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The Companies Act 1994

Public Company: section 2(r) states that public company means a company incorporated
under this Act or under any law at any time in force before this commencement of this Act
and which is not a private company.
Public companies may be classified into three types:
1. Companies limited by shares;
2. Companies Limited by Guarantee;
3. Unlimited Companies
a. Company Limited by Shares: In these companies there is a share-capital, and each
share has a fixed nominal value which the share-holder pays at a time or by
installments. The member is not liable to pay anything more than the fixed value of
the share, whatever may be the liabilities of the company.
b. Company Limited by Guarantee: In these companies, each member promises to
pay a fixed sum of money in the event of liquidation of the company. This amount is
called the Guarantee. Sometimes the members are required to buy a share of a fixed
value and also give a guarantee for a further sum in the event of liquidation. There is
no liability to pay anything more than the value of the share (where there is a share)
and the guarantee.
c. Unlimited Company: In these companies the liability of the shareholder is
unlimited, as in partnership firms. Past members who ceased to be members within
the previous year may be liable in respect of debts incurred before they ceased to be
members. However, there is no such liability of members until the company is wound
up. An unlimited company may be with or without a share capital. They must register
their articles of association.
Private vs. Public Company
The main points of difference between the two types of companies are enumerated below:
1. Number of members: The number of members in a private company cannot be less
than two and cannot be more than fifty. In a public company, the number of members
cannot be less than seven but no maximum has been fixed. It may have any number of
members.
2. Restrictions on transfer of shares: In a private company there must be regulations
restricting the transfer of shares. In a public company there need not be any. By
restricting transfer, a private company can prevent the membership of persons or
classes of persons who are considered to be undesirable.
3. Restriction on invitation to public: A private company cannot invite the public to
purchase its shares or debentures. A public company can do so.
4. Restriction on name: A private company must add the words, Private Limited at
the end of its name.
5. Prospectus: A private company need not file a prospectus or a statement in lieu of
prospectus. A public limited company must file it.
6. Number of Directors: A public company must have at least three Directors whereas,
a private company must have two Directors.

7. Qualification shares and consent of directors: In the case of a private company, if


there be a director, his consent in writing to act as such and his contract to take up
qualification shares need not be filed with the Registrar. But in case of a public
company, it is an obligation to file these documents.
8. Issue of right shares: When a public company proposes to increases its subscribed
capital by the issue of new shares, it must be offered first to the existing equity
shareholders on a pro rata basis, unless the members in a general meeting decide
otherwise. This provision does not apply to private companies.
9. Commencement of business: A private company can commence business
immediately after incorporation, whereas a public company has to wait until it obtains
a certificate for the Commencement of Business
10. Statutory Meeting and Statutory Report: A private company need not hold the
Statutory Meeting or file the Statutory Report, while it is mandatory for the public
limited company.
MEMORANDUM OF ASSOCIATION
The Memorandum of Association is document which contains the fundamental rules
regarding the constitution and activities of a company. It is the basic document which lays
down how the company is to be constituted and what work it shall undertake. The purpose of
memorandum is to enable the member of the company, its creditors, and the public to know
what its power are and what is the range of its activities. The memorandum contains rules
regarding the capital structure, the liability of the members, the objects of the company, and
all other important matters relating to the company. The memorandum is altered only after
certain formalities are observed.
IMPORTANCE OF THE MEMORANDUM
The Memorandum shows the range of the enterprise. The memorandum is the foundation on
which the superstructure of the company has been built up. It enables the shareholders,
creditors and outsiders to know the permitted activities of the company (Egyptian Salt and
Soda Co. Ltd. Vs. Port Said Salt Association Ltd)
ARTICLES OF ASSOCIATION
The Articles of Association is a document which contains rules, regulations and bye-laws
regarding the internal management of the company. Articles must not violate any provision of
the memorandum or any provision of the Companies Act. The rules laid down in the articles
must always be read subject to the rules contained in the memorandum.
CONTENT OF ARTICLES
Articles of Association usually contain provisions in respect of the following matters:
a. Share capital, rights of shareholders, payment of commissions, share certificates.
b. Lien on shares.
c. Calls on shares.
d. Transfer of shares.
e. Transmission of shares.
f. Forfeiture of shares.
g. Conversion of shares into stock.
h. Share warrants.
i. Alteration of capital.
j. General meeting and voting rights of members.
k. Appointment and remuneration of directors, board of directors, managers of secretary.
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l.
m.
n.
o.

Dividends and reserves.


Accounts and audits
Capitalization of profits.
Winding up.

