legal procedures to establish a business or company

1. Assignment
on
Legal Procedures & Laws to Establish Company in Bangladesh
Prepared By:
Name: Mahmud Rahman
Department: Finance & Banking
University of Barisal
Cell: 01683362792
E-mail: mahmud1024@gmail.com
Supervisor:
Mahfuzur Rahman
Research associate at wash project Buet
Date of Submission: 4th
May, 2017.

2. Table of contents
Contents Page No.
1. Start up in Bangladesh
2. Company registration in Bangladesh
3. Partnership
4. Company Law
5. References
01-05
05-09
09-12
12-26
26

3. Start up in Bangladesh
Bangladesh positioned 122 among 183 countries in the ranking of ‘Ease of the Doing Business’ by
the World Bank. Bangladesh dropped from 118 in 2011 to 122 in the year 2012, it means coming
days are becoming business unfriendly. Economic growth of a country is largely indebted to
business. A business friendly environment is critical for motivating the growth of small and
medium size enterprises. Unfortunately, our authority is paying very little heed to the issue.
Here is a list below -a detailed summary of the bureaucratic and legal hurdles a startup
entrepreneur must overcome in order to incorporate and register a new firm means starting a
business in Bangladesh, along with their associated time and set-up costs in Bangladesh. It
examines the procedures, time and cost involved in launching a commercial or industrial firm
with up to 50 employees and start-up capital of 10 times the economy’s per-capita gross national
income (GNI).
These are only explicit issues. There are many implicit issues too. Corruption, red tape problem,
uncooperative behavior of bureaucrats are some to mention. Ok, let’s move forward. Hope this
article will help Startup Entrepreneurs greatly.
Step 01: On-line verification of the uniqueness of the proposed company name with the
Registrar of Joint Stock Companies and Firms.
The proposed name needs to be sent on-line and clearance certificate is provided via e-mail by
the Deputy Registrar (Name Clearance), RJSC. A print out of the name clearance certificate is to
be submitted to the RJSC along with the other documents and forms required for the
incorporation of the company.
Time Duration: 1 day
Estimated Associated costs: BDT 100
Step 02: Pay adhesive stamp fees at a designated bank.
Until recently, special adhesive stamps of value was affixed to the memorandum of association
regardless of the company’s authorized capital. Provision of Pay order in lieu of stamp was passed
on 20 January 2010 (SRO # 21-Law) under The Stamp Duty (Additional Modes of Payment Act
1974). Applicants do not need any-more to buy physical special adhesive stamps. Payment can
be made to the designated bank accounts of the Treasury. Previously all the fees were supposed
to be deposited only in selected branches of Sonali Bank. RJSC has now allowed one of the leading
private sector banks with extensive national coverage —the BRAC Bank—to collect fees.
For an authorized capital of between BDT 100,000 to BDT 1,000,000 the adhesive stamps of total
value BDT 2000 is required – BDT 500 is required for the memorandum of association and BDT
1500 for the articles of association.

4. Time Duration: 1 day
Estimated Associated Costs: BDT 2000
Step 03: File documents with the Registrar of Joint Stock Companies and Firms for
registration.
For filing the memorandum and articles of association, the company pays fees based on the
company’s authorized capital. For a company with a capital of BDT 318320, the cost is BDT 4125
(BDT 2925 registration fees + 1200 registration filing fees). The fees are paid at the designated
banks.
The following documents to be submitted to the registrar:
(a) name clearance certificate;
(b) memorandum of association;
(c) articles of association
(d) forms I, VI, IX, X, and XII;
(e) proof of payment (i.e. receipt from the designated bank) for Treasury Stamps;
(f) encashment certificate (for nonresident subscribers); and
(g) tax identification number (for resident subscribers).
Time Duration: 1 day
Estimated Associated Costs: BDT 2925 registration fees + 1200 registration filing fees
Step 04: Make a company seal
Time Duration: 1 day
Estimated Associated Costs: BDT 40-50
Step 05: Register with the tax authority:
To commence business, every company must register itself with the appropriate taxation
authority (Deputy Commission of Taxes of Company Circle, Zonal Taxation Department) under
the National Board of Revenue (NBR) and procure a tax identification number for the new
company.
Time Duration: 9 days
Estimated Associated Costs: No charge
Step 06: Register for VAT
For VAT purposes, companies may be registered separately with the Customs, Excise, and VAT
Commission (under the NBR). The various VATs incurred while operating the business will be
regulated by the area NBR Customs Department and VAT and Excise Department.

