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The Formation of a Company in Bangladesh

This is a presentation about Companies Act 1994, Factories act mainly the rules and regulation before the formation of a company.

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The Formation of a Company in Bangladesh

  1. 1. 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.
  2. 2. 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 it’s members and the individuals composing it.
  3. 3. There are two types of company 1.Public Limited Company 2.Private Limited Company Public Limited Company can be divided in Four stages- Limited by Shares Limited by Guarantee Unlimited Company Statutory public Company v
  4. 4. 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.
  5. 5. 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.
  6. 6. 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
  7. 7. Definition- The Memorandum of association is a document which contains the fundamental rules regarding the constitution and activities of a company. Forms and contents of memorandum- 1.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
  8. 8. 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
  9. 9. 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 Articles- 1.Rules 2.Forms of Articles a. Be printed b. Be Divided into Paragraphs c. Be Signed by each Subscribers
  10. 10. 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
  11. 11. The following documents with the necessary fear 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.
  12. 12.  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) Signature Allotment 2) Transfer 3) Transmission 4) Acquiescence
  13. 13.  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 in capable of entering into contracts can not be a member.  Minor  Company  Creditor  Factious person  Trustee
  14. 14. 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
  15. 15.  Effects of registration: As soon as a company is registered and a certificate of incorporation is issued by the register, 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.”
  16. 16. 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 front of some shares of the company; D.Lump sum from the company.
  17. 17. 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.
  18. 18. Characteristics- 1.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.
  19. 19. Forms and contents- 1.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
  20. 20. Forms and contents- 7.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.
  21. 21. 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
  22. 22. Requirements a) The minimum subscription, b) Every director has paid money payable by him, c) A statement in lieu of prospectus, d) Copy of memorandum, e) Copy of articles of association signed by the director f) A declaration by directors “Above requirement have been complied with” After issuing “Certificate of Commencement “ a public ltd co. can commence business.
  23. 23.  The winding up of a company means the termination of the legal existence of a company by stopping it’s business, collecting it’s assets and distributing the assets among the creditors and shareholder's as the Act. Winding Up
  24. 24.  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
  25. 25.  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 company’s asset, pay the liabilities of the company and pay the balance of the proceeds to the contributories
  26. 26.  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
  27. 27.  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
  28. 28.  Factory acts that are followed in Bangladesh established in 1965(No of4.1965)  There are three main segments of factory acts focused: and hygiene 3.welfare
  29. 29. Cleanliness: (1)It helps to know how to keep the factory health and hygiene. Particularly in-  Dispose of it in a suitable manner.  Accumulation of dirt and refuge.  Using proper manufacturing process.  Washing, coloring room& staircase, using disinfectant where necessary or by some other effective method Disposal of wastes and effluent: (1)Effective arrangements shall be made in every factory at the time of manufacturing. (2)Making rules regarding the arrangements:
  30. 30. Ventilation and temperature:  (1) Ventilation system keeps the factory temperature balanced .such as-  (a)Adequate ventilation by the circulation of fresh air.  (b) Temperatures will secure to workers & prevent injury to health.  ©Designed factory with ventilating condition.  Dust and fume:  (1)Dust and fume emerged from manufacturing process are injurious and offensive to workers health.  (2)Effective measures should be taken for reducing dust &fume.  (3) Combustion engine shall be operated unless the exhaust is conducted.
  31. 31. Artificial humidification:  (1 The humidity of the air is artificially increased by the Government making rules – (a) Prescribing standards of humidification. (b) Regulating the methods of humidification. (c)Test determining the humidity of the air to be correctly carried out and recorded. (d) Prescribing methods to be adopted Overcrowded  (1) Proper workers shall be employed.  (2) Prejudice for employment in a work-room-  (a) at least three hundred and fifty cubic feet of space in the case of a factory in existence on the date of the commencement of this Act, and  (b) At least five hundred cubic feet of space in the case of a factory built after the commencement of this Act.
