Rowshonara Akter Akhi

Lecturer
Department of Finance
& Banking
Business
Law
► Law includes all those rules and regulations which regulate our relations

with other individuals and with the state.

► Business laws are those laws which regulate the conduct of the business.
Compan
y
• An association of persons for trade or other lawful activity formed for the
purpose of carrying on business or profit.

• Every association is not a company .

• Legally, a company refers to an association which is “registered

as a company” under the Companies Act , 1994 (Banking 1991).
Characteristics of a
Company
1. An artificial person created by law:
• A company is called an artificial person because it does not take birth like a
natural person but comes into existence through law.
• Being the creation of law, the company possesses only those properties, which
are
conferred upon it by its charter.

2. Perpetual Existence:
• The term perpetual existence means the continued existence.
• The death, insolvency or unsoundness of mind of its members or transfer of shares by
its members does not in any way affect the existence of the company.
• Members may come and members may go but the company goes on forever.
• The company can be compared with flowing river where water (members) keeps
on changing continuously, still the identity of the river (company) remains the
same
Characteristics of a Company
(Cont’d)
3. Common Seal:
• The term Common Seal means the official signature of the company.
• Since the company being an artificial person cannot sign its name on a document,
every company is required to have its common seal with its name engraved on the
same.
• This seal acts as the official signature of the company.
• Any document bearing the common seal of the company and duly witnesses by at
least two directors will be binding on the company.

4. Limited Liability:
• In case of a company limited by share, the liability of a member is limited up to
the
amount remaining unpaid on the shares held by a member.
Characteristics of a Company
(Cont’d)

5. Free Transferability of shares:

• The shares of a public company are freely transferable.
• A shareholder can transfer association, even a public limited company can put
certain restrictions on the transfer of shares but it cannot altogether stop it.
• A shareholder of public company possessing fully paid up shares is at liberty
to transfer his shares to anyone he likes in accordance with the manner
provided for in the articles of association of the company.
Classification on the basis of
incorporation
 Statutory Companies:
 Created by a special act of the Legislature.
 Do not have any Memorandum or Articles of Association.
 They derive their powers from the Acts, which constitute them.
 Changes in structures or powers is possible through legislative amendment.
 Main objective: to serve Public Interest.
 Example: Titas gas, BREB.
 Are concerned with public utilities – railways, electricity and gas.
 Provisions of companies Act,1994 apply to them, if they are not inconsistent with
the provisions of the special act under which they are formed.
Classification on the basis of incorporation
(Cont’d)
 Registered Company:
• Companies registered under the companies Act 1994 or under any other
provisions of Company Law are called RegisteredCompanies.
• Comes into existence when the certificate of incorporation was issued by
the
Registrar of Joint Stock Companies and Firms(RJSC).
• Derive their powers from the Companies Act and MOA may be either a Private
Company or a Public Company.
• These companies may be companies limited by shares, companies
limited by
guarantee, unlimited companies.
Classification on the basis of
liability
I) Limited Companies:
(a) Companies with limited liability:

- The liability of the members is limited by its MOA to the amount unpaid on
the shares, (If any) such a company is known as company limited by shares.
- Liability can be exposed during existence and winding up of the company.

- If the shares are fully paid, the liability of members are nil.
Classification on the basis of liability
(Cont’d)
(b) Companies limited by Guarantee:
• Each member promises to pay a fixed sum of money in case of its winding up.
• This amount is called 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.
• Such companies are generally non-trading companies and not formed for earning
profits, but formed for the promotion of the art, science, sports and culture.
• Such companies may be registered with or without a share capital.
Classification on the basis of liability
(Cont’d)
• II Unlimited Companies:
 A company not having any limit on the liability of its is termed as
members
unlimited companies.

 The members
Because of theare personally
separate legalliable
entity,for the
the debtscannot
others of the sue
company.
the members directly.
 The creditors should approach the court for the winding up of the company .
 Members have to contribute their property and the liquidator has to use the funds
in the discharge of the company.
 May or may not have a share capital.
 If it has share capital the amount of share capital must also be stated in the Articles.
According to
Ownerships:
• Public limited company
A company which has right to issue shares to general public and liability of shares
holder’s is limited to the value of their share in company. there is no limit of
maximum number of members.

• Private limited company

A company which cannot issue shares to general public and the liability of share
holder’s is limited to the value of their share in company. Minimum number of
members in private company must be two and maximum is fifty.
According to Ownership (Cont’d)

• Holding company
A company which buys 50% or above shares of other company is called holding
company or parent company

• Subsidiary company
A company whose 50% shares are held by an another company is
called Subsidiary Company.
• Government company
Company which sells 50% shares to government is called Government Company.
According to
nationality
• Foreign company
A company which is registered and having head office outside Bangladesh
is called Foreign Company.

• Domestic company
A company which is formed and registered inside Bangladesh is called domestic
company.
 Difference between Public Limited and Private Limited
Company
Private Limited Company Public Limited Company
There must be minimum 2 members and There must be minimum 7 members and no
maximum limit is 50. limit for the maximum members.

Members of private company cannot transfer Members of public ltd company can freely
their share. transfer shares to other person.

Private company cannot issue shares to general Public company has right to issue share
public. to general public for raising funds.

A private company cannot issue debentures for Public company has right to issue share
the fund raising. for fund
raising.
There must be at least two directors.
There must be at least seven directors.
Private company cannot issue prospectus to
general public for subscription in shares. Public ltd company has right to issue
prospectus to general public.
Every company has to submit legal documents for the registration of
company but out of these documents, following three documents are
important.
Procedure for the formation or incorporation of Joint
Stock Company

allotment of
investigation shares
Procedures of Registration &
Incorporation
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.

Commencement of
Business
• After issuing “Certificate of Commencement “ a public ltd co.
can
commence business.
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 hav
been complied with” e
Membership of a
Company
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
Who can be a member?
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
Compan
y
Creditor
Trustee
How membership cases?
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 power of lien
h) By mortgage
i) By redemption