5. Time Duration: 5 days, simultaneously with step 5
Associated Costs: No charge
Step 07: Obtain a trade license
Companies may obtain a trade license from the City Corporation. The trade license application
must be accompanied by the following documents:
1) a certified copy of the company’s articles and memorandum of association,
2) a copy of the certificate of incorporation,
3) the company’s statement of bank solvency,
4) the company’s tax identification number certificate,
5) a copy of the rent agreement for the company’s office,
6) three photographs (copies) and 7) particulars of the person in charge of the main corporate
functions.
Time Duration: 6 days
Associated Costs: BDT 5000
Company registration in Bangladesh
Company registration in Bangladesh
This guide will provide you a detailed overview of company registration requirements, procedure,
and timeline for registering a private limited company in Bangladesh. Like most other
jurisdictions, Bangladesh has a set of initial and ongoing regulatory compliance requirements for
starting and operating a company.
When considering the registration of a new company or relocation of your existing company to
Bangladesh, note that most Bangladeshi companies are registered as private limited liability
companies (commonly known as private limited companies). A private limited company in
Bangladesh is a separate legal entity and shareholders are not liable for the company’s debts
beyond the amount of share capital they have contributed. According to the Companies Act 1994,
any person (foreign or local) above the age of 18 can register a company in Bangladesh.
If you are a foreign investor, we recommend you to read our article on foreign investment. It will
help you to understand the legal regime about foreign investment in Bangladesh.
PRE-REGISTRATION – WHAT YOU NEED TO KNOW
KEY FACTS ABOUT COMPANY FORMATION

6. Company Name. The name must be approved (cleared) before incorporation of the company in
Bangladesh.
Directors. Minimum two directors are mandatory. Directors can be either local or foreign.
Directors must be at least 18 years of age and must not be bankrupt or convicted for any
malpractice in the past. The law requires that a director must own qualification shares stated in
the Articles of Association. A shareholder which is not a natural person (i.e. a company) can
select nominee director.
Shareholders. A private limited company in Bangladesh can have a minimum of 2 and
maximum of 50 shareholders. A director and shareholder can be the same or a different
person. The shareholder can be a person or another legal entity such as another company or
trust. 100% local or foreign shareholding is allowed. New shares can be issued or existing shares
can be transferred to another person anytime after the Bangladeshi company has gone through
the incorporation process.
Authorized Capital. You must state the authorized capital in the Memorandum of Association
and Articles of Association. It is the maximum amount of share capital that the company is
authorized to issue (allocate) to shareholders. Part of the authorized capital can remain
unissued. There is no minimum or maximum limit for authorized capital in Bangladesh.
Paid-up Capital. Minimum paid-up capital for registration of a Bangladeshi company is Taka 1.
Paid-up capital (also known as share capital) can be increased anytime after the incorporation
of the company.
Registered Address. In order to register a company in Bangladesh, you must provide a local
address as the registered address of the company. The registered address must be a physical
address (can be either a residential or commercial address) and cannot be a P.O. Box.
Memorandum and Articles of Association. The company to be incorporated must prepare a
memorandum of association (MOA) and articles of association (AOA).
CONSIDERATIONS FOR FOREIGNERS
Foreigners wishing to open a Bangladesh company, must take into consideration the following
points:
• You must open a bank account in the name of the proposed company with the name
clearance obtained from the Registrar of Joint Stock Companies and Firms (RJSC) i.e. the
registrar of companies and bring in the initial paid up capital. This is a mandatory for
company incorporation in Bangladesh.
• All company incorporation formalities can be handled without you having to visit
Bangladesh. The only exception may be opening a bank account, depending upon the
bank you choose.

7. • All the director and shareholders can be foreigner.
• There is no requirement for you to obtain any special Bangladesh visa if you merely
want to incorporate a private limited company but have no plans to relocate to
Bangladesh. You are free to operate your company from overseas as well as free to visit
Bangladesh on a business visa whenever required to attend to company matters on a
short-term basis.
• If you plan to relocate to Bangladesh to operate your company, you are required to
obtain a work permit.
REQUIRED DOCUMENTS
For the purpose of company incorporation in Bangladesh, the following information is required
by the company registrar:
• Company Name. A name clearance must be obtained.
• Memorandum of Association and Articles of Association. RJSC requires that the object
clause in the MOA to be within 400 words and 7 clauses.
• Shareholders Particulars (National ID if the shareholder is a Bangladeshi)
• Directors Particulars (including Tax Identification Number)
• Registered Address
• Singed Form IX and Subscriber Page. Scanned copy in pdf will be required.
• For foreigners: Copy of passport of shareholder and director.
REGISTRATION PROCEDURE
Company registration procedure in Bangladesh is partially computerized.
There are three distinct steps involved in the Bangladeshi company setup procedure: a) Name
Clearance; ii) Bank account opening and bringing in the paid up capital; and finally b) Company
Registration. Step ii is only applicable if there is any foreign shareholder in the proposed
company.
STEP 1: NAME CLEARANCE
To set up a Bangladesh company, your first step would be to obtain a name clearance for the
proposed company name. You will have to visit www.roc.gov.bd and create a username first.
Then you will be able to apply for name clearance. After you made the application for name
clearance, you will receive a bank payment slip and you will have to pay Taka 600 to the
designated bank. After making the payment, you will have to log in to your account on the RJSC
website and then you will get the name clearance.

