ACCA

1. 1
Introduction
1.What is a company?
Ans.:
Company:
The word ‘Company’ has no strictly technical or legal meaning. In the general law a
company is a legal person in its own right and quite distinct from its officers and
members. So a company is an artificial being invisible, intangible but existing only in
terms of law. It is then a legal personality known by a name, seal, office and acting
through its human agents. According to Company Act 1994, Section 2 (1) c,
‘Company’ means a company formed and registered under this Act or an ‘existing
company’.
An ‘existing company’ means a company formed and registered under any law relating
to companies in force at any time before the commencement of this Act and is in
operation after commencement of this Act. [Section 2 (1) h].
Q.2. What do you mean by limited liability? Discuss about the company limited by
share, guarantee, or unlimited.
Ans.:
Limited Liability:
Limited liability means a liability to the extent of the amount of share or guarantee. The
public or private companies are also divided into a few more types in the terms of
liability of the members. These are 
1. Companies Limited by Guarantee:
This category of company has the liability of its members limited by the memorandum to
such amount as the members may undertake to contribute the assets of the company on
the event of its being wound up. Most guarantee companies are clubs and associations.
According to Companies Act 1994, Section 7 (b), company limited by guarantee may
also have share capital.
2. Companies Limited by Share:
This category of company has the liability of its members limited by the memorandum to
the amount, if any unpaid on the shares respectively held by them. Once a member’s
share is fully paid, then his liability to the company is ceases. After then he is not liable to
make any contribution to the company’s assets in respect of the share in the event of the
company being wound up.
3. Unlimited Companies:
A company having no limit on the liability of its members is an unlimited company.

2. 2
Q.3. Discuss its legal characteristics of Company.
Ans.:
Legal Characteristic or Feature of Company:
Company is more important among the various business organizations. Some special
characters make it as an artificial person. This legal and natural characteristics of a
company is discussed as follows 
1. Legal Characteristics of a Company:
After registration a company get some legal advantages such as artificial personality,
perpetual successions, operate case, borrowing power even purchase and sale assets in its
own name etc.
2. Law Created Concern:
This organization is created according to Companies Act 1994.
3. Separate and Distinct Personality:
A company has a separate legal entity from its directors and shareholders. For this reason
anybody cannot wish to winding up the company without the rules of company law. So if
all the members are died, the company can continue its entity by its own name.
4. Perpetual Succession:
A company can go on forever after its formation, although the members may come and
go. So a legal point of view a company has perpetual successions.
5. Ownership of the Property:
As an individual and artificial person company itself owns its all assets and liabilities. In
fact a company can control its all assets, management and sales. So the shareholders are
not owners of the company’s assets. A company itself owns its all property.
6. Limited Liability:
As an individual and artificial person company itself owns its all assets and liabilities.
The Liability of the members is limited to the amount if any unpaid on their shares. Once
a members share are fully paid then his liability to the company on them ceases. After
then he is not liable to make any contribution to the company’s assets in respect of the
shares in the event of the company being wound up.
7. Transfer of Shares:
The shares of a company can be transfer without any restriction.
8. Separation of Ownership and Management:
The management and directors are separated from the ownership of the company by law.
Though the company is form by the owners, the ownerships and the entity of the
company are quite separate. As a result the company and owners are not liable to each
other for their own functions.
9. Share Capital:
Company’s capital is divided into specific amount and number of shares.

3. 3
10. Number of Member:
According to Companies Act, 1994 the number of member of Private Limited
Company is minimum 2 and maximum 50. And number of member of Public Limited
Company is minimum 7 and maximum number is limited by share having a share capital
with a memorandum of association.
11. Compulsory Registration:
According to Companies Act, 1994 registration is compulsory for formation of a
company.
Q.4. “A company is an artificial legal person completely separate and distinct from
its shareholders/members.” Discuss at least two leading cases.
Ans.:
According to company law a registered company is a legal person in its own right and
quite distinct from its officers and members. This fact is that a company has a separate
entity from its director and shareholders. For this reason anybody cannot wish to wind up
the company without the rules of company law. So if all the members are died, the
company can continue its entity by its own name and seal. A company makes liable itself
to others and also makes others liable to company. A company can operate case,
borrowing power, even purchase and sales assets in its own name.
The management and directors are separated from the ownership of the company by the
law. Though the owners formed the company, the ownership and the entity of the
company are quite separate. As a result the company and owners are not liable to each
other for their own functions.
Case-1: Salomon vs. Salomon & Co. Ltd.:
Salmon is a businessman and shoe manufacturer. He formed a company in which shares
were issued to himself, his wife and five children. The new company buys the business
from Salomon for £30000. Salomon get 20000 share of £1 each and debenture £10000 by
exchange of the old business. During the winding up of the company total value of the
assets of the company was £6000. During that time company has outside creditors £7000
and debenture of Salomon £10000. Outside creditors claim that though ‘Salomon’ and
‘Salomon & Co. Ltd.’ are same person, so he cannot claim for his debenture of £10000.
The court judges that ‘Salomon’ and ‘Salomon & Co. Ltd.’ are separate entity against
the case of other creditors. So Salomon gets preference on that asset of £6000.
Case-2: Lee vs. Lees Air Firming Ltd.:
Lee was a crop duster in New Zealand. The business was conducted through a company
in which Lee owned 2999 shares out of 3000 issued shares. He was the sole director of
the company, and was employed at a salary. Lee subsequently died in aeroplane crash
while crop-dusting. His wife claimed compensation from the New Zealand government
under a statutory scheme. The company did not consider him as an employee and denied
to pay the compensation. But Prevee Council judges Mr. Lee was an employee of his
company and his widow was entitle to be compensated, because the company and Lee
were separate legal persons between whom there was contract of service.

4. 4
Q.5.What are the different types of companies that are registered under the
Companies Act 1994 in Bangladesh.
Ans.:
There are various types of companies and now all of the companies are created by
registration under the Companies Act, 1994. The most common types of company are
Public Limited Company and Private Limited Company.
These are discuss as follows 
1. Public Limited Company:
A Public Limited Company is a company having the liability of its members limited by
shares or guarantee and having a share capital with a memorandum of association.
According to Companies Act, 1994, Section 2 (1) r, ‘Public Company’ means a
company incorporated under this Act or under any law at any time in the force before the
commencement of this Act and which is not a Private Company.
The number of member of a Public Limited Company is minimum 7 and maximum
number is limited by share according to share capital described in memorandum of
association.
The special significance of Public Limited Company is that they are permitted to offer
securities and shares to the public. The shares of this company can be transfer without
any restriction.
2. Private Limited Company:
According to Companies Act, 1994 Section 2 (1) q, ‘Private Company’ Means a
company which by its articles 
I. The right to transfer of share (if any) is limited.
II. Prohibits any invitation to the public to subscribe for its shares or debenture (if any).
III.Limits the number of its members to fifty, excluding persons who are in its
employment.
Characteristics:

5. 5
I. Number of Members:
Number of members of a Private Limited Company is limited and this limit is
minimum 2 and maximum 50.
II. Issue of Share:
It cannot invite to the public to subscribe for its share or debenture.
III. Limited Liability:
The liability of the members is limited.
IV. Share Transferability:
The right to transfer of share (if any) is limited.
V. Source of Capital:
The member of the company supplies capital.
VI. Use Word Limited:
It must add ‘Private Limited’ to end of name according to company law.
VII. Prospectus:
It cannot publish prospectus.
VIII. Minimum Subscription:
It does not need to collect minimum subscription.
IX. Commencement of Business:
It can start business after registrations without certificate of commencement.
X. Directors Appointment:
There are no legal obligations for appointment of director. But two directors are
sufficient.
XI. Qualifications Share:
Directors of Private Limited Company does not need qualification share.
XII. Statutory Obligation:
Private Limited Company is exempted from statutory meeting, audit of accounts and
submit balance sheet to the registrar.
Q.6. What is the difference between a Private Limited Company and Public Limited
Company.
Ans.:
Distinction between Private Ltd. Company and Public Limited Company:

6. 6
The difference between Private Limited Company and Public Limited Company are
as follows 
Private Limited Company Public Limited Company
1. Formation: Its formation is easy.
2. Section: Section 2 (1) q.
3. Minimum Number of Members: At
least two members.
4. Maximum Number of Members:
Maximum number of members is fifty.
5. Share Issue: It cannot invite to issue
share to public.
6. Share Transfer: Its share is not
transferable.
7. Commencement of Business: It can
start business after registration.
8. Prospectus: It cannot publish
prospectus.
9. Number of Directors: Its minimum
number of directors is two.
10. Selection of Directors: It has no legal
obligations to select directors.
11. Use Word Ltd.: It has to add ‘private
Ltd.’ at the end of company name.
12. Minimum Subscription: It does not
need to collect minimum subscription.
13. Signature: It needs signature of two
members on the memorandum of
association and articles of association.
14. Debenture: It cannot issue debenture.
15. Directors Qualification Share: It does
not submit the copy of directors
qualification share to the registrar.
16. Statutory Meeting: It is not obligated
to call statutory meeting.
17. Statutory Report: It is not obligated to
submit statutory report to the registrar.
1. Its formation is comparatively complex.
2. Section 2 (1) r.
3. At least seven members.
4. Maximum number of member is limited
by number of shareholders.
5. It can invite to issue share to public.
6. Its share is transferable.
7. It cannot start business without
certificate of commencement.
8. It can publish prospectus.
9. Its minimum number of directors is
three.
10. Its shareholders select directors.
11. It has to add only ‘Ltd.’ at the end of
the company name.
12. It has needs to collect minimum
subscription.
13. It needs signature at least seven
members.
14. It can issue debenture.
15. It is obligated to submit the copy of
directors qualification share to the registrar.
16. It is obligated to call statutory meeting.
17. It is obligated to submit statutory report
to the registrar.