  32. 32. Lighting:  (1) Providing sufficient and suitable lighting.  (2) Effective provision shall be made for the prevention of -  (a) Excess lighting.  (b)Shadows that cause eye strain or risk of accident to any worker Drinking water: (1) In every factory effective arrangements shall be made for all workers & a sufficient supply of wholesome drinking water Latrines and urinals:  (1) In every factory -  (a) Sufficient latrines and urinals.  (b) Latrines and urinals shall be separate for male and female.  (c) Adequately lighted and ventilated Spittoons  (1) Provide sufficient number of spittoons for hygienic condition.  (2) The Government may make rules prescribing the type and the number of spittoons to be provided and their location in any factory.
  33. 33. . Precautions in case of fire:  provided with such means of escape in case of fire  Effective and clearly audible means of giving warning.  A free passage-way giving access to each means of escape.  Inflammable materials are used or stored specifying measures . Precautions in case of fire:  provided with such means of escape in case of fire  Effective and clearly audible means of giving warning.  A free passage-way giving access to each means of escape.  Inflammable materials are used or stored specifying measures
  34. 34.  Fencing of machinery: Use of safeguards to kept machinery safe. .  Employment of young persons on dangerous machines:  (1) No young person shall work at any machine unless he has been fully instructed -  (a) has received sufficient training, or  (b) is under adequate supervision by a person who has thorough knowledge and experience .
  35. 35. Striking gear and devices for cutting off power.:  (1) In every factory – Suitable striking gear or other efficient mechanical appliances shall be provided and maintained and used. Self-acting machines: Machines shall fix in a safe place where any person does not pass or employed & remain within a distance fixed .
  36. 36. Casing of new machinery: (a)In all machinery every set screw, belt or key or any revolving shaft, spindle, wheel or pinion shall be so sunk, encased or otherwise effectively guarded as to prevent danger; and (b) all spur, worm and other toothed or friction gearing which does not require frequent adjustment while in motion, shall be completely encased unless it is so situated
  37. 37. Prohibition of employment of women and children near cotton-openers: No woman or child shall be employed in any part of a factory for pressing cotton in which a cotton-opener is at work. Cranes and other lifting machinery: (1) The following provisions shall apply in respect of cranes and all other lifting machinery, in any factory  Every part of machinery shall be of good construction.  Properly maintained  examined by a competent person at least once ;
  38. 38. Hoists and lifts: (1) In every factory- (a) every hoist and lift shall be – (i) of good mechanical construction, sound material and adequate strength, (ii) Properly maintained, and shall be thoroughly examined by a competent person. Revolving machinery:  (1) Effective measures shall be taken  (2)such as every revolving vessel, cage, basket, flywheel, pulley disc or similar appliance driven by power. . Pressure plant: Need pressure plant at the time of manufacturing process.
  39. 39.  Powers to require specifications of defective parts or tests of stability.  Power to make rules to supplement  Precautions against dangerous fumes.  Explosive or inflammable dust, gas: (1) any manufacturing process produces dust, gas, fume or vapor of such character and to such extent as to be likely to explode on ignition to remove -  (a) effective enclosure of the plant or machinery used in the process;  (b) removal or prevention of the accumulation of such dust, gas, fume
  40. 40. Washing facilities:  (1) In every factory - (a) adequate and suitable facilities for washing and bathing (b) separate and adequately screened facilities shall be provided for the use of male and female (c) Such facilities shall be kept clean.  (2) The Government may prescribe standards of adequate and suitable facilities for washing
  41. 41. First-aid appliances:  (1) There shall be provided and maintained readily accessible first aid boxes and cupboards equipped .  (2) Such boxes should be kept in charge of responsible person. Canteens: providing good canteen facilities. Shelters:  adequate and suitable shelters or rest rooms, and a suitable lunch room with provision for drinking water where workers can eat meals brought by them.
  42. 42.  Rooms for children  Welfare officers (1) In every factory wherein five hundred or more workers are employed, the occupier shall employ in the factory such number of welfare officers as may be prescribed. (2) The Government may prescribe the duties, qualifications and conditions of service of officers employed under sub-section (1).