8. You may read this guide prepared by RJSC for name clearance.
Tip: use Internet Explorer and Mozilla Firefox while using the RJSC website. Other browser
might not work properly.
To improve your chances of quick name approval, make sure the name:
• is not identical or too similar to any existing local company names
• does not infringe with any trademarks
• is not obscene or vulgar
• is not already reserved
An approved name will be reserved for 6 months from the date of clearance. You can extend
the name by filing an extension request just before the expiry date.
STEP 2: BANK ACCOUNT OPENING AND BRINGING IN THE PAID UP CAPITAL
This step is only applicable if the proposed company has foreign shareholding.
Next, you will have to open a bank account in the proposed company name with any scheduled
bank in Bangladesh. After opening the account, you will have to remit money equal to the
shares to be owned by the foreign shareholder from outside Bangladesh in the account. The
Bank will issue an Encashment Certificate which will be required by RJSC for incorporation.
STEP 3: REGISTER COMPANY
The last step is to submit all the required information in the RJSC’s website. Also you will be
required to upload Form IX and Subscriber Page. After you finish all the process, you will receive
a bank payment slip for paying the registration fees along with stamp duty.
You may read this guide prepared by RJSC for submitting all the information in the RJSC’s
website.
After making the payment in the bank, you are done. Now you will have to follow up with the
RJSC for obtaining the incorporation certificate. RJSC officials will check the documents and
information. If they are satisfied, they will issue the digitally signed i) Certificate of
Incorporation; ii) MOA and AOA; and iii) Form XII. These documents will be mailed to your email
address associated with your RJSC account.
There are cases when the incorporation procedure can get delayed if the shareholders or
directors are of certain nationalities, although this happens in rare cases only. In such cases, the
authorities might ask for additional information.
POST-REGISTRATION FORMALITIES
DOCUMENTS ISSUED BY RJSC:

9. • Certificate of Incorporation: RJSC will issue a Certificate of Incorporation of the
company. The certificate will have the registration number, name of the company and
the date of incorporation.
• Form XII: Form XII contains the list of directors of the incorporated company.
• Certified copies of MOA and AOA
Some of the other items you will almost certainly need upon registration of your Bangladeshi
company include:
• Share certificates for each of the shareholders.
• Register for shareholders, shares, directors etc.
• Company seal for the company
• A rubber stamp for the company
APPLYING FOR TRADE LICENSE, TAX IDENTIFICATION NUMBER AND OTHER LICENSES
After the incorporation, you should buy a commercial space or rent some space in any
commercial area.
Then you need to apply for Trade License and Tax Identification Number. Depending on your
company’s business activities, you may need to obtain more business licenses.
RETURN FILING REQUIREMENTS
Annual Return: Each calendar year, an Annual General Meeting must be held. The AGM must
be conducted within 18 months of company incorporation, after which no more than 15
months can elapse between one AGM and the next.
Regular Return: In case of any change in the board of directors or in the shareholding structure
or any other change, a relevant return must be filed with the RJSC within a certain period of
time.
Partnership
A partnership is a type of business structure where two or more partners start an entity to do
business. For a partnership to exist, there must always be two or more partners.
A Partnership is defined by the Partnership Act, 1932, (the “Partnership Act”) as ‘the relation
between persons who have agreed to share profits of the business carried on by all or any of

10. them acting for all’. This definition gives three minimum requirements to constitute a
partnership:
1. there must be an agreement entered into orally or in writing by the persons who desire
to form a partnership,
2. the object of the agreement must be to share the profits of business intended to be
carried on by the partnership, and
3. the business must be carried on by all the partners or by any of them acting for all of
them. The term ‘person’ is not defined by the Partnership Act.
It is not compulsory to register your partnership firm as there are no penalties for non-
registration. However, it is advisable since the following rights are denied to an unregistered
firm:
• A partner cannot file a suit in any court against the firm or other partners for the
enforcement of any right arising from a contract or right conferred by the Partnership
Act
• A right arising from a contract cannot be enforced in any Court by or on behalf of your
firm against any third party
• Further, the firm or any of its partners cannot claim a set off (i.e. mutual adjustment of
debts owned by the disputant parties to one another) or other proceedings in a dispute
with a third party.
PARTNERSHIP – QUICK FACTS
LIABILITY
• A partnership is considered as a separate legal identity (i.e. separate from its owners) in
Bangladesh only if the partnership is registered.
• All the partners of a partnership are liable severally and jointly for the liability of the
partnership.
• The concept of Limited Liability Partnership does not exist in Bangladesh.
TAXATION
From a tax perspective, partnerships in Bangladesh are not taxed at the entity level and profits
are treated as part of each partners’ personal income and are taxed at personal income tax
rates.
MEMBERS & MANAGEMENT
• There must be a minimum of 2 partners and maximum of 20 partners.

