed to have a paid-up capital or more than Rs.3
crore, sanction of the central govt. must be obtained lender
the capital issues (control) Act, 1956
3.
The company must be registered in accordance with the
provision of the companies Act, 1956 and the certificate of
incorporation must be obtained.
4.
The prospectus or the statement in lieu of prospectus must
be issued and registered with the register.
5.
The minimum subscription must be raised and thereafter
the allotment of shares must be made.
6.
The certificate for the commencement of business must be
obtained from the register.

Private company into a public company


1. Conversion
2. By resolution
3. By Default
4. By creating a statutory public company
5. Automatic conversion
Public Company into a Private company
1. Conversion
2. Special Resolution
3. Confirmation by the court

DefinitionThe Memorandum of association is a


document which contains the fundamental
rules regarding the constitution and activities of
a company.
Forms and contents of memorandum1.NAME Clause
2.Situation Clause
3.Objects Clause
4.Area and Operation Clause
5.Liability Clause
6.Capital Clause
7.The Association of Subscriptions Clause

LEGAL EFFECTS OF
MEMORANDUM
A. The contractual powers of a
company
1.Natural Possibility
2.Legal Possibility
B. Forms of contracts and
Deeds of
a Company
1.The Doctrine of ultra vies

Definition-The articles of association is a


document which contains rules, regulation and
bye-laws regarding the internal management
of a company.
Forms and contents of Articles1.Rules
2.Forms of Articles
a. Be printed
b. Be Divided into Paragraphs
c. Be Signed by each Subscribers

CONTENTS OF ARTICLES

CONTENTS OF ARTICLES

1.Share Capital
2.Lien on Shares
3.Calls on Shares
4.Tranfers of Shares
5.Transmissions of Shares
6.Forfieture of Shares
7.Conversion of Shares
into Stock

8.Alteration of Capital
9.General Meetings and
voting rights of members
10.Appointment of all the
directors
11.Dividends and reserves
12.Accounts and audits
13.Share warrants
14.Capitalization of Profits
15.Winding up

The following documents with the necessary fee


must be submitted to the registrar of companies of
the state in which the registered office of the
company will be situated.
1)The memorandum of association signed by at least
7 persons in the care of public companies and 2
persons in the care of private companies.
2)The articles of association
3)A declaration of an advocate, an attorney, a
chartered accountant, or a person named in the
articles as director, manager or secretary of the
company.
4)The registration fees with a filing fee per document.

Member: according to section 41 of the act, the term


member of a company means the subscriber of the
memorandum of the company.
A person can become member of a company in any
one of the following ways:1)
2)
3)
4)

Signature Allotment
Transfer
Transmission
Acquiescence

The company act does not prescribe any


qualification for membership of a company but since
membership created by agreement it may be argued
that person incapable of entering into contracts can
not be a member.

Minor
Company
Creditor
Fictitious person
Trustee

The membership of a person in a company may


terminate in any one of the following ways:
a)By death
b)By insolvency
c)By rescission
d)By forfeiture
e)By surrender
f)By transfer
g)By sale
h)By power of lien
i)By mortgage
j)By redemption

Effects of registration: As soon as a company is registered


and a certificate of incorporation is issued by the registrar three
important legal consequences: The company acquires a distinct legal entity.
It secures a perpetual succession.
Its property is not the property of its shareholders. [sec-34]

Promoters: According to Palmer, company president, A person


who originates a share for the formation of the company, has
the memo and the articles prepared executed and registered
and finds the first directors, settles the terms of the preliminary
contracts and prospectus (if any) and make arrangements for
advertising and circulating the prospectus and placing the
capital is a promoter.

The
usual
methods
of
taking
remuneration are follows:A.Selling to the company at a profit some
property purchased by the promoter
before he became one;
B.Taking a commission on the shares sold;
C.Taking a portion of some shares of the
company;
D.Lump sum from the company.

Definition:
has been defined in the act as any
document described or issued as a
prospectus and includes any notice,
circular, advertisement, or other document
inviting deposits from the public or inviting
offers from the public for the subscriptions
or purchase of any share in, or debentures
of a body corporate.

Characteristics1.Described or issued as a prospectus.


2.Includes Notice, circular, advertisement.
3.Invitation to the members of the public.
4.Invitation to the subscribers of shares or
debentures.
5.The company secures capital through
this documents.

Forms and contents1.Particular object, signatories of the memorandum


and share subscriptions of a company.
2.Numbers and classes of shares
3.Capital and dividends attached to different
classes of shares.
4.Particulars regarding the whole management
body of the company.
5.Minimum amount of subscriptions and amount
payable on application
6.Time of opening of subscription list

Forms and contents7.Preliminary expenses incurred.


8.Details of any premium or under-writing commissions
paid.
9.Particulars of reserves including reserves capitalized.
10.Name and extent of interest of every director and
promoter.
11.Restrictions upon the powers of the directors
12.Voting rights, capitalization of reserves and surplus of
revaluation.
13.Inspection of Balance sheet and Profit and loss account
.
14.Two reports are annexed with the prospectus.

LEGAL REQUIREMENTS OF PROSPECTUS


1.Time
2.Particulars
3.Date
4.Signature
5.Copy of Prospectus
6.Statement by Experts
7.Deposits
8.Registration
9.Terms of Contracts
10. Prospectus by a foreign company.
11.Penalty for non-compliance
12.Defence

After issuing Certificate of Commencement a

public ltd co. can commence business.

Requirements
a)
b)
c)
d)
e)
f)

The minimum subscription,


Every director has paid money payable by him,
A statement in lieu of prospectus,
Copy of memorandum,
Copy of articles of association signed by the
director
A declaration by directors Above requirement
have been complied with

The winding up of a company means


the termination of the legal existence
of a company by stopping its business,
collecting its assets and distributing
the assets among the creditors and
shareholder's as the Act.

Winding Up

Grounds of compulsory winding


up:

A. Special

Resolution of the Company

B. Default
C. Not

Commencing or Suspending the Company


D. Reduction of Member
E. Inability to pay Debts
F. The just and equitable clause

Declaration of solvency
Statutory Declaration to the Register
A Resolution in a general meeting of the
Company within 5 weeks of Declaration of
Solvency
Appointment of Liquidators
Collecting the companys asset, pay the
liabilities of the company and pay the
balance of the proceeds to the
contributories

A Resolution for the winding up of the


company in a general meeting of the
Company
In the meeting of creditors the Directors must
state the position of company and the list of
creditors
A liquidator/s are appointed by the both
meeting, the nominees of the creditors are
preferred
A committee of Inspection
The work of winding up according to Statute

Power to order winding up subject to


supervision
Effect of petition for winding up subject to
supervision
Court may have regard to wishes of creditors
and contributories
Power of Court to appoint and remove
liquidators
Effect of supervision order
Appointment of liquidators subject to
supervision to the office of official liquidators