  43. 43. Power to make rules to supplement this Chapter.  The government may takes rules-  The welfare of workers as may be specified, compliance with any of the provisions .  Requiring in any factory or class or description of factories that representatives of the workers employed in the factory shall be associated with the management of the welfare arrangements for the workers.  e Government may make rules
  44. 44. Industrial Relation’s Ordinance
  45. 45. • Trade union mean’s an association of worker’s • Trade union reefer's the relation between workman and employees • Trade union impose restrictive conditions on the conduct or any trade or business • Trade union may be temporary or permanent • Trade union may be formed for the relationship among a. Workman and employer's b. Workman and workman c. Employer and employer
  46. 46.  Any agreement between partner’s as to their own business  An agreement between an employer and those employed by him  Any agreement in consideration of the sale of the goodwill of the business
  47. 47.  Collective Bargaining mean’s the relation to an establishment or industry in the trade union of workmen which is the agent in establishment  As the case maybe industry in the matter of Collective Bargaining  Where there is only one registered trade union in an establishment or a group of establishments and the total number of workmen employed be dreamed o be Collective Bargaining agent for such establishment or group
  48. 48.  Conciliation mean’s that the government shall by notification in he official Gazette, appoint as many person’s as it considers necessary to be conciliator's  The purposes of this ordinance and shall specify in the notification  The area within which or the class of establishment or industries in relation to which is one of them
  49. 49. Certain class of workers are allowed to be compensated and they are- 1.Depandant- a. Widow, Minor, Legitimate son , unmarried legitimate daughter , a widowed mother. b. If wholly dependant on the earnings of the workman at the time of his death a son or a daughter who has attained the age of 18 years and who is infirm;
  50. 50. 2.Minor 3.Employer- a. Anybody of persons, whether incorporated or not. b. Any managing agent of an employer. c. The legal representatives of deceased employer. d. Any person to whom the services of a workman are temporarily lent or lent out, while the workman is working for him. 4. Disablement- a. Partial disablement b. Total disablement 5. Wages 6. Monthly Wages 7. Workman
  51. 51. An employer is liable to pay compensation to a workman: 1) For personal injury caused to him by accident, and 2) For any occupational disease contracted by him. 1) Personal Injury: Personal injury includes: i) Must have been caused during the course of his employment; and ii) Must have been caused by accident arising out of his employment.
  52. 52.  The injury should not have been caused by accident which is directly attributable to: i) The workman having been under the influence of drink or drugs at the time of the accident; ii) Willful disregard of instruction relating to safety precautions given by the employer; and/or iii) The willful disregard of the usage of the safety device or safety guard provided for the purpose of securing safety of the workman by the employer.
  53. 53.  2) Occupational Disease: The Act also recognizes that the workman employed in certain types of industries of occupation risk exposure to certain occupational disease peculiar to that employment. This section states that the contracting of any of these occupational diseases shall be deemed to be:  i) An injury by accident within the meaning of the Act and compensation is payable to the workman who contracts such disease;  ii) The types of employment which exposes the workman to occupational disease as well as the list of occupational diseases are contained in Schedule III of the Act. Schedule III is divided into three parts, viz., A, B and C.  No specific period of employment is necessary for a claim for compensation with respect to occupational diseases mentioned in Part A.
  54. 54.  For diseases specified in Part B the workman must be in continuous service of the same employer for a period of six months in the employment specified in that part.  For diseases in Part C the period of employment would be such as is specified by the Central Government for each of such employment whether in the service of one or more employers. If a workman employed in any employment mentioned in Part C of the Schedule II contracts any occupational disease peculiar to that employment, the contracting whereof is deemed to be an injury by accident within the meaning of Section 3 and such employment was under more than one employer then all the employers shall be liable for the payment of compensation in such proportion as the commissioner in the circumstances may deem just.
  55. 55.  Section 4 of the Act prescribes the amount of compensation payable under the provisions of the Act. The amount of compensation payable to a workman depends on:  1) The nature of the injury caused by accident.  2) The monthly wages of the workman concerned, and  3) The relevant factor for working out lump-sum equivalent of compensation amount as specified in Schedule IV.  There is no distinction between an adult and a minor worker with respect to the amount of compensation.
  56. 56.  New Section 4 provides for compensation for: 1) Death; 2) Permanent total disablement; 3) Permanent partial disablement; and 4) Temporary disablement – total or partial.  1) Compensation for Death: Where death results from an injury, the amount of compensation shall be equal to 50 percent of the monthly wages of the deceased workman multiplied by the relevant factor, or Rs. 85,000 whichever is more.