11. • The partners can be natural persons or companies.
• Unlike private or public limited companies, a partnership in Bangladesh does not have
directors, shareholder or secretary, instead the partners own and run the business.
PARTNERSHIP – DOCUMENTS REQUIRED
In order to register a partnership in Bangladesh, the following information/documents are
needed:
• Proposed partnership name;
• Partnership agreement duly notarized;
• Form I;
• Particulars of the partners;
• Residential address of the partners;
• Details of the registered address for the partnership; and
• Percentage of the share of profit of each partner.
PARTNERSHIP – REGISTRATION PROCEDURE
A partnership may be registered with Registrar of Joint Stock Companies and Firm of
Bangladesh (“RJSC”).
The partnership registration process consists of two steps: a) name reservation; and b)
registration of the entity. Under normal circumstances, a partnership registration can be
completed within one/two days.
STEP 1- CHOOSING THE PARTNERSHIP NAME
The partners are free to choose any name as they desire for their partnership firm subject to
the following rules :-
• The names must not be too identical or similar to the name of another existing firm
doing similar business so as to lead to confusion. The reason for this rule being that the
reputation or goodwill of a firm may be injured, if a new firm could adopt an allied
name.
• The name must not contain certain words expressing or implying the sanction, approval
or patronage of Govt.
Once you select a name, you should apply for name clearance using the website of RJSC.
STEP 2 – PREPARE A PARTNERSHIP DEED

12. You should prepare a partnership deed. Usually, a partnership deed contains the following
clauses:
• Name and Address of the firm as well as all the partners;
• Nature of business to be carried on;
• Date of Commencement of business;
• Duration of Partnership (whether for a fixed period/indefinite time);
• Capital contribution by each partner;
• Profit sharing ratio among the partners;
• Rules to be followed in case of retirement, death and admission of a partner; and
• The above are the minimum essentials which are required in all partnership deeds. The
partners may also mention any additional clauses.
The Partnership Deed should be on a stamp paper in accordance with the Stamp Act and should
be signed by all partners. Then it should be notarized.
STEP 3- REGISTER PARTNERSHIP DEED WITH RJSC
The partnership deed and filled up Form I should be filed with RJSC. These documents will be
reviewed by the officials of the RJSC. When the officials are satisfied with the points stated in
the partnership deed, he shall record an entry of the statement in a register called the Register
of Firms and issue a Certificate of Registration.
Company law
Objects and purposes of business organizations in which the funds of a large number of
investors are managed by a few persons for the purpose of earning profits which are shared by
all investors.
Company
According to Sec. 2 (1) (c) the Companies Act, 1994-“Company means a company formed and
registered under this Act or an existing company”.
Thus, a company is an association of persons formed under the Companies Act, 1994 with a
view to achieving some common objectives. Though a company is regarded a legal person, it
possesses similar rights and owes similar obligations like a natural person.

13. Partnership
Section 4 of the Partnership Act, 1932 defines the tern ‘partnership’ in the following words:
“Partnership” is the relation between persons who have agreed to share the profits of a business
carried on by all or any of them acting for all.”
In short, a partnership is the relation between two or more persons who carry on a business
enterprise in which the profits and losses are shared proportionately.
The maximum number of members that can exist in partnership is 10 in case of a firm carrying
on banking business and 20 in case of any other business. This restriction is placed by the
Companies Act, 1994 (Sec. 4) and not the Partnership Act, 1932.
Joint Venture Company
It refers to an association of two or more individuals or companies engaged in a solitary
business enterprise for profit without actual partnership or incorporation. It is a contractual
business undertaking between two or more parties. It is similar to a partnership business, with
one key difference: a partnership generally involves an ongoing, long-term business
relationship, whereas a joint venture is based on a single business transaction. Individuals or
companies choose to enter joint ventures in order to share strengths, minimize risks, and
increase competitive advantages in the marketplace.
For example, a high-technology firm may contract with a manufacturer to bring its idea for a
product to market; the former provides the know-how, the latter the means.
Co-operative Society
A co-operative society is a means for forming a legal entity to conduct business. It means
a voluntary association of persons who conduct business together to promote their common
economic interest. It works on the principle of self-help as well as mutual help.
The main objective is to provide support to the members. Nobody joins a cooperative society to
earn profit. People come forward as a group, pool their individual resources, utilise them in the
best possible manner, and derive some common benefit out of it.
Sole Trading Business & Sole Trader
A sole trading business means a business which is wholly owned and run by a single person who
receives all profits and has unlimited liability for all losses and debts. The single person who
owns and runs such a business is called a ‘sole proprietor’ or ‘sole trader’. It is to be noted that
to set up a sole trading business, no legal filing requirements or fees and no professional advice
is needed. One just literally goes into business on one’s own and the law will recognise it as
having legal form.
Limited Liability