7. 7
Q.7. Discuss the disadvantages of Private Limited Company.
Ans.:
1. It cannot issue share to public.
2. Its share is not transferable.
3. It cannot collect huge capital.
4. Its number of member does not exceed fifty.
Q.8. Discuss the special privileges and exemptions of a Private Limited Company.
Or
Discuss the advantages of Private Limited Company.
Ans.:
General Advantages:
1. Easy Formation:
Its legal obligation is less than that of Public Limited Company. So its formation is
easier than Public Limited Company.
2. Size of Business:
Since it is small in size, its special facilities are more than Public Limited Company.
3. Privacy:
It can protect its privacy because its size is small and number of member is minimum.
4. Prompt Decision:
It can take decision promptly.
5. Efficient Management:
The owners are personally involved in management. As a result management is more
efficient.
6. Easy Taking and Giving Loan:
Loan taking and giving of Private Limited Company is easier than Public Limited
Company.
7. Relation to Third Party and Each Other:
It makes good relation to each other and consumers because the members are few and
personally involved in the company.
8. Conversion:
The members can convert Private Limited Company to Public Limited Company by
changes articles of association if they wish.

8. 8
Legal Advantages and Exemptions:
1. Number of Member:
The number of member is minimum two and maximum fifty.
2. Commencement of Business:
It can start business after registration without certificate of commencement.
3. Minimum Subscription:
It does not need to collect minimum subscription.
4. Prospectus:
It cannot publish prospectus.
5. Qualification Share:
Directors of Private Limited Company does not need qualification share.
6. Declaration of Directors Agreement:
It does not need to submit declaration of director’s agreement to registrar.
7. Director’s Appointment:
There are no legal obligations for appointment of director’s. But two directors are
sufficient.
8. Statutory Meeting:
It does not need to call statutory meeting and submit statutory report to the registrar.
9. Voting Power:
The members can employ their voting power.
10. Classification of Share:
It can distribute any kind of share to the members.
11. New Share Distribution:
It has no legal obligation to distribute new share within the limited members.
12. Quorum:
Two members are sufficient to fulfill the quorum if the articles of association do not
mention any particular number.
13. Demands for Poll:
When seven members are personally present in the meeting of Private Limited
Company one member and when more than seven members are personally present in the
meeting of Private Limited Company, two members shall be entitle to demand for a
poll.
14. Signature on Memorandum of Association and Article of Association:
Signature of two members is sufficient on the memorandum of association and article of
association.

9. 9
Q.9. Describe the procedures of conversion of Private Limited Company to into
Public Limited Company and vice-versa.
Or
How Private Limited Company can re-register as Public Limited Company?
Ans.:
According to Companies Act 1994, Section 231, the conversion of Private Limited
Company into Public Limited Company & vice-versa are as follows 
I. Alteration of articles of association by special resolution:
The Private Limited Company is to be altered its articles of association by taking
special resolution which does not violet the company law.
II. Alteration of Article of Association:
The following items of article of association of Private Limited Company are to be
changed 
1. The right to transfer of share is limited.
2. The company cannot invite at large to sell its share or securities.
3. The total membership of the shareholder should not exceed fifty.
The following items are to replace on the exchange of above items: 
1. The share of the company is transferable.
2. The share or debenture of the company is issueable.
3. Minimum number of member is seven maximum is limited by number of
shareholder.
III. Winding Up of Private Limited Company:
It would not being Private Limited Company from the changing date of articles of
association.
IV. Submission of Prospectus or Statement in Lieu of Prospectus:
Submit a new prospectus or statement in lieu of prospectus to the registrar within 30 days
from the changing date of article of association.
V. Submission of The Name Schedule of Director:
The number of directors of converted Public Limited Company is to be increased at
least three and the new schedule will be submitted to the registrar.

10. 10
Q.10.What are the documents to be submitted and formalities to be completed
before the submission of application to the registrar of Joint Stock Companies for
registration of a Public Limited Company?
Ans.:
The promoter collects form from the registrar after paying registration fees and encloses
the following with the application 
a. Memorandum of Association:
It is a principal document of a company. It includes name, address, objects and capital of
company.
b. Articles of Association:
The articles of association are the domestic regulations of the company and govern its
internal administration.
c. Directors Schedule:
The names of the agreed persons as director are to be enclosed with the application for
registration.
d. Letter of Agreement:
Submit the agreement letter of director’s signature by them.
e. Agreement of Qualification Shares:
Submit director’s qualification shares.
f. Include the World ‘Limited’:
The word ‘limited’ should be added at the end of the name of the company.
g. Letter of Declaration:
A declaration by an advocate of high court or by a person named in the articles of
association as a director, manager, and or secretary of the company compliance with all
of the said requirements shall be filed with the registrar.
h. Collection of Certificate of Incorporation:
If the registrar is satisfied on the above documents, he listed the name of company and
issued a certificate of incorporation.

11. 11
Q.11. Whether the registrar of joint stock companies can refuse registration of any
Public Limited Company? If so; why?
Ans.:
The registrar of Joint Stock Company can refuse registration of any Public Limited
Company for the following causes 
1. If a company having the liability of its members limited by Act of parliament and if it
is not defined as a Joint Stock Company according to Companies Act 1994,
Section 355.
2. If the minimum number of member is less than seven.
3. If the minimum number of director is less than three.
4. If the company cannot issue share or debenture to the public.
5. If the company cannot publish prospectus.
6. If the company is not obligated to call statutory meeting or to submit statutory report.
7. If the registrar can identify any false and misleading statement in the prospectus.
So in conclusion it can be said that if the submitted information with the application for
the registration is false and misleading and if it is not fulfill the requirement of Public
Limited Company, than the registrar of Joint Stock Company can refuse the
registration of Public Limited Company.
Q.12. What is the amount of fees for registration of a Public Limited Company
having the authorized capital of Tk.10 crore and issued capital of Tk.5 crore.
Ans.:
According to Companies Act, 1994, Section 348, and Schedule-II, the amount of fees to
be paid to the registrar as follows 
1. A company whose nominal capital does not exceed Tk. 20000, registration fees to be
paid Tk.120.
2. If the nominal capital exceeds Tk.20000 fees to be paid as follows 
— Tk.60 for every 10000 taka or part of 10000 taka of nominal capital after first
Tk.20000 up to Tk.50000.
— Tk.15 for every 10000 taka or part of 10000 taka of nominal capital after first
Tk.50000 up to Tk.1000000.
— Tk.8 for every 10000 taka or part of 10000 taka of nominal capital after first
Tk.1000000 up to Tk.5000000.
— Tk. 15 for every 100000 taka or part of 100000 taka of nominal capital after first
Tk.5000000 up to any limit.
N.B.: Amount to be calculated on nominal / authorized capital.

12. 12
♥ Calculation of registration fees of a Public Limited Company having authorized
capital Tk.100000000 & issued capital of Tk.50000000.
Amount
Tk.
For 1st
20000 taka 120
For 1st
50000 taka after 20000 taka
(50000-20000) X 60 180
10000
For 1st
1000000 taka after 50000 taka
(1000000-50000) X 15 1425
10000
For 1st
5000000 taka after 1000000 taka
(5000000-1000000) X 8 3200
10000
For the remaining amount after 5000000 taka
(100000000-5000000) X 15 14250
100000
Total amount to be paid for registration 19175
Q.13. What is special company?
Ans.:
Limited liability companies will have somewhat the same fundamental characteristic.
However, particular feature of a company necessitates special regulation under the
Companies Act in respect of certain matter. The Act provided scope for registration of
charitable and other similar object organizations under Section 28 with an exemption to
use the word ‘limited’ after its name.
Q.14. What is Subsidiary Company and Holding Company?
Ans.:
A company is deemed to be subsidiary of another (holding) if:
a. Other company either holds more than 50% voting right in it; or
b. A member of it and has the right to appoint or remove a majority of its board of
directors; or
c. A member of it and controls alone, pursuant to an agreement with other shareholders
or members, a majority of the voting rights in it.
So from the above it is clear that the first mentioned company is a subsidiary of any
company by virtue of its memorandum, and that is other’s subsidiary.