MEMORANDUM vs. ARTICLES OF ASSOCIATION


The distinction between the memorandum and the articles of association can be summed
up as follows:
a. The memorandum is the fundamental charter of the company determining its
constitution and objectives; the articles are rules regarding internal management.
b. Any rule in the articles contrary to the memorandum is invalid.
c. Articles can be altered easily; the memorandum can be altered only after the adoption
of certain formalities.
d. Certain clauses of memorandum cannot be altered without the sanction of the
Government and of the Court e.g., the object clause and the liability clause. Other
clauses can be altered easily e.g., the name clause. Articles can be altered by passing a
special resolution. The approval of the Government is required in special cases e.g.,
the remuneration of directors of public companies for change of articles, Court
sanction is generally not required.
e. The memorandum defines the powers of the company and the relationship between the
company and the member and also non-members. Articles define and regulate the
relationship between the company and the members and the relationship between the
members.
f. Acts beyond the powers of memorandum are void. Such an act cannot be ratified by
the members even by a unanimous resolution. But acts done by a company beyond the
articles can be ratified by the shareholders provided they are within the powers of
Memorandum.
g. If an act is within the powers given by the memorandum but contrary to some
provision of the articles, the members can change the articles and ratify the act.
FORM AND CONTENTS OF MEMORANDUM OF A COMPAY LIMITED BY
SHARES
According to section 6 of the Companies Act, the memorandum of a company limited by
the share shall state the following:
a. The name of the company, with limited as the last word in its name.
b. The address of the registered office.
c. The object of the company, and, except in the case of trading companies, the territories
to which they extend.
d. That the liability of the members is limited.
e. The amount of share capital with which the company proposes to be registered, and
the divisions thereof into shares of a fixed amount.
Specimen of Memorandum of Association of a company limited by shares (ScheduleVI):
a. The name of the company is ............................... Limited.
b. The registered office of the company shall be situated in Bangladesh.
c. The objects for which the company is established are as follows:
d. The liability of the members is limited.
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e. The share capital of the company is two hundred thousand taka divided into one
thousand shares of two hundred taka each.
We the several persons, whose names and addresses are subscribed, are desirous on being
formed into a company in pursuance of this memorandum of association and we
respectively agree to take the number of shares in the capital of the company set opposite
our respective names:
Names, Addresses, nationality
Number of shares taken
Signature of the
Description of subscribers
by the subscriber
subscribers
1.
2.
3.
4.
5.
CONTENTS OF MEMORANDUM OF COMPANY LIMITED BY GUARANTEE
Contents of the memorandum of a company limited by guarantee are laid down in section 7.
According to this section, in the case of a company limited by guarantee, the memorandum
shall state:
a. The name of the company, with limited as the last word in its name;
b. The address of the registered office;
c. The object of the company, and, except in the case of trading companies, the
territories to which they extend;
d. That the liability of the members is limited;
e. That each member undertakes to contribute to the assets of the company in the event
of its being wound up while he is a member or within one year afterwards, for
payment of the debts and liabilities of the company contracted before he ceases to be
a member, and of the charges and expenses of winding up, and for adjustment of the
rights of the contributories among themselves, such amount as may be required, not
exceeding a specified amount.
If the company has a share capital, the memorandum shall also state the amount of
share capital with which the company proposes to be registered and the division thereof
into shares of a fixed amount; Each subscriber of the memorandum shall take at least one
share; and each subscriber shall write opposite to his name the number of shares he takes.
FORM AND CONTENTS OF MEMORANDUM OF UNLIMITED COMPANY
Section 8 states that in the case of an unlimited company, the memorandum shall statea. The name of the company
b. The address of the registered office of the company
c. The objects of the company and, except in the case of trading companies, the
territories to which they extend.
If the company has a share capital, then each subscriber of the memorandum shall take at
least one share; and each subscriber shall write opposite to his name the number of shares
he takes.