14. It means the fact that the liabilities of the shareholders are limited to the extent of the value of
shares held by them or the amount guaranteed by them. Thus, their personal or private
property cannot be attached for debts of the company. This advantage attracts many people to
invest their savings in the company.
Unlimited Liability
It means the fact that the liability of the shareholders is unlimited and their personal or private
property can be utilized to meet the debts of the company. However, in this case, the
shareholders’ liability extends beyond the value of shares held by them.
Limited Company
A limited liability company refers to the company in which the members bear limited liabilities.
Here members’ liability is confined to a limited amount and they are not personally liable for
the payment of all liabilities of company.
For example, in the event of winding up of the company, if the assets of the company cannot
meet its liabilities, then personal property of the members cannot be utilized to meet
company’s liabilities.
Unlimited Company
An unlimited company is one in which the members’ liability is unlimited. Thus, in such
companies, the members remain personally liable for the payment of all liabilities of company.
For example, in the event of winding up of the company, if the assets of the company become
insufficient to pay its liabilities, the personal property of the members will be utilized to meet
company’s liabilities.
Company limited by Shares
It refers to the company which has a share capital and in which the liability of each member
is limited by the Memorandum to the extent of face value of share subscribed by him.
In other words, during the existence of the company or in the event of winding up, a member
can be called upon to pay the amount remaining unpaid on the shares subscribed by him. Such
a company is called company limited by shares. A company limited by shares may be a public
company or a private company.

15. Company Limited by Guarantee
It means the company which may or may not have a share capital and the members
thereof promise to pay the company’s debts up to a fixed sum in the event of liquidation of the
company. Such a company may be a public company or a private company.
Government Company
A Company of which not less than 51% of the paid up capital is held by the Central Government
of by State Government or Government singly or jointly is known as a Government Company. It
includes a company subsidiary to a government company. The share capital of a government
company may be wholly or partly owned by the government, but it would not make it the agent
of the Government.
Foreign Company
It means any company incorporated outside Bangladesh but has an established place of
business in Bangladesh.
Private Company
Sec. 2 (1) (q) of the Companies Act, 1994 provides,
“Private company means a company which by its articles-
1. Restricts the right to transfer its shares, if any,
2. Prohibits any invitation to public to subscribe for its shares or debenture, if any,
▪ Limits the number of its members to fifty not including persons who are in its
employment.”
Thus, in a private company, the members cannot transfer their shares and the number of
members cannot exceed 50 (minimum 2).
Invitation to public to subscribe for its shares is not allowed.
Public Company
Sec. 2 (1) (r) of the Companies Act, 1994 speaks,
“Public company means a company incorporated under this Act or under any law at any time in
force before the commencement of this Act and which is not a private company.”
In short, a public company is one the AOA (articles of association) of which don’t provide any
restrictions on-
1. the transfer of shares,
2. maximum number of members and

16. ▪ the invitation to public seeking their subscription for its shares.
The minimum limit of its member is 7.
Holding & Subsidiary Company
When a company holds ‘majority of shares’ i.e. more than 50% of the equity shares of
the another company, the former is called holding company or parent company and the latter is
called subsidiary company.
EXAMPLE: B is a company incorporated under the Companies Act, 1994 having share capital of
TK 6 lacs divided into 6000 shares of TK 100 each. Out of the total shares, 3100 shares are held
by A, another company. In this case, A is a holding company and B is the subsidiary company.
The concept is illustrated with chart-
Memorandum of Association (MOA)
The memorandum of association (MOA) is the first and most important document of a
company which informs the general public of the company name, its share capital, the address
of its registered office, the objects of the company etc.
Articles of Association (AOA)
The articles of association are the second most important document of a company which
contains rules and regulations for internal management or affairs of the company.
Ultra-Vires Transactions
Transactions performed by the company going beyond its powers granted by its memorandum
are known as ultra-vires transactions.
Indoor Management Role
A person dealing with a corporation – assuming that he or she is acting in good faith and
without knowledge of any irregularity – need not inquire about the formality of the internal
proceedings of the corporation, but is entitled to assume that there has been compliance with
the articles and bylaws. This principle, known as the ‘indoor management rule’, was
authoritatively laid down in the 19th century case of Royal British Bank v Turquand (1856).

17. Outsider Rights
The rights which attach to the outsiders of the company i.e., the third persons who are not the
members of the company are called ‘outsider rights’. Interestingly, a member will be
considered an outsider, if he does not purely remain in a capacity of a member.
EXAMPLE: A member as a solicitor, promoter or a director is considered an outsider in the
company laws as he possesses a capacity other than that of a member. Thus, such a member has no
right to enforce the articles of association against the company as the articles of association do not
create a contract between the outsiders and the company.
Prospectus
A prospectus means any invitation made to the general public inviting it to deposit money with
the company or to take shares or debentures of the company. Such invitation may be in the
form of a document or a notice, circular, advertisement etc. The sole requirement is that the
invitation must be issued to the public.
Promoters
According to Sec. 145 (6) (a) of the Companies Act of 1994,
“Promoter means a promoter who was a party to the preparation of the prospectus or of the
portion thereof.”
In short, the term ‘promoters’ can be defined as those persons who think of forming a
company, take necessary steps to accomplish that purpose and thus actually bring the company
into existence.
Pre-incorporation Contracts
The ‘pre-incorporation contracts’ are those contracts entered by the promoters on behalf of
the company before its incorporation.
EXAMPLE: A contract for the purchase of assets for the proposed company is a pre-
incorporation contract.
Separate Legal Entity
It means that a company is separate and distinct from its members. As a result, the members
cannot be held liable for the acts or debts of the company. However, a company can sue or be
sued in its own name and hold the property in its own name as well. This principle was
successfully adopted in the famous case Salomon v. Salomon and Co. Ltd. (1897).