  57. 57. 2) Compensation for Permanent Total Disablement: Where permanent total disablement results form an injury, the amount of compensation payable shall be equal to 60 percent of the monthly wages of the injured workman multiplied by the relevant factor, or Rs. 90,000, whichever is more.
  58. 58.  3) Compensation for Permanent Partial Disablement:  i) In the case of an injury specified in Part II of Schedule I, such percentage of the compensation which would have been payable in the case of permanent total disablement as is specified therein as being the percentage of the loss of earning capacity caused by the injury; and in other words, the percentage of compensation payable is proportionate to the loss of earning capacity permanently caused by the scheduled injury. Thus, if the loss of earning capacity caused by an injury specified in Part II of Schedule I is 30 percent, the amount of compensation shall be 30 percent of compensation payable in case of permanent total disablement.  ii) In the case of an injury not specified in Schedule I such percentage of the compensation payable in the case of permanent total disablement as is proportionate to the loss of earning capacity (as assessed by the qualified medical practitioner) permanently caused by the injury.
  59. 59.  4) Compensation for Temporary Disablement: A half monthly payment of the sum whether total or partial results equivalent to 25% of monthly .wages of the from the injury workman to be paid in the manner prescribed.  5) Compensation to be Paid when due and Penalty for Default: Section 4A provides for the payment of compensation and the penalty for default. It provides that compensation shall be paid as soon as it falls due. Section 4 mandates employer to pay compensation amount as soon as it falls due to victim or his or her legal heirs. workman to be paid in the manner prescribed.
  60. 60.  Section 8 of the Act provides for the deposit of the compensation before the Commissioner, as also to the distribution of compensation by the Commissioner. Section 8 lays down following rules with regard to distribution of compensation:  1) No payment of compensation in respect of workman whose injury has resulted in death, and no payment of lump sum as compensation to a woman or a person under a legal disability, shall be made otherwise then by deposit with the Commissioner, and no such payment made directly by an employer shall be deemed to be payment of compensation.  2) Any other sum amounting to not less than ten rupees which is payable as compensation may be deposited with the Commissioner on behalf of the person entitled thereto.  3) The receipt of the Commissioner shall be a sufficient discharge in respect of any compensation deposited with him.
  61. 61. 4) On the deposit of any money as compensation in respect of a deceased workman the Commissioner shall, if he thinks necessary, cause notice to be published or to be served on each dependant in such manner as he thinks fit, calling upon the dependents to appear before him on such date as he may fix for determining the distribution of the compensation. If the Commissioner is satisfied, after any inquiry which he may deem necessary, that no dependant exists, he shall repay the balance of the money to the employer by whom it was paid.
  62. 62.  5) Compensation deposited in respect of a deceased workman shall, subject to any deduction made, be apportioned among the dependants of the deceased workman or any of them in such proportion as the Commissioner thinks fit or may, in the discretion of the Commissioner, be allotted to any one dependant.  6) Where any compensation deposited with the Commissioner is payable to any person, the Commissioner shall pay the money to the person entitled thereto.  7) i) Where any lumpsum deposited with the Commissioner is payable to a woman or a person under a legal disability, such sum may be invested, applied or otherwise dealt with for the benefit of the woman, or of such person during his disability, in such manner as the Commissioner may direct.  ii) Where a half-monthly payment is payable to a person under legal disability, the Commissioner may pay it to any dependant of the workman or to any other person whom the Commissioner thinks best fitted to provide for the welfare of the workman.
  63. 63. 8) The Commissioner may, on account of neglect of children on the part of a parent or on account of the variation of the circumstances of any dependant, or for any other sufficient cause, vary his earlier orders regarding distribution or investment of compensation. But no such order prejudicial to any person shall be made unless such person has been given an opportunity of showing because why the order should not be made. 9) Where the Commissioner varies any order under sub-section (8) by reason of the fact that payment of compensation to any person has been obtained by fraud, impersonation or other improper means any amount so paid to or on behalf of such person may be recovered as an arrear of land revenue