PROSPECTUS
A prospectus is an invitation to the public to purchase shares or debenture of a
company. In other words, a prospectus may be defined as any document that
includes any notice, circular, advertisement or other document inviting deposits
from the public or inviting offers from the public for the subscription or purchase
of any share in, or debentures of a body corporate. Prospectus has the following
characteristics:
1. It is a document described or issued as a prospectus.
2. It includes any notice, circular, advertisement inviting deposits from the public.
3. It is an invitation to the public.
4. The public is invited to subscribe the shares or debentures of a company.
CONTENTS OF THE PROSPECTUS
Every prospectus issued by or on behalf of a company shall state the matters
specified in part-I of schedule III of the Companies Act 1994. According to the
Part I of Schedule III, the following items are to be included in the prospectus:
1. The names, addresses, descriptions and occupations of the signatories to the
memorandum and the number of share subscribed for them.
2. The number and classes of shares and the nature and extent of interest of
holders in the property and profits of the company.
3. The number of redeemable preference shares intended to be issued with the
date of redemption.
4. The rights in respect of capital and dividend attached to different classes of
shares.
5. The number of shares fixed by the articles as the qualification of director.
6. Particular regarding director, managing agents, manager, secretaries and
treasures etc.
7. Remuneration of the directors.
8. The minimum amount of subscription and amount payable on application.
9. Time of opening of subscription list.
10. Preliminary expenses incurred.
11. Particulars regarding purchase of property.
12. Details of any premium or under-writing commissions paid.
13. Particular of reserve s including reserve capital.
14. Nature and extent of interest of every director or promoter..
15. Name and addresses of the auditors of the company.
16. The nature and extent of restrictions upon members at company meetings.
17. Restrictions upon powers of the directors.
18. Voting rights, capitalization of reserves and surplus of revaluation.
STATEMENT IN LIEU OF PROSPECTUS:
A public company having a share capital and not issuing prospectus must at least 3
days before the first allotment of shares or debentures, file with the registrar for
registration a statement in lieu of prospectus. The statement must be in the form
prescribed in Schedule IV of the Companies Act 1994.

REGISTRATION OF PROSPECTUS
Before publication of prospectus inviting people to subscribe share of debentures of a
company, a copy of the prospectus must be delivered to the Registrar for registration on or
before the date of publication. It should signed by the directors or proposed directors of the
company or by their agent. On the face of the prospectus delivered to the Registrar for
registration, it should be stated that a copy has been delivered for registration; and must
contain a list of statement included in the prospectus. The registrar shall not register a
prospectus unless the prospectus contains all the elements mentioned earlier and the
prospectus is accompanied by the consent in writing of the person if any, named therein as
the auditor, legal adviser, attorney, solicitor, banker or broker of the company or intended
company, to act in that capacity.
No prospectus shall be issued more than ninety days after the data on which a copy thereof is
delivered for registration, and if a prospectus is so issued, it shall be deemed to be a
prospectus a copy of which has not been delivered under this section to the registrar. If a
prospectus is issued without delivering a copy thereof to the Registrar, the company and
every person from those who have knowing been a party to the issue of the prospectus shall
be punishable with the fine which may extend to five thousand taka (Section138)
PENALTY FOR UNTRUE STATEMENT IN PROSPECTUS
The criminal liabilities that arise out of faulty statement in the prospectus ASC laid down
in section 145 of the Act. Additionally section 146 spell down that when a prospectus
includes any untrue statement every person who authorized the issue of the prospectus shall
be punishable with imprisonment for a term which may extend to two years. Or with fine
which may extend to five thousand taka or with both, unless he proves either that the
statement was immaterial or that he had reasonable ground, to believe that the statement was
true (section 146)
KINDS OF MEETINGS
There are three kinds of meetings: Statutory, Ordinary, Extraordinary meeting.
Each type of meeting is highlighted below:
1. Statutory Meeting: Every company limited by shares and every company limited by
a guarantee and having a share capital is required to hold a Statutory Meeting of the
members of the company within a period of six months and not less than one month
from the date on which the company becomes entitled to commence business
(Sec.83).
2. Ordinary Meetings: A general meeting of a company should be held within 18
months from the date of its incorporation and thereafter once at least in every calendar
year. This meeting may also be called an Annual General Meeting. The period during
which the subsequent meeting should be held in fifteen months from the previous
general meeting. The articles may provide that such meeting shall be held on a certain
date every year. If no such meeting is held, the company and every director or
manager who is a party to the default shall be liable to a fine of tk 10,00 and 250 for
each day of default and the Court may, on the application of any member of the
company, call or direct the calling of such meeting (SEC. 81, 82)
3. Extra Ordinary Meeting: All meetings of the shareholders other than the annual
meetings or those provided for in the articles are known as extraordinary general
meetings. This meeting may be called by the directors either suo moto or on the
requisition of not less than one-tenth of the shareholders. Where the directors fail to
call such a meeting so requisitioned within the prescribed time limit 84(1) it would be
called by the requisitionists themselves 84(3).
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VOLUNTARY WINDING UP
As mentioned in section 286, a company may be wound up voluntarily under the
following circumstances:
a. When the period, it any, fixed for the duration of the company by the articles expires,
or the event, if any occurs, on the occurrence of which articles provide that the
company is to be dissolved and the company in general meeting has passed a
resolution requiring the company to be wound up voluntarily;
b. If the company resolves by special resolution that the company be wound up
voluntarily;
c. If the company resolves by extraordinary resolution to the effect that it cannot by
reason of its liabilities continue its business, and that it is advisable to wind up.