18. Lifting the Corporate Veil
By the decision of Salomon v. Salomon and Co. Ltd. (1897), we knew that there is a fictional
veil between the company and its members and the company is a separate legal entity distinct
from its members. Thus, lifting the corporate veil means disregarding or ignoring the separate
legal entity of the company and examining the character of the persons who are in real control
of the company.
In other words, where a fraudulent and dishonest use is made of the legal entity, the individuals
concerned will not be allowed to take shelter behind the corporate personality. In this regards
the court will break through the corporate shell and apply the principle of what is known
as “lifting or piercing through the corporate veil.”
Meeting
Generally, a meeting is defined as a gathering of a number of persons for transacting any lawful
business. A company meeting must be convened and held according to the provisions of the
Companies Act, 1994 and rules framed thereunder.
Quorum
The term ‘quorum’ means the minimum number of members that must be present at the
meetings of the company. Sec 85 of the Companies Act, 1994 provides for the quorum of a
meeting of the company and that is 5 members for public company and 2 members for private
company.
Statutory Meeting
Statutory meeting means the first meeting of the members of the company after its
incorporation which is held within 6 months from the date at which the company is entitled to
commence its business. According to Sec. 83 of the Companies Act, 1994, this type of meetings
must be held within 6 months from the date of incorporation.
Annual General Meeting (AGM)
It is the regular meeting of the members of the company which must be held once in each
year in addition to any other meetings. Sec. 81 of the Companies Act, 1994 deals with AGM.
Extra-ordinary General Meeting
The meeting which is called for dealing with some urgent special business is called the ‘extra-
ordinary general meeting’. The statutory and annual general meetings cannot be regarded as
the extra-ordinary general meetings. As per Sec. 84 of the Companies Act, 1994, the requisition
of the holders of not less than 1/10th on the issued share capital of the company is a must for
calling an ‘extra-ordinary general meeting’.

19. Class Meeting
Generally, there two classes of shareholders, namely equity shareholders and preference
shareholders. When any class of these two types of shareholders calls a general meeting, it is
called a class meeting.
Meetings of Directors
Meetings of Directors mean the meetings of the Board of Directors which need to be held at
least once in every three calendar months. However, there must be at least four meetings of
the Board of Directors in every year. [Sec. 96 of the Companies Act, 1994]
Resolution
The proposal which is voted at the meeting and accepted by the members is termed as
resolution.
Ordinary Resolution
Ordinary resolution means the resolution which is passed by ‘simple majority’ of members
(entitled to vote either in person or by proxy) is called the ordinary resolution. The term ‘simple
majority’ denotes to the situation where the votes cast in favour of the resolution are more
than the votes cast against the resolution.
EXAMPLE: At a general meeting of the company, 1000 members were present. Out of these
1000 members, 501 members casted their votes in favour of the resolution, and the remaining
499 members casted their votes against the resolution. In this case, the resolution is said to be
passed by simple majority (501 members).
Special Resolution
Special resolution means the resolution which is passed by ‘special majority’ of the
members i.e., by the support of 3/4th majority of the members present and entitled to vote at a
meeting. For the purpose of such a resolution, at least a twenty one day’s notice is required to
be given to the members specifying the intention to propose the resolution as a special
resolution. [Sec. 87 of the Companies Act, 1994]
EXAMPLE: At a general meeting of the company, 1000 members were present. Out of these
1000 members, 750 members casted their votes in favour of the resolution, and the remaining
250 members casted their votes against the resolution. In this case, the resolution is said to be
passed by special majority (750 members which is 3/4th majority of 1000 members).
Minutes
The term ‘minutes’ means the written record of the proceedings of every general meeting and
of every meeting of its Board of Directors. Sec. 89 of the Companies Act, 1994 deals with
minutes.

20. Share
The term ‘share’ is defined in Sec. 2 (1) (v) of the Companies Act of 1994, which reads as below:
“Share means a share in the share capital of a company, and includes stock except where a
distinction between stock and share is expressed or implied.”
Justice Farewell gave an exhaustive definition in the case Borland’s Trustees vs. Steel Bros.
(1901):
“A share is the interest of a shareholder in the company, measured by a sum of money for the
purpose of liability and dividends in the first place, and of interest in the second; and also
consisting of a series of contracts as contained in the articles of association.”
In short, the capital of a company is usually divided into different units of a fixed amount and
each unit is called a share. Thus, the persons who hold the shares of a company are called the
shareholders of the company.
Stock
Stock means the aggregate of fully paid up shares legally consolidated. In other words, it is a set
of shares put together in a bundle.
Share Certificate
Share certificate is a document issued by the company to its every shareholder certifying that
he is the holder of the specified number of shares in the company.
Share Warrant
A share warrant is a document specifying certain shares, and stating that its bearer is entitled to
the shares specified therein. It may be noted that a share warrant, as the substitute for a share
certificate, is issued by the company under its common seal.
Equity or Ordinary Shares
The equity or ordinary shares are those which don’t enjoy any preferential rights. Thus, for the
purpose of dividends (during the continuance of the company) and repayment of the capital (in
the event of winding up) these shares rank after the preference shares.
Preference Shares
The preference shares are those which enjoy some preferential rights over the equity or
ordinary shares. Thus, for the purpose of dividends (during the continuance of the company)
and repayment of the capital (in the event of winding up) these shares get preference over the
equity shares.

21. Cumulative Preference Shares
The Cumulative Preference Shares are those which are assured of the dividends every year even
if there are no profits in a particular year. If in a particular year, there are no profits to pay the
dividends, the unpaid dividends of such preference shares is treated as arrear. Thus, the unpaid
dividends accumulate and are paid if there are sufficient profits in the subsequent year.
Non-Cumulative Preference Shares
Non-cumulative preference shares are those which do not get any dividend if in the particular
year there are no profits to pay their preferential dividends. Their dividends do not accumulate
and are not carried forward to the subsequent year. Thus, the unpaid dividends cannot be
claimed when there are sufficient profits in the subsequent year.
Participating Preference Shares
The participating preference shares are those which, in addition to their preferential dividends,
are also entitled to participate in the ‘surplus profits’ or ‘surplus assets’.
Here the term ‘surplus profits’ means the balance of profits which is left after paying the fixed
amount of dividends to the preference shareholders and some dividend to the equity
shareholders. The term ‘surplus assets’ means the balance of assets which is left after paying
back both the preference and equity shareholders.
Non-participating Preference Shares
The non-participating preference shares are those which are not entitled to participate in the
‘surplus profits’ or ‘surplus assets’. They are only entitled to a fixed rate of dividend. Usually, the
preference shares are deemed to be ‘non-participating’.
Deferred Shares
The deferred shares are those which are issued to the promoters or the founders of the
company in return of their contribution in forming the company. These shares are also called
‘promoters’ shares’. The deferred shareholders rank after the ordinary shareholders in terms of
satisfying the claims.
Share Capital
A company usually raises an amount of money by issue of shares and the amount so raised is
called share capital or capital.
Authorized capital
Authorized capital means the maximum amount of share capital which is mentioned in the
company’s memorandum of association (MOA) with which the company plans to be registered.

22. By issuing the shares, a company is authorized to raise only the amount of share capital which is
fixed in the memorandum. This type of share capital is also termed
as ‘nominal’ or ‘registered’ capital.
Issued Capital
Issued capital means the part of the authorised capital which is offered to the public for
subscription. The company has no obligation to issue whole of its authorised capital. It may be
noted that the company cannot issue the capital to the public exceeding the authorised capital.
Subscribed Capital
Subscribed capital means the part of the issued capital which is subscribed by the public.
Called-up Capital
Called-up capital means the part of subscribed capital which is called (demanded) by the
company to be paid. The rest part of subscribed capital which is not called by the company is
called ‘uncalled capital’.
Paid-up Capital
The total amount of money paid by the shareholders as the part of called-up capital is called
the ‘paid-up capital’.
Reserve Capital
Reserve capital refers to the part of the uncalled capital which cannot be called by the company
except in the event of its winding up. According to Sec. 74 of the Companies Act, 1994, the
company may, be special resolution, declare that a portion or whole of the uncalled capital
shall not be called except in the event of its winding up.
Debenture
Sec. 2 (1) (e) of the Companies Act, 1994 says,
“Debenture includes debenture stock, bonds and any other securities of a company, whether
constituting a charge on the assets of company or not.”
According to Topham:
“Debenture the holder usually arising out of a loan and most commonly secured by charge.”
In short, debenture is a certificate of loan issued by the company which creates or
acknowledges a debt due from the company.

23. Fixed Charge
A charge is said to be fixed when it attaches to any specific property. Thus, the company is not
allowed to dispose of that specific property without the assent of the holders of the charge.
Floating Charge
A charge is said to be floating when it is floating, i.e. which does not attach to any definite or
specific property. Thus, the company can dispose of its property without the consent of the
holders of the charge as if no charge were created on that property.
Dividends
The profits of the company which are distributed among its members are called dividends. It is
noteworthy that dividends must be paid only out of company’s profits. The payment of
dividends cannot be made out of company’s capital.
Winding Up/ Liquidation of the Company
The term ‘winding up’ of a company is defined as the process or the proceedings by which a
company is dissolved.
According to Prof. Gower,
“Winding up of a company is the process whereby its life is ended and its property is
administered for the benefit of its creditors and members. And an administrator, called a
liquidator, is appointed and he takes control of the company, collects its assets, pays its debts
and finally distributes any surplus among the members in accordance with their rights”.
In short, the winding up is the process of putting an end to the life of the company. During this
process, the debts of the company are paid off out of the assets of the company and the
surplus or remaining assets are distributed among the members in proportion to their rights in
the company.
Winding Up by Court
Sec. 241 of the Companies Act, 1994 speaks about ‘winding up by court’. As per Sec. 241, a
company may be wound up by the court;
▪ if the company has, by a special resolution, resolved that the company may be wound
up by the court; or
▪ if default is made in filing the statutory report or in holding the statutory meeting; or
▪ if the company does not commence its business within a year from its incorporation or
suspends its business for a whole year; or

24. ▪ if the number of members is reduced, in case of a private company below 2, or, in case
of a public company below 7; or
▪ if the company is unable to pay its debts; or
▪ if the court is of the opinion that it is just and equitable that the company should be
wound up.
Voluntary Winding Up
Voluntary winding up means the winding up by the members or creditors themselves without
any intervention of the court. Sec 286 of the Companies Act, 1994 deals with the cases in which
the company may be voluntarily wound up.
Members’ Voluntary Winding Up
The term ‘members’ voluntary winding up’ refers to the winding up in which a ‘declaration of
solvency’ is made and delivered to the Registrar (for registration) as per the provisions of the
Companies Act. [Sec. 290 of the Companies Act, 1994]. The ‘declaration of solvency’ means the
declaration in which the directors of the company states that the company has no debts, or
that it will be in a position to pay its debts in full. [Sec 290 (1)]
Creditors’ Voluntary Winding Up
The term ‘creditors’ voluntary winding up’ refers to the winding up in which no ‘declaration of
solvency’ is made and the company is in a position that it is unable to pay its debts in full. As in
such a situation, the interest of the creditors is involved, they are given the powers to control
and supervise the winding up of the company.
Winding Up Subject to the Supervision of the Court
Sec. 316 of the Companies Act, 1994 provides that when a company has, by special or
extraordinary resolution, resolved to wind up voluntarily, the court may make an order that the
voluntary winding up shall continue subject to supervision of the court, and on such terms and
conditions as the court thinks just.
Official Liquidator
An official liquidator is an officer who helps the court in conducting the winding up
proceedings. Generally, such an officer takes all the properties of the company into his custody

25. and acts in the name of the company with the sanction of the court. [SS. 260 & 262 of the
Companies Act, 1994]
Contributory
The term ‘contributory’ means every person who is liable to contribute to the assets of the
company in the event of its being winding up. [Sec. 237 of the Companies Act, 1994]
Thus, on the commencement of the winding up of a company, its shareholders are called
contributories. Interestingly, the holders of fully paid up shares are also considered
contributories though their liability is nix.
Managing Agent
According to Sec. 2 (1) (l) of the Companies Act of 1994, a managing agent is a person, firm or
company who or which is entitled to manage the whole affairs of a company by virtue of an
agreement with the company, and under the control or direction of the directors so far as
provided in the agreement.
Managing Director
According to Sec. 2 (1) (m) of the Companies Act of 1994, a managing director is the director
who is entrusted with the ‘substantial powers of management’ which would not otherwise be
exercisable by him.
The substantial powers of management means the powers to take decision concerning some
policy matters e.g., pricing of products, buying and selling, appointment of employees etc.
Class rights
Generally, there two classes of shareholders, namely equity shareholders and preference
shareholders. The rights which attach to any of these classes of shareholders are known as the
‘class rights’.
Majority Rule
A company is governed and managed by the will of the majority of its shareholders and the
minority is not allowed to bring an action about a thing which has fairly been substantiated by
the majority of shareholders. It is known as the ‘majority rule’ or the’ rule of supremacy of the
majority’. The rule is well established in the famous case of Foss v. Harbottle (1843).
Secured Creditor
Secured creditor means the creditor who has a charge on the company’s assets for the
repayment of his dues.

26. Reconstruction
The term ‘reconstruction’ may be defined as the transfer of the business and the undertaking of
one company to another new company formed for carrying on the same business.
Amalgamation
The term ‘amalgamation’ may be defined as the combination of two or more existing
companies to form a new company. In this process, one existing company is absorbed into and
blended with another existing company and thus, the business of those companies is carried on
by a new company (which is the result of the combination of the companies).
Misfeasance
Misfeasance means willful misconduct or willful negligence which results in loss to the
company.
References
Laws of Bangladesh bdlaws.minlaw.gov.bd
Company Law in Bangladesh: key conceptsbdlawdigest.org
Commercial Law (including company law) And industrial Law by Sen and Mitra .
Future Startup Innovators Under 35 For 2016: Young People Shaping The Future Of
Bangladeshfuturestartup.com