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A public limited company on the other hand, possesses quite different attributes compared to the private limited company. In public company, the minimum number of shareholders should be seven with unlimited number of maximum shareholders. The directors, in contrast has to be three. The company could offer and invite the general public to subscribe the company’s shares and or debentures provided the company is listed by any of the two stock exchanges namely Dhaka Stock Exchange and Chittagong Stock Exchange. The potential investors could find more about a public limited company in the Companies Act 1994.
Albeit the Companies Act 1994 delineated the attributes of the public limited company, there are no clear rules or guidelines pertaining to the registration/ incorporation of the company in the said Act. RJSC, the responsible authority for incorporating entities in Bangladesh or in other words, the company house of Bangladesh, on the contrary, depicted the process precisely. Depending on the types of investment, that is, whether the investor(s) is from Bangladesh or from a different country the process slightly varies. If the investors or the intended owners of the company are not the citizens of Bangladesh and they wish to bring in their monies in order to invest in Bangladesh their invested monies are protected under the Foreign Private Investment (Promotion and Protection) Act 1980. The Government of Bangladesh is very lenient towards the foreign direct investment (FDIs) as because it increases more work opportunities for the skilled workforce, develops the infrastructures and boosts up the economy. Likewise, the foreign investors are benefitted as well by investing in Bangladesh due to its cheap skilled workforce, geographic location with convenient maritime and air route connecting all the major ports and cities of the world, and the most importantly Bangladesh provides tax holidays, tax exemptions, and duty and tax-free imports of raw materials and machineries of the company subject to certain conditions. Please follow our guide on this.
The first step of incorporation is to obtain a name clearance certificate. This is to ensure that no other company is operating its business in the proposed name so that they could evade income tax and other related government taxes and most importantly to put an end to trademark infringements. This is a
very straightforward process and could be completed online by logging into the RJSC’s website. However, the applicants need to contemplate a few things before they embark on to the process of opting a name for their proposed company. For instance, inter alia, the proposed name should not be identical or similar to other companies which are already in business in Bangladesh, applied for the name clearance or has reserved the name, does not infringe any trademark regulations, does not seem vulgar or offensive, does not invoke any racial or religious uprisings and many other things. If the entity, however, is a liaison office or a branch office of a foreign company, the applicants do not require a name clearance certificate.
The intended applicant needs to register himself by creating a username and password. Click here to register. Before applying for the name clearance certificate, the applicant could search whether any other company is in existence in the same or similar name by clicking ‘search entity name’. If any other company is operational in the same name, the applicant has to change the name and search again. Immediately upon finding an apposite name, the applicant could initiate the name clearance application process. The process itself is rather easy. In the application form the applicant has to insert the area where he intends to inaugurate his business, type of the business i.e., a public company, the details of the applicant and by opting his designation in the company from the drop-down menu. One thing the applicant must remember that whilst entering the proposed name, the word “PLC.” should be used as a suffix.
When the application is submitted by the RJSC, the applicant would receive an option to pay the application fee either by in person paying the monies in cash over the counter of either Eastern Bank Ltd. or the One Bank Ltd; or to pay the fee online via debit or credit cards. The actual application fee is BDT 200 plus 15 percent tax so the amount payable is BDT 230 if paid to the bank in person, otherwise the amount would be BDT 253 if paid via a debit or credit card. The applicant now has to submit the application along with the payment slip. If there is no problem with the proposed name and the payment, the RJSC would issue the name clearance certificate. The certificate would remain valid for only three calendar days within which the applicant would have to submit all the required documents and the application fees for the registration of the entity.
Once the name clearance certificate is obtained from the RJSC, the investor/ applicant must submit all the required documents to the RJSC along with the name clearance certificate. The list of all the required documents along with a brief description is provided below:
Memorandum of Association or in short MOA is a legal document that is prepared during the formation of the company and is authorised by the RJSC once the entity is incorporated. In this document the applicant or the managing director specifies all the details about the company which includes the name, address, list of the directors, and the number of shares they have subscribed.
The most significant attribute of the MOA is that, it lists the objectives of the business. The objectives are the jurisdictions of the company where it could operate its business activities. The company could not go beyond the listed objectives and must perform within that sphere of objectives. However, it is prudent to list as many objectives as possible so that their business activities do not fall outside of the sphere.
The MOA must contain few details regarding the company. For instance, it must state the name of the company with ‘limited’ as the last word of the name, the address of the registered office, the objectives of the company and of course the territory to which they intend to extend their business activities, the amount of share capital, the number of shares subscribed by each subscriber and each subscriber must subscribe at least one share.
Once the company is incorporated, should the directors wish to alter the MOA regarding the objects of the company they could do so under sections 12 – 16 of the Companies Act 1994 by special resolution provided the intention is to perform its business activities more efficiently or economically, to adopt new and improved means, to extend the area of business, to merge on with other business entities, to abolish existing objects which are proved to be inconvenient or disadvantageous or to amalgamate with any other body of persons. However, the alteration could only be done by the order of the Court on appeal by the directors. The Court, before making any order, must be satisfied that the notice of alteration was provided to all the shareholders and the persons who would be affected by the alteration and that every creditor who in the opinion of the Court is entitled to object and does so in the manner prescribed by the Court either has consented to the alteration of the MOA or his debt or claim has been paid out or has been secured to the satisfaction of the Court.
The Court has the full discretion in exercising sections 12 – 13 under section 14 that it could adjourn the proceedings where it reckons that an arrangement should be made regarding buying out the interests of the dissenting members or the creditors and should pass an order to make such provisions provided the Court deems pragmatic. However, the directors should be cognizant of the fact that the share capital could not expended whilst purchasing the interests of the dissenting shareholders or the creditors.
Articles of Association:
Articles of Association or in short AOA is a legal document required by the section 17 of the Companies Act 1994. This document stipulates the manner in which a company would be run its business activities within the organisation. For an illustration, the AOA specifies the manner how the company would issue shares, pay up the dividends to its shareholders if the company makes a profit over the year, how the audit should be done and how frequently should it be done like an internal audit and an external audit like hiring an independent third party accounting firm, how the voting rights would be allocated within the shareholders, how the directors are to be appointed, and how the financial records to be handled. Unlike MOA, which bridges the Government and the company itself to ensure that the company is not performing its business activities in
ultra vires, or in other words, outside of its jurisdiction authorised by the law, the AOA on the other hand bridges the company activities and the shareholders of the company. Since, it outlines the purpose and the business activities of the company, the AOA is compendiously called user’s manual.
The AOA to be effective should be registered along with the MOA. The AOA should be printed, divided into paragraphs with consecutive numbers and must be signed by each subscriber of the MOA with their addresses and description including the number of shares each subscriber subscribing of the company and should be signed by two witnesses who would attest the signatures of the subscribers.
Should the company decide to alter its AOA they can do so by a special resolution. The directors could add clauses to or exclude clauses from the AOA. A special resolution is a resolution where a three-fourth (75 per cent) majority is obtained from the voting members who are entitled to vote provided a notice of not less than twenty one days was given indicating the intention to propose a special resolution on a specified matter. However, a notice of less than twenty one days could be counted as an appropriate notice provided that all the members who are entitled to attend and vote unanimously agree to the proposal and pass the resolution as a special resolution. In any meeting if the voting members agree to the proposal of passing it as a special resolution it could be a special resolution and if no poll is demanded, then the declaration of the Chairman of the company on the basis of ‘show of hands’ is the final in favour of or against of the resolution. However, if the members demand a poll in a meeting where a special resolution was proposed, the resolution would be passed as a poll. It would be upon the discretion of the Chairman how the poll would be conducted in accordance with the AOA, and if the Chairman directs the poll could be arranged in the same meeting where a special resolution was supposed to be passed. If the poll is demanded and in computing the majority of vote, a reference should be made to the number of votes a member is entitled to by the AOA or under section 87 of the Companies Act 1994.
Once the AOA is altered, the altered AOA should be submitted to the registrar of RJSC within fifteen calendar days in hard copies with the signature of the responsible officer of the company certifying that the AOA has been altered, and the Registrar shall keep a copy of the altered AOA in the record. All the special resolutions that are in force at that moment must be submitted to the Registrar of the RJSC which should be embodied in or be annexed to each copy of the AOA after the special resolutions have been passed. If the company does not or fails to comply with the deadline, they would be liable to a fine at not more than hundred taka for each day they delay or they would be fined at not more than fifty taka for failing to submit all the existing resolutions to the Registrar of the RJSC. Moreover, the responsible officer who advertently or knowingly authorises
this default or does not comply with this procedure would be liable to the similar penalty as the company.
The MOA and the AOA as discussed are the two most crucial documents of the company and should be submitted to the Registrar of the RJSC without any delay. With our expertise in this sector we the ABC Partners would be more than happy to elucidate all your queries and assist to prepare the perfect MOA and the AOA for your desired company. Please click here to find out more how ABC Partners could help you with the Memorandum of Association and the Articles of Association.