13. 13
Q.15. What is ‘Holding Company’?
Ans.:
According to Companies Act 1994, Section 2 (5), a company shall be deemed to be the
‘subsidiary undertaking’ or ‘holding company’ of another if, and only if, that other is
its subsidiary. So when a company holds controlling share of another company then
controlling company is called holding company and non-controlling company is called
subsidiary company.
Q.16.How would you distinguish between a company and a partnership firm?
Ans.:
Company Partnership Firm
1. It applies Companies Act, 1994.
2. Its formation is very difficult.
3. It has legal entity.
4. Its registration is mandatory.
5. There is no agreemental relationship
among the members.
6. Minimum number of member is two in
case of private ltd. company and seven
in case of public ltd. company.
7. Maximum number of member is 50 in
case of private ltd. company and
maximum number is limited by number
of shareholders in case of public
limited company.
8. Its member’s liability is limited.
9. Its profit is to distribute according to
number of share.
10. Government control is more.
1. It applies Partnership Act, 1932.
2. Its formation is easier than company.
3. It has no legal entity.
4. Its registration is not mandatory.
5. Its base is agreement. So there is
agreemental relationship among the
partners.
6. At least two members.
7. Banking company ten and other
company twenty.
8. Its member’s liability is unlimited.
9. Its profit is distributed according to
profit sharing ratio.
10. Government control is less.

14. 14
Promoter
Q.1. Give the definition of Promoters. Discuss different types of promoters.
Ans.:
Promoters:
The persons who build a company are called promoters. It is not clearly defined in the
Companies Act, 1994 nor its existence is traceable. They are the person who undertakes
all the trouble to prepare the necessary documents, paper etc. Beside this the promoter
bear the initial expenses, select first director, publish prospectus, and collect capital. A
promoter could even be an organization.
The promoters may be classified into few types:
1. Ordinary Promoters
2. Occasional Promoters
3. Professional Promoter.
1. Ordinary Promoters:
If some persons promote and float a company of which they are the members are
classified in this class and called ordinary promoters.
2. Occasional Promoters:
When some persons undertake to promote a company for some others, but they
themselves are neither members of the proposed company, nor their usual business is
such business promotion is called occasional promoters.
3. Professional Promoters:
The professional promoters are promoter who does it as a business and after floating of a
company they are no more engage in it. Usually the professional promoters are very
skilled and experienced in these matters regarding legal formalities and government rules.
Q.2. Discuss the right of the promoters.
Ans.:
A promoter has the following rights in respect of promoting a company:
1. Reasonable remuneration.
2. Cost incurred for registration and other related purpose.
3. Free shares as promoter.
4. Commission on sale of shares.
5. Disclosed profit by selling his property to the company.
6. Any disclosed profit.
7. Price for selling his property to the company.
8. Indemnity against suit for false or misleading statements in the prospectus, which in
reality was done in good faith.

15. 15
Q.3. What is the usual functions or duties of promoters.
Ans.:
The functions of the promoters are as follows 
I. At first they sit together to set out the nature of the proposed company, its objects,
by laws, capital etc.
II. They obtain the name clearance from the registrar for the proposed company.
III. They prepare the memorandum of association and articles of association for the
proposed company.
IV. They bear all the initial expenses and enter into pre-incorporation contracts.
V. They take all necessary steps for registration of the proposed company.
VI. If it is private company, then the company start business from the date of its
incorporation and duty of the promoters are over.
VII. If it is public company limited by share, the promoters prepare prospectus or the
statement in lieu of prospectus and submit it to the registrar.
VIII.They invite public to purchase the share or debenture of the proposed company.
IX. After registration they collect the certificate of commencement to start the business
and duty of the promoters are over here in case of public limited company.
Q.4. Discuss about the remuneration of the promoter.
Ans.:
The promoter has frequently to do a lot of work in connection with the flotation of a
company. So he is entitled to get remuneration for his service. He may be remunerated in
any of the three ways:
1. He may pass on the business or other property to the company at an inflated price.
2. He may be given a commission on the purchase price of the business or property
taken over by the company; or
3. He may be granted a lump sum as remuneration.
The promoter’s remuneration may be paid in cash or partly in cash and partly in shares
and debenture of the company. Whatever remuneration the promoters get is to be
disclosed in the company’s prospectus.

16. 16
Q.5. What is the step that a promoter has to pass through for the formation of a
Public Limited Company from promotion to the commencement of business.
Ans.:
The following major three steps are to be taken to form a Public Limited Company 
1. Promotional Stage
2. Stage for registration
3. Stage for Commencement of business.
1. Promotional Stage:
At this stage more than one person promote to form a company and take following
decisions 
a. Selection of Name and Approval:
At first the promoter select a name and submit to the registrar for approval. This name is
not quite similar with name of other existing company.
b. Nature of Company:
At this stage the promoter taking decision either the company is to be public limited or
private limited.
c. Number of Promoter/members:
In respect of private limited company at least two and public limited company at least
seven promoters/members take all requiring arrangement to form a company.
d. Planning and implementation:
At this stage promoters select the plan and prepare memorandum of association and
articles of association for formation of the company.
2. Stage for registration:
The promoter collects form from the registrar after paying registration fees and encloses
the following with application 
a. Memorandum of Association:
It is a principal document of a company. It includes name, address, objects, and capital of
the company.
b. Article of association:
The articles of association are the domestic regulations of the company and govern its
internal administration.
c. Directors Schedule:
The names of the agreed persons as directors are to be enclosed with the application for
registration.
d. Letter of agreement:
Submit the agreement letter of director’s signature by them.
e. Agreement of Qualification Shares:
Submit director’s qualification shares.

17. 17
f. Letter of declaration:
A declaration by an advocate of high court or by a person named in the articles of
association as a director, manager, and or secretary of the company compliance with all
of the said requirements shall be filed with the registrar.
g. Collection of Certificate of Incorporation:
If the registrar is satisfied on the above documents he listed the name of company and
issue a certificate of incorporation.
3. Stage for Commencement of business:
The director’s submit the documents to the registrar in a particular form to get certificate
of commencement.
a. Prospectus:
Publish prospectus to invite the public for issue share.
b. Declaration of Minimum Subscription:
A declaration of minimum subscription, which was mentioned in the prospectus, is
already collected.
c. Declaration of Qualification share:
A declaration in respect of payment of qualification share of the director is needed.
d. Declaration by Secretary:
A declaration by the secretary or director for completion of all legal functions is needed.
e. Commencement of Business:
The company can start business after getting the certificate of commencement.
Q.6. Discuss the legal responsibility and liability of the promoters.
Ans.:
The promoters have liabilities towards the company for which they may be sued for
damages. The legal responsibility and liability of the promoters could be summarized as
follows 
1. Fiduciary Relationship:
A fiduciary relationship exists in between the company and promoters.
2. Secret Profit:
Attaining any secret profit by the promoters in course of promotion of a company is
prohibited. They are bound to disclose all the profits they have accumulated during the
process. The company may sue the promoters to recover such secret profit.
3. Representation:
Promoters are not representatives of the company. So the company cannot be held liable
for any of the acts of the promoters either before or during formation of the company.
4. Pre-incorporation Contracts:
Promoters are personally liable for any pre-incorporation contract in favor of the
company.
5. Trustee:

18. 18
Promoters are not treated as trustees of the company either before or during formation of
the company.
6. False Statement in the Prospectus:
Promoters can be held liable for any false or misleading statement made in the
prospectus.
7. Liability on death and Bankruptcy:
Even on death and becoming bankrupt the liability of a promoter is not extinguished.
After his death his legal representative is liable to pay the demand and on bankruptcy it is
not over till he declared released by the court of law.
Q.7. What legal consequences a promoter may have to face for giving false and
misleading statement in a prospectus?
Ans.:
A promoter is held liable for his false and misleading statement in a prospectus. The
promoter can be held liable in the following manner 
1. He can be sued for damages.
2. His own shares (if any) are forfeited.
3. Can be charged under section 145 & 397 of the Companies Act 1994.
4. The shareholder who bought the share on the basis of his false or misleading
statement may sue him for damages.
5. He can be held criminally liable.
6. His heirs (Property) can be held liable if he dies during the period in which his
liability is pending.
Q.8. Discuss the legal position of a promoter or status of a promoter before
incorporation. Or
What do you mean by pre-incorporation contracts/ preliminary contracts.
Ans.:
Before incorporation of the company it is sometimes necessary for the promoters to enter
into contracts with third parties as process for either registration of the company or
business for the under formation company. Though the companies legal separate entity
are not exists before incorporation so the question arises who will be the liable for this
contract. Let us briefly consider the legal position of a promoter in such situation:
1. Promoters are not an agent:
Since the legal entity of the company is not exists as artificial person before
incorporation, so the promoters cannot be an agent of the company, which he formed.
2. Promoters are not future trustee:
Promoters are not future trustee either before or after formation of company.
3. Fiduciary position:

19. 19
A fiduciary relationship exists in between the company and promoters. Any secret profit
obtain by the promoters in course of promotion of a company is prohibited. For such
secret profit promoters should be inform to the authority. At that time authorities are the
board of directors and existing and intended shareholders.
4. Full Disclosure:
Any profit that may be legal or illegal obtained by the promoters, accumulated during the
process should be informed to the authority.
So the promoters have some legal position in the company, which they formed. They
cannot be an agent of the company before incorporation and trustee of the company
before or after incorporation. In fact they have the fiduciary position in the company.
Q.9. What is the difference between a certificate of incorporation and certificate of
commencement of business?
Ans.:
The distinction between a certificate of incorporation and certificate of commencement of
business are as follows 
Certificate of Incorporation Certificate of Commencement
1. It is a certificate of incorporation.
2. Business cannot be start after certificate
of incorporation.
3. Company is not to be listed on the
register before certificate of
incorporation.
4. There is no legal obligation before
certificate of incorporation.
1. It is a certificate of commencement of
business.
2. Business can be start after certificate of
commencement.
3. Company is to be listed on the register
before certificate of commencement.
4. There is some legal obligation before
certificate of commencement.
Q.10. What is the effect of a certificate of incorporation?
Ans.:
The following are the effects of certificate of incorporation of a company:
1. After incorporation a company obtain legal entity.
2. The company and members must follow the rules of memorandum of association and
articles of association.
3. A registered company can file case against others and other can also file case against
it.
4. A registered company entitle into contract with the third party in its own name.

20. 20
5. Any member can consider all of its payment to the company as a loan according to
the memorandum of association or articles of association.
Q.11. What does you meant by “veil of incorporation”?
Ans.:
Veil of Incorporation:
A company has a separate legal entity from its directors and shareholders. For this reason
any body cannot wish to winding up the company without the rules of company law. So
if all the members are died, the company can continue its entity by its own name. In the
legal point of view this nature of the company is called “veil of incorporation”.
Q.12. When the veil of incorporation is lifted?
Ans.:
The facility of limited liability by shares or guarantee sometimes provides undue
advantages to some persons who hide themselves behind the corporate shield. The courts
are allowed to lift the veil of incorporation in certain circumstances when they deem it
necessary. The following are some situations when the veil of incorporation can be lifted:
1. When the company runs the business with below statutory minimum number of
members for more than six months.
2. If more than half of the total shares are held by another company, then for
ascertaining whether the first is the subsidiary of the later.
3. If the controlling shareholders are enemy aliens, the veil can be lifted to ascertain the
truth.
4. If all the shareholders admit and resolute in short notice, the resolution is valid, but on
objection, such veil could be lifted to find out the falsity of allegation.
5. If a company buys majority shares of another company and forces the minority to sell
their shares, the veil could be lifted to ascertain the individual personality of the buyer
company.
6. When a company makes loans to its directors the veil can be lifted.
7. If a company carries with business for parent company and when parent company
control the subsidiary’s business the veil could be lifted.
8. For taxation Purpose.
9. For ascertaining the director’s wrongful trading.
10. For the company carries with illegal or fraudulent trading.

21. 21
Prospectus
Q.1. What is prospectus? What contents are required to be entailed in a prospectus?
Ans.:
Prospectus:
A new definition has been given for prospectus in the Companies Act 1994. The need
for capital generation by a Public Limited Company is materialized through the
issuance of this prospectus. This invites the public to subscribe its shares or debentures.
Actually, it is a printed pamphlet, circulated and advertised in the newspapers. A copy of
the prospectus, dated and signed by the directors must be filed with the registrar of Joint
Stock Company before publication. It must also be in agreement with the conditions laid
down by the Securities and Exchange Commission.
Section 135 of the Companies Act 1994, refers to the Schedule-III, which contains the
detailed list of some specific requirements as to the prospectus. However, a prospectus
should include, in broad terms, the following:
1. Name of the company with date of incorporation.
2. Date of the prospectus.
3. Consent of Securities and Exchange Commission.
4. Capital Outlay.
5. Business, management background, and prospects in brief.
6. Name of the directors with address and other particulars.
7. The qualifying shares of the directors.
8. Remuneration of the directors.
9. The minimum subscription on capital.
10. The amount to be paid during application and allotment.
11. The underwriting commission or brokerage, if any payable for effecting sales of
shares.
12. The names and addresses of vendors, if any and the amount payable to vendors in
cash or by means have to be clarified.
13. The amount if any either paid, or agreed to be paid, to the promoters in last two
preceding years.
14. Name of the auditors with address.
15. The number and classes of shares, if any and the nature and extent of the interest of
the holders in the property and profits of the company.
16. Dividend policy and expected dividend to be declared by the company.
17. The risk factors involved.
18. The rights of voting of each class of shareholders where shares are so classified.
19. A report by auditors on profit and dividend declared.
20. Contents of the memorandum etc.

22. 22
Q.2. Distinguish between prospectus and statement in lieu of prospectus.
Ans.:
Prospectus Statement in lieu of Prospectus
1. Prospectus is a printed pamphlet by
which a Public Limited Company
invites the public for subscription to its
shares or debentures.
2. Any Public Limited Company can
publish prospectus.
3. It can invite public for subscription or
purchase of any shares or debentures.
1. When a Public Limited Company
procures its capital from private
arrangement a statement in lieu of
prospectus is submitted to the registrar
in the absence of prospectus.
2. When minimum subscription is not
collected Public Limited Company
prepares statement in lieu of
prospectus.
3. It cannot invite public for purchase of
any shares or debentures.
Q.3. What is the defenses open against the persons, who is liable for misstatement in
prospectus?
Ans.:
Liability and penalty for the misstatement in the prospectus:
1. Civil Liability:
According to Companies Act 1994, Section 145 (1), the persons who are liable for
misstatement in the prospectus shall be liable to pay compensation to every person who
subscribes on the faith of the prospectus for any loss or damage.
2. Criminal Liability:
According to Companies Act 1994, Section 146 (1), every person who authorized the
issue of prospectus shall be punishable with imprisonment for a term, which extends to
two years or with fine, which may extend to five thousand taka or with both.
3. Liability Under Law of Fraud:
Every person who is liable for misstatement in the prospectus, victim can sue against
them under the traditional law of fraud instead of the company law.
4. Penalty for Fraudulently Inducing Persons to Invest Money:
According to Companies Act 1994, Section 147, any person who either by knowingly or
recklessly making any statement, promise or forecast which is false, misleading or
deceptive, or by any dishonest concealment of material facts, induces or attempts to
induce another person to enter into any agreement shall be punishable with imprisonment
for a term which may extend to five years or with fine which may extend to fifteen
thousand taka, or with both.

23. 23
Q.4. Who is liable for misstatement in prospectus?
Ans.:
According to Companies Act 1994, Section 145, following persons are liable for
misstatement in the prospectus 
1. Every person who is a director of the company at the time of issue of prospectus.
2. Every person who agreed to be a director of the company.
3. Every person who is a promoter of the company.
4. Every person who has authorized the issue of the prospectus.
Q.5. What is the procedures of filling a prospectus of a Public Limited Company?
Or
Describe the rules as to preparation, submission and circulation of prospectus.
Ans.:
The following are the rules as to preparation, submission, and circulation of prospectus 
1. Name:
At first the name of company is to be mention as heading.
2. Registration Office:
The full address of the registered office of the company is to be mentioned under
heading.
3. Registration Date:
The date of incorporation is to be mentioned in the prospectus.
4. Circulation Date:
In the prospectus its issue date is to be mentioned. If it does not mention any date as issue
date, the circulation date is to be considered as issue date.
5. Sign and Filling:
A copy of the prospectus signed by the promoter, director and or proposed director must
be filed with the registrar of Joint Stock Company before circulation.
6. Condition of Registration:
If the date of prospectus is not mentioned and the Section 134, 135, 136, 137, & 138 are
not followed, the registrar can refuse registration of the prospectus.
7. Filling:
It should be clearly mention in the prospectus that a copy has been delivered to the
registrar for registration.
8. Punishment:
If any prospectus is issued in contravention of Section 136 & 137, the company and
every person, who is knowingly a party to the issue thereof, shall be punishable with fine,
which may extend to Tk.5000.

24. 24
Memorandum of Association
Q.1. What is memorandum of association?
Ans.:
Memorandum of Association:
According to Companies Act 1994, Section 2 (1) n, ‘Memorandum’ means the
memorandum of association of a company as originally framed or as altered in pursuance
of the provisions of this Act. Actually it is the principal document of company, which
regulates the external affairs. The limit of scope and power of the company is said in this
document. Nothing can be done outside the scope of the object clause of memorandum.
So it is called the constitution of the company.
The main purpose of memorandum of association is to 
1. Ascertain its name.
2. Mention of a specific place of business.
3. Its objects.
4. Its nature i.e. Public Limited or Private Limited.
5. Its limited liability of members, and
6. Its capital
Q.2. What is the content of memorandum of association.
Ans.:
According to Companies Act 1994, Section 6, 7, & 8 lay down the contents of
memorandum of association. The memorandum of association of every company must
state 
1. The name of the company with ‘Limited’ as the last world of a company limited by
share or by guarantee.
2. Memorandum of Association should mention a specific place of business of the
company, which is known as the registered office.
3. The object of the company.
4. The liability of the members is limited either by shares or by guarantee.
5. In case of company limited by guarantee that each member undertakes to contribute
to the assets of the company in the event of it’s being wound up. A member is liable
to pay the guaranteed amount while he is a member, or within one year after he
ceases to be a member.
6. In case of company having a share capital, except unlimited company, the total
amount of share capital with which the company proposes to be registered and the
division thereof into shares of a fixed amount.
A Public Limited Company must have at least seven (7) and Private Limited
Company at least two (2) members. This minimum number of person must subscribe
their names to the memorandum. Each subscriber must take at least one (1) share, and
must write opposite to his name the number of shares he takes.

25. 25
Q.3. What is the clause of memorandum of association.
Ans.:
The clauses of memorandum of association are as follows 
1. The Name Clause:
The proposed name of the company is mention in this clause with ‘Limited’ as the last
word in its name. This name of the company should be separated from any other existing
name. It is necessary to take permission from registrar for use the name of winding up
company.
2. The Situation Clause:
Memorandum of association should mention a specific place of business of the company,
which is known as the registered office. According to Companies Act 1994, Section
77(1), a company have a registered office from the day on which a company begins to
carry on business, or from the twenty-eight (28) day after the date of its incorporation,
whichever is earlier. All communications and notices with the company to be addressed
in this office. The address of registered office should include in the memorandum of
association for following purposes 
a. To select nationality
b. To select the limit of scope of Court.
c. To distribute notice, latter etc.
d. To know the place of list of members.
3. The Object Clause:
It is the most important clause of memorandum of association. The company cannot do
any function outside the object clause. Anything done outside the scope of the object
clause of memorandum is ultra vires. The all-possible function of a company is mention
in this clause. The company cannot change the object clause without the permission of
the Court.
4. The Capital Clause:
This clause mentions the total amount of share capital with which the company proposes
to register, and the divisions thereof into shares of a fixed amount. A Public Limited
Company can issue two types of share i.e.
1. Ordinary share, and
2. Preferred Share.
5. The Liability Clause:
This clause mentions the limited liability of shareholders. It is enough to state that the
liability is limited but it should clearly mentioned whether it is limited by share or by
guarantee.
6. Association Clause:
In this clause the initial subscribers declare that they intend to be formed into a company
and will take number of shares mentioned against their respective names.

26. 26
Q.4. Can the object of the company is altered? If so, why?
Ans.:
The object clause of memorandum of association of the company can be altered
according to the Company Law for any of the following reason.
1. To carry on its business more economically or more efficiently.
2. To attain its main purpose by new or improved means.
3. To enlarge or change the local area of its operations.
4. To restrict or abandon any of the objects specified in the memorandum.
5. To sell or dispose of the whole or any part of the undertaking of the company.
6. To amalgamate with any other company or body of persons.
Q.5. What is the alteration procedures of memorandum of association?
Ans.:
The memorandum of association of a company can be altered by the following
procedures 
1. By taking special decision in the special meeting of the members.
2. The Court must approve the alteration.
3. Before confirming the alteration, the Court must be satisfied about the following
terms of the company 
a. Sufficient notice has been given to every holder of debentures or creditors of the
company.
Provided that the Court may dispense with the company for special reasons for
the notice required by this section in the case of any persons or class.
b. Every creditor who signifies his objection in manner directed by the Court, either
his consent to the alteration has been obtained or his debt or claim has been
discharged or has been secured to the satisfaction of the Court.
4. The Court may approve either wholly or in part of proposed alteration on such terms
and conditions as it thinks fit.
5. The following functions are to be completed after the order confirming the alteration
approved by the Court 
a. The attested copy of approval order and converted memorandum of association
are to be submitted to the registrar within ninety (90) days from the date of order.
b. The Court may extend the submission period of documents to the registrar.
c. The registrar incorporated the new memorandum instead of old memorandum.

27. 27
Q.6. “Memorandum defines and confirms the power of a company”  Explain the
statement.
Ans.:
Memorandum of association is the principal document of a company, which regulates the
external affairs. The limit of scope and power of the company is said in this document.
Nothing can be done outside the scope of the object of clause of memorandum. So it is
called the constitution of the company. Anything done outside the scope of the object
clause of memorandum is ultra vires. The all-possible function of a company is mention
in this clause. So it can be said that the memorandum defines and confirms the power of a
company.
Q.7. What is the legal effect of memorandum of association?
Ans.:
As a main document of the company the legal effects of memorandum of association are
as follows 
1. Contractual Condition:
Memorandum of association of a registered company make contractual obligation
between the company and members. As a result the members and their legal agent are
legally obligated to follow the memorandum.
2. Constitutions and Power:
Constitutions and power of the company are made on the basis of memorandum of
association. So the company cannot do anything outside the rules of memorandum.
3. Express Document:
Memorandum of association is an expressed document of a company. All related parties
are aware about the subjects and purposes of the company by this documents.
4. Liability of Company:
Company is not liable for doing anything outside the memorandum to the directors and
shareholders.
5. Effect on Shareholder and director:
The directors cannot make the company liable to third party by doing anything outside
their power described in memorandum. Shareholders also cannot approve anything
outside the memorandum.

28. 28
Q.8. What is the rules in respect of affixing stamps on memorandum and articles of
association.
Ans.:
In accordance with the provisions of Stamp Act 1899 as amended by Finance Act 1993,
Stamp duty is to be affixed on memorandum and articles in the following rates as per
Schedule-I:
Memorandum of Association of a Company: Amount
Tk.
a. If accompanied by articles of association under
Section 17 of the Companies Act 1994 500
b. If not as accompanied:
I. Where the nominal share capital does not
exceed Tk.100000. 1000
II. Where the nominal share capital exceeds Tk.100000. 2000
Articles of Association of a Company:
a. Where the nominal share capital does not exceed Tk.1000000 1000
b. Where the nominal share capital exceeds Tk.1000000 but does
not exceeding Tk.30000000. 2000
c. Where the nominal share capital exceeds Tk.30000000. 5000
Exemption:
Memorandum and articles of association not formed for any profit and registered under
Section 28 of the Companies Act 1994 are exempted from stamp duty.

29. 29
Articles of Association
Q.1. What is an article of association? What are the contents of the articles of
association?
Ans.:
Articles of Association:
According to Companies Act 1994, Section 2 (1) a, ‘Articles’ means the articles of
association of a company as originally framed or as altered by the special resolution,
including so far as they apply to the company, the regulation contained in the First
Schedule to this Act. Actually it is the domestic regulation of a company and governs its
internal administration. It includes and controls, share distribution, share transfer, capital
changing, directors appointment, dividend distribution, voting power, conduct of board
meetings and winding up of company etc. The person signature on the memorandum is
also signature on the articles. It explains the clauses of memorandum.
The Contents of the articles of association:
The contents of articles of association are as follows 
1. Full name of the company.
2. Daily functions and rules of management.
3. Name, address and other description of directors and managing director.
4. Responsibilities, duties, right and power of directors and managing director.
5. Number of directors.
6. Appointment rules of manager and secretary.
7. Remuneration of director.
8. Number and value of qualification share of directors.
9. Total amount and number of authorized capital and classification of shares.
10. Par value and payment system of shares.
11. Terms and conditions of share forfeiture.
12. Procedure of share issue and transfer.
13. Commission of share underwriting.
14. Borrowing power and procedure of company.
15. Calling and operating system of meeting.
16. Voting system of the meeting.
17. Voting power of the member.
18. Rules of dividend declared and dividend transfer to the company.
19. Name and address of auditors, bankers, solicitors, broker and managing agent.
20. Winding up procedure of company.

30. 30
Q.2. What is the legal effect of articles of association?
Ans.:
Following are the legal effect of articles of association:
1. Contractual Obligation:
A registered article of association makes a contractual obligation among the members and
the company. So the members are obligated to follow the articles.
2. Case File:
Company can file case against any member due to avoid articles. Any member can also
file case against other member or the company.
3. Due Debts:
All money payable by any member to the company under the articles shall be considered
as debts due to him.
4. Open Document:
Since the articles of association in an open document to the company, assume that all
related parties are aware from the contents of articles. So if any parties make any
transaction avoiding the rules of articles, the company will not liable.
5. Contracts Between the Company and Third Party:
The company or its member does not make any contract with the third party according to
articles of association.
6. Directors Obligation:
The power and responsibilities of directors are limited by the rules of articles. If any
director violet any rules of articles is to be liable personally.
Q.3. Comment on whether a company can be incorporated as a limited company
without the word ‘Ltd.’?
Ans.:
Whether an association formed for promoting commerce art, science, religion, charity, or
any other useful object and applies or intends to apply its profit if any or other income in
promoting its objects and to prohibit the payment of any dividend to its member, the
government may by license with approval of one of its secretaries, direct that the
association be registered as a company with limited liability without the addition of the
word ‘Limited’ to its name.
Q.4. Can articles are to be made unalterable?
Ans.:
The power of altering the articles is a statutory power; therefore, a company cannot either
by a clause in the articles or by a contract makes the articles unalterable. That would
equal to offending and defeating the provisions of the Companies Act.

31. 31
Q.5. Can articles are altered? If altered how?
Ans.:
Articles of association can be altered, extended and amended according to rules of
Company Law, without permission of Court but taking decision in the members
meeting.
The following rules and restrictions are to be followed to alter the articles:
1. The articles of association can be altered after taking special resolution in the
members meeting.
2. Alteration of articles never violet the rules of memorandum and Company Law.
3. The alteration in the articles should be fair and for the benefit of the company as a
whole and not for a class or group of members only.
4. Alteration of articles is not to be contradiction with the order of the Court.
5. The right of the minority members cannot be broken by alteration of articles.
6. Alteration of articles is not for increasing the liability of all members or a few
members.
7. Alteration of articles is not for breaking the contract with third party.
Every special resolution amending the articles of association must be supported by a
return to the registrar within fifteen (15) days of passing of the resolution as required
under Section 88 of the Act.
Q.6.What are the provisions of Companies Act 1994 regarding the registration of
articles and application of schedule-1?
Ans.:
Registration of Articles:
A company limited by guarantee and an unlimited company shall, and a company limited
by shares may, have an article of association wherein provision shall be made for
regulating the affairs of the company; and the articles shall be signed by the subscribers
of the memorandum and be registered together with the memorandum. [Section 17 (1)]
Articles of association may adopt all or any of the regulations contained in Schedule-I,
and regulations 56, 66, 71, 78, 79, 80, 81, 82, 95, 97, 105, 108, 112, 113, 114, 115, and
116 of Schedule-I, compulsorily apply to all companies, whereas regulations 78 to 82 of
Schedule-I shall not deemed to be included in the articles of any private company except
those which is the subsidiary of any public company. [Section 17 (2)]
Application of Schedule-I:
In the case of a company limited by shares and registered after the commencement of this
Act, if articles are not registered, or, if articles are registered, in so far as the articles do
not exclude or modify the regulations in Schedule-I, those regulations shall, so far as
applicable be the regulations of the company in the same manner and to the same extent
as if they were contained in the duly registered articles. [Section 18]

32. 32
Q.7. Distinguish between the memorandum of association and articles of association.
Ans.:
Memorandum of association Articles of association
1. It is the principal document of a
company. It includes object, power, and
right of a company.
2. It maintains the relation between
company and third party.
3. It is the guidance and law of articles.
4. Company Law makes it.
5. It maintains all general contents of
company.
6. It must be registered.
7. Every company must have the
memorandum.
8. It cannot be altered without the
permission of Court.
1. It is the internal documents of a
company. It includes internal operation
rules.
2. It maintains internal relations.
3. It is controlled by memorandum of
association.
4. Company Law and memorandum
makes it.
5. It states and explains the contents of
memorandum.
6. It is not obligated for registration.
7. Joint Stock Company may not have
this.
8. It can be altered without the
permission of Court.

33. 33
Share Capital
Q.1. What is share? Discuss the features of share. Explain different kinds of share.
Ans.:
Share:
Share is the unit of capital measured by a sum of money. It is intangible but very much
movable property. The capital of a company is divided into shares, which is distinguished
by its appropriate numbers. The shares are contained in a certificate, which is
transferable. A share certificate is given under the common seal of the company
specifying the number of shares, say five or fifty and mentioning the name of the holder.
According to Companies Act 1994, Section 2 (1) v, ‘Share’ means a share in the capital
of the company and includes stock except when a distinction between stock and shares is
expressed or implied.
Features of Shares:
Following are the features of shares 
1. Share is the unit of capital measured by a sum of money.
2. According to Companies Act 1994, Section 30 (1), share is a movable property and
shall be transferable in manner provided by the articles of the company.
3. Ownership of share creates some contractual right, responsibility and liability.
4. According to Companies Act 1994, Section 30 (2), each share in a company having
a share capital, which is distinguish by the appropriate number.
5. Share is the personal estate of shareholders with his interest in the company.
Kinds of Shares:
Under the Companies Act, 1994, a Public Limited Company issue two types of shares:
a. Equity Share, and
b. Preference Share
a. Equity Share:
Equity shares are those, which are not preference shares. These shares do not enjoy any
preferential right in respect of dividend or repayment of capital. These shares bear all the
risk of the company after payment of all debts, interests, and preferred dividend (if any)
declared by Board of Directors in the Annual General Meeting. Sometimes equity
shareholders received interim dividends.
b. Preference Shares:
Preference shares are those shares, which have: 
1. A preferential right to be paid dividend at a fixed rate during the lifetime of the
company.
2. A preferential right to be repaid capital during the winding up of the company.
Preference share can be divided into several types as follows 

34. 34
1. Cumulative Preference Shares:
If in a certain year the company fails to pay specified amount of interest to the preference
shareholders due to low profit, then some preference shares have the right to get the
unpaid amount as arrears in the subsequent years. This arrear can be carried through only
for five (5) years.
2. Non-cumulative Preference Shares:
In case of such shares, if dividend in any year cannot be paid, the right to receive
dividend for that year lapse. Shareholders are not entitled to get such arrear dividends out
of profit of subsequent year.
3. Participating Preference Shares:
These types of share at first get the specified amount of interest, thereafter participate
along with equity shareholders in the dividends. They participate in the event of winding
up in same manner.
4. Non-Participating Preference Share:
The holder of these shares are entitled to a fixed rate of dividend only and do not share
with the equity shares in dividend.
5. Redeemable Preference Shares:
These shares in addition to the preferential right in respect of dividend enjoy the right to
be paid back the face value of preference share to the holders after certain period of time.
Provided that if the articles have the provision, then the company may sell such shares on
some certain conditions.
6. Non-redeemable Preference Shares:
The preference shares, which are not redeemable, are redeemed only on winding up of
the company.
7. Guaranteed Preference Shares:
Either any other company or person guarantees these preference shares interest.
8. Convertible Preference Shares:
These shares are given the right of being converted into equity shares within a specified
period or date according to the terms of issue.
Q.2. Give the definition of (1) Employee’s Share (2) Non-voting Ordinary Share (3)
Deferred or founders shares.
Ans.:
1. Employee’s Share:
It depends on the articles of association of a company. If the articles provides than the
company may issue shares to its employees in consideration for job performance as
bonus. This is not in existence in our country, but not impossible.
2. Non-voting Ordinary Share:
This type of share is not existent in our law; it is prevalent in English Law.
3. Deferred or founders shares:

35. 35
These shares are usually very limited in number and their right to profit is also very
limited. Usually they get profit and interest being paid to other types of shareholders.
This types of share is normally given to a promoters and underwriters. When these are
given to a promoter or founder of the company, they are called ‘founder share’ and
when it is given to underwriter it is called, ‘deferred share’.
Q.3. What is meant by bonus share? In what circumstances bonus share can be
issued?
Ans.:
Bonus Share:
Companies issue bonus shares to its shareholders when it makes enough profit, but it has
little in cash to pay cash as dividend. So they issue bonus shares free in exchange of
dividend instead of cash. Bonus share are also issue for adjustment between earned profit
and capital.
The requirements to issuance of bonus shares are as follows 
1. The articles of the company must permit the issuance of bonus shares.
2. Its authorized capital must be sufficient to cover the same.
3. The shareholders must resolve to capitalize profits or to apply the share premium
account or utilize other reserves and issue bonus shares.
4. The shares must be allotted by a board resolution in the proportions determined by
shareholders in general meeting.
5. A return of allotment must be submitted to the registrar within sixty (60) days after
allotment of shares.
Bonus Share Can be Issued in Following Circumstances:
1. Short of Cash Money:
When company cannot distribute cash dividend due to little cash but it makes enough
profit then the company issue bonus share in exchange of dividend instead cash.
2. Increasing Working Capital:
When working capital is to be increased owing to expand business and any liability is to
be paid suddenly then the company issue bonus share.
3. Adjustment of Share Capital and Profit:
When there is no adjustment between earned profit and capital then the company issue
bonus share.
4. Balance of Reserve:
When the deposit of reserve is greater than share capital then the company issue bonus
share.

36. 36
Q.4. What is transfer of share?
Ans.:
Transfer of Share:
The way in which a person disposes of his ownership of share to another is called transfer
of share. The procedure by which this is done differs according to whether or not the
transfer is by way of sale in the Stock Exchange or to an individual. In case of a private
company such is limited only within individuals and purely regulated by the articles
subject to conditions of the Act. A share transfer is done through deed and it must be first
registered in the company register and thereafter with the registrar. Every shareholder has
a right to transfer his share.
Q.5. Whether any fees are required for transfer of share.
Ans.:
Fees for Transfer of share:
According to Companies Act 1994, Schedule-I, the company fixed a fee not exceeding
Tk.10 in respect of transfer application of share.
Q.6. Write a short note of (1) Blank Transfer (2) Forged Transfer (3) Transmission
of Share.
Ans.:
1. Blank Transfer:
If the name and address of the transferee and the date of transfer are not mentioned in the
transfer form (117 form) is called blank transfer. Blank transfer facilitates spot trading of
share and it can sell and mortgage to more persons. Besides this, it can be submitted to
the company for registration mentioning name of any person selected by the transferor. In
this case transferee is not legal owner before listed his name in the register of members of
the company.
2. Forged transfer:
When share transferred is occurred by the false and misleading statement is called forged
transfer. This kind of share transfer is quite illegal and nullity. The forged transfer is null
even the company register the transfer. So the ownership of share is not change for this
kind of transfer. The persons who apply for the registration of forged transfer is liable for
compensate the company.
3. Transmission of Share:
The transmission of shares is an involuntary act resulting from the operation of law due
to death or insolvency of a shareholder. The ownership of shares of a deceased member,
in such a case vests in his heirs or legal representative. A succession certificate from the
Court of competent authority is the legal requirement in case of transmission of shares.
However, the documentary entries are the same for transfer or transmission of share in
the books of company.

37. 37
Q.7. What is the procedures for share transfer?
Ans.:
Procedure for Share Transfer:
The following are the procedure of transfer of shares 
1. Provision of Articles of Association:
Shares are movable properties and transferable from one person to another in a manner
provided by articles of association.
2. Written Agreement:
A written agreement should be made between the transferor and transferee for transfer of
share.
3. Application Submit:
An application for the registration of the transfer of share in a company may be made
either by the transferor or by the transferee.
4. Notice:
If the transferor makes the application in case of partly paid shares no registration shall
be affected unless the company gives notice of the application to the transferee. If the
transferee makes no objection within two (2) weeks from the date of receipt of the notice,
the company shall enter the name of transferee in its register of members in the same
manner and conditions as the transferee was made the application for registration. In case
of fully paid shares the notice is not required.
5. Documents of Transfer:
A particular form prescribed in the articles of association, which is signed by the
transferor and transferee and stamped properly regarding share transfer is to be submitted
to the company. It includes the full name, address, and profession of the transferee. If the
article of association does not provide any prescribed form, the transfer may be affected
in the form prescribed in regulation 19 of table-A.
The share certificate or the letter of share allotment is to be enclosed with the form.
6. Refuse of Transfer:
If a company refuses to registrar the transfer of any shares or debentures, the company
shall send the notice of refusal to the transferee and transferor within one (1) month from
the date on which the instrument of transfer was lodged.
7. Appeal:
Applicant can appeal against refusal.
8. Right:
The transferor has full right on shares before the registration of shares, which transferee
makes.
9. Issue of New Certificate:
After completing all procedure of share transfer, the company issue new share certificate
to transferee.

38. 38
Q.8. Distinguish between transfer of share and transmission of share?
Ans.:
The distinction between transfer of share and the transmission of share are as follows 
Transfer of Share Transmission of Share
1. It is occurred by sale, donation or any
other similar voluntary work.
2. It is done by particular form and written
agreement.
3. In this case a certain fee is to be paid
for apply.
4. Transferor is considered legal owner till
the transferee is not makes registration.
5. None can transfer share without being
members.
6. Notice of transfer is obligatory.
1. It is occurred by death, insolvency of
shareholders and winding up and
nationalization of company.
2. It is done according to law of heir.
3. It is to be informed to the company by
a general letter.
4. The ownership is transfer to the heir.
5. Legal representative can transfer
shares without being members.
6. Notice of transfer is not obligatory.
Q.9. What is right share? Distinguish between bonus share and right share.
Ans.:
Right Shares:
Right shares are those shares, which are issued after the original issue of shares, but
having an inherent right of the existing shareholder to subscribe to these shares in
proportion of their holdings. These shares can however, be issued to the non-members
when the existing shareholders do not accept the offer within a prescribed time limit. The
issue of right shares must be within the limit of authorized capital of the company. Right
issues are to be made as per SEC guidelines and listing regulations. Generally right
shares are issued to the existing shareholder at a concessive rate.
Following are the difference between bonus share and right share:
Bonus Share Right Share
1. Bonus share means one kind of
dividend.
2. Shareholders are not paid any amount
against bonus share.
3. In respect of bonus share profit is
capitalized.
4. Bonus shares are issued for increasing
working capital, short of cash money,
and adjustment of capital reserve.
5. Source of issuing bonus share are
general reserve, credit balance of P/L
account and capital reserve etc.
1. Right share means one kind of share
capital.
2. Shareholders must be paid against
right share.
3. Right share increased total share
capital.
4. Right shares are issued for new capital.
5. Source of issuing right shares are
existing shareholders.

39. 39
Q.10. What is share warrants? Distinguished between share warrant and share
certificate.
Ans.:
Share Warrant:
Share warrant is a document issued by a Public Limited Company in respect of fully
paid shares. A Public Limited Company limited by shares authorized by its articles for
issuance of share warrant under its common seal.
Following are the conditions for issue of a share warrant 
1. Only a Public Limited Company limited by share may issue share warrant.
2. A Public Limited Company must authorize by its articles for issuance of share
warrant.
3. The shares are fully paid up and stamped properly.
4. The total number of share is mention in the share warrant.
5. Annual report of the company includes a detail description about share warrant.
On the issue of share warrant, the company must enter the following particulars in the
register of member 
I. The date of issue of the warrant.
II. The fact of the issue of the warrant.
III. A statement of share included in the warrant distinguishing each by its number.
The following are the main points of distinction between the share certificate and share
warrant 
Share Certificate Share Warrant
1. A share certificate is issued in respect
of partly or fully paid shares.
2. The holder of share certificate is a
registered member of the company.
3. Both public and private companies are
required to issue share certificates.
4. A share certificate can constitute the
share qualification of a director where
the articles impose qualification.
5. A share certificate is not a negotiable
instrument.
6. The holder of share certificate can go to
the Court seeking remedy for any
management misdeeds or for alteration
of the articles or even present a petition
for winding up of the company.
1. Share warrant can be issued only in
respect of fully paid shares.
2. The name of the bearer of the share
warrant is not entered in the register of
members.
3. Only a public company can issue share
warrant.
4. But a share warrant does not constitute
the share qualification of a director
where the articles impose qualification.
5. A share warrant is indeed a negotiable
instrument.
6. But the holder of share warrant cannot
do so.

40. 40
Q.11. What is the source of issuing bonus share?
Ans.:
Source of issuing bonus share as follows 
1. General reserve.
2. Credit balance of profit and loss account.
3. Capital reserve or profit related reserve.
4. Balance of refunded debenture.
5. Balance of refunded capital.
6. Companies undistributed profit.
7. Balance of share premium account.
8. Any other balance.
Q.12. What is stock? Distinguish between stock and share.
Ans.:
Stock:
Stock means the number of shares available in any share certificate. Stocks are recorded
in the register of share of certificates called Scrip Register. It is the items of trade in the
Stock Exchange. Stock must be fully paid because of its transferability.
Following are difference between the stock and share:
Share Stock
1. Shares are in units.
2. Shares are intangible.
3. Shares are recorded in the member
register.
4. Shares constitute capital of the
company.
5. Shares may not be fully paid.
6. Ownership of share is complete only on
registration at company end.
1. Stock is in a lump holding.
2. Stock of shares is available in share
certificate.
3. Stocks are recorded in the register of
share certificate called Scrip Register.
4. Stocks are items of trade in the Stock
Exchange.
5. Stock must be fully paid because of its
transferability.
6. Ownership of stock is complete by
mere possession of the share
certificate.

41. 41
Q.13. What is the various methods available to Public Limited Company to issue
share or debenture.
Ans.:
The following are the methods to issue share of a Public Limited Company 
1. Issue of share at par.
2. Issue of share at premium.
3. Issue of share at discount.
1. Issue of Share at Par:
When share is issued at its face value is called share issue at par. Let the value of share is
Tk.10, it would be issue at Tk.10.
2. Issue of Share at Premium:
According to Company Law, when the issued value of share exceeds its face value is
called share issue at a premium. Let the face value of share is Tk.10 and it is issued at
Tk.12, here the premium is Tk.2.
3. Issue of Share at Discount:
When the issued value of share is less than its face value is called share issue at discount.
Let the face value of share is Tk.10 and it is issued at Tk.8, here the discount is Tk.2.
Q.14. Can a company issued its share at a premium? For what purpose the amount
of received premium may be used? Or, How to used the share premium fund?
Ans.:
It is not always that shares of the company have to be issued at par value for subscription
by the public. Depending on specific circumstances a company may, subject to certain
control and restrictions by the government, issue its share at a premium or at a discount.
There are specific provisions in the Act for this situation, which is discussed below: 
Share Issue at a Premium:
Share may be issued at a premium; that is a price more than their face value. The Act
provides that a company may issue shares at a premium but stipulates specific application
of the premium fund. This premium is to be transferred to a separate share premium
account and utilized for certain specific purposes, such as 
1. To issue bonus share.
2. To write off initial expenses.
3. To reduce share capital.
4. Redemption of any redeemable preference share or debenture.
5. Amortization of intangible assets.

42. 42
Q.15. What is the circumstance in which a company may issue its share at discount?
Ans.:
There is specific statutory provision for issuance of shares at a discount. According to
Companies Act 1994, Section 153, a company is authorized to issue shares of the same
class at a discount under the following conditions 
Section 153 (1):
a. Such issuance of shares at a discount must be 
1. Sanctioned by the Court.
2. Authorized by the shareholders in general meeting.
b. The resolution of the shareholders must be specific, that is 
1. It must fix the rate of discount.
2. This rate cannot exceed 10% as the maximum.
c. The company cannot issue shares at a discount before expiry of at least one (1) year
from the date of its commencement of business.
d. The issuance of share at a discount must be made within six (6) months of the
sanction of the Court, or within such extended times as is allowed by the Court.
Section 153 (2):
Every prospectus for the issue of the shares and every balance sheet issued by the
company subsequently must contain detailed particulars of the discount allowed on the
issue of the shares.
Section 153 (3):
If accompany defaults in complying with Section 153 (2) the company and also every
officer of the company who is in default shall be liable to pay fine not exceeding Tk.500.
Q.16. What does you meant by “Allotment of Share”?
Ans.:
A Public Limited Company after incorporation issues prospectus for inviting public to
subscribe the capital of the company. Banks collect share application money and send
those to the company concerned. The applicants are allotted with shares on the basis for
their application. This is called allotment of shares. If subscription surpasses the extent of
offer, the matter is generally settled in the following ways:
a. Full allotment is made to the applicants of minimum acceptable units.
b. Allotment is made for the remainders on pro-rata basis.
c. Refund warrant is issued for the balance amount.
Or
a. Allotment is made by lottery or as prescribed by the Securities and Exchange
Commission.
b. Refund warrant is issued to the unsuccessful applicants.

43. 43
Q.17. Discuss the Stock Exchange guidelines for issue of share.
Ans.:
The issuance of corporate shares are now controlled and governed by the Securities and
Exchange Commission (SEC) established by the government of Bangladesh. The
following are the first SEC guidelines for share issue and to be known as the “Public
Issue Rules”.
1. Public Offering:
A public company whose paid up capital amounts to Tk.5 million must obtain sanction
from SEC before raising its further capital. If capital of a local owned public company
exceeds Tk.5 million, it must offer at least 50% of its capital to public including foreign
investors. However, it is not compulsory for a Joint Stock Company or 100% foreign
owned public company to make public offering. If such a public company wishes to
make public offering it can do so.
In case of a local owned company, private placement or allotment may be made to the
foreign investors subject to following conditions: 
a. One third (⅓) of Initial Public Offering (IPO) or right shares which again shall not
exceed the total foreign exchange requirement for import of Plant and Machinery.
b. A lock-in period of one (1) year.
The limit has been set out to specify maximum quota for foreign investors at one-third
(⅓) of IPO and the minimum quota for local investors at two-third (⅔). Out of the quota
for local investors 15% has been reserved for ICB unit/mutual funds and 5% for
employees. The balance is available to investors of various categories.
2. Green Field Project:
A ‘Greenfield Company’ means a public company, which has not yet gone into
commercial operation but is in the process, has already initiated works like acquiring
land, completing construction, opening L/C, finalized shipment etc. This was intended to
dodge a bank debts based industrialization keeping the stock market in the sideline.
In order to facilitate industrialization by raising capital through stock market, a
Greenfield Public Company is allowed to raise equity and debts from the public to
accomplish its industrial projects. A Greenfield Public Company is required to comply
with certain conditions for the purpose of public offering including the following 
a. Sponsors should have attractive record of profitability, liquidity, and solvency.
b. Sponsors should not be bank or tax defaulters.
c. Sponsors must raise their portion of share capital before public offering.
d. The company must acquire land, complete construction of building, open letter of
credit and finalized shipment before public offer.
e. The company must make financial and physical plans for implementation of the
project.

44. 44
3. Pricing of Securities:
Once a public company whether operating or Greenfield, decides to make public offering,
it needs to fix up the price of its securities. The company in conjunction with the issue
manager and underwriter fix up the price of its securities. It is require justifying the price
of its securities in order to enable the public to evaluate the price. The justification is
required to be given with reference to: 
a. Net assets value par share,
b. Earning based value per share, and
c. Market price per share.
4. Prospectus:
Prospectus is a document, which invites the public for subscription of shares and
securities of Public Limited Company. No Public Company can issue a prospectus in
Bangladesh without prior approval of SEC. The SEC approves a prospectus on a full and
fair disclosure basis and not on merit basis. To obtain SEC’s approval, a prospectus must
make full, fair and adequate disclosers about the following: 
a. Purpose of public offering.
b. Justification of share price.
c. Justification for share premium.
d. Financial forecast and basis and assumptions underlying such forecast.
e. Actual financial information for the last five (5) years.
f. Description of the project including capacity, products, country of origin of
machinery, technology and management.
g. Highlights, risk factors and managements perception about the risk factors.
In spelling out the guidelines, the SEC reserves the right to alter, modify, or change any
or all of the above parameters at any time.
Q.18. A person dies while possessing one-lac ordinary shares of company X. After
his death how will his heirs be owner of his share of company X?
Ans.:
The ownership of shares of a deceased member, in such a case, vests in his heirs or legal
representative. A succession certificate from the Court of competent authority is the
legal requirement in this case. However, an application with the necessary document such
as share certificate or letter of share allotment is to be submitted to the registrar for
registration.

45. 45
Q.19. How a share is allocated? Or, Describe the common-law rules for allotment of
shares.
Ans.:
The general rules and procedures governing allotment of shares are as follows 
1. No allotment can be made before filing of the prospectus or a statement in lieu of
prospectus with the registrar of Joint Stock Companies.
2. Usually the board of directors distributes the shares. But the power of share
distribution can be transfer to a committee or some persons if the articles of
association allow this.
3. According to contract law application for share is consider as offer and allotment for
share is consider as acceptance of offer.
4. According to contract law the applicant can cancel the proposal for purchase of share
if the share is not distributes within the reasonable time.
5. It is clearly mention in the prospectus and application form that the share purchase by
fraud name is punishable with penalty.
6. If subscription exceeds the extent of offer, the share is distributed according to pro-
rata basis, or by lottery.
Q.20. What is the restrictions on allotment of share?
Ans.:
The following are the restrictions on the allotment of shares: 
1. Any company must submit prospectus or a statement in lieu of prospectus to the
registrar before share distribution.
2. A company cannot distribute share without collecting minimum subscription, which
is stated in the prospectus.
3. Minimum subscription, which is stated in the prospectus, is to be computed by cash
received rather than any received instead of cash.
4. All money received from the applicants must remain deposited in a schedule bank.
The money cannot be withdrawn before receipt of the certificate of commencement.
5. At least 5% of face value of share must be paid with the application.
6. If the minimum subscription is not collected within 180 day’s from the first issue of
prospectus or within the 40 day’s from the closer of subscription list as specified in
the prospectus, whichever is earlier, the collected money shall be repaid to the
applicants without interest within the aforesaid period. The directors are individually
or jointly repay the money with 5% interest above bank rate after expiry of the
aforesaid period.
7. Company cannot distribute share until the expiration of the eight days after the time
of the opening subscription.
8. No application can be returned within eight days from the share-listed date.

46. 46
Q.21. What is the effect of irregular allotment of share?
Ans.:
If the allotment of any share is not complied with Section 141 and 148, then such an
allotment is presumed to be an irregular allotment. The for such is as follows 
1. Voidable Allotment:
If the applicant fails to pay the minimum subscription (5%) along with the application, or
any subsequent amount as required by the prospectus, then on application of the
shareholder such an allotment may be cancelled and his name should be taken off from
the membership register of the company. The right to cancel the allotment lies only with
the allottee and the company cannot take any extra advantage out of it. Once a share is
allotted, the company cannot deny it.
2. Compensation for Irregular Allotment:
If any promoter, director or concerned person of the company issues/allots any share
without complying the provisions entailed in Section 141 or 148 with respect to
allotment, he shall be liable to compensate the company and the allottee for any loss,
damages or costs which the company or the allottee may have sustained or incurred
thereby.
Provided that proceedings to recover any such loss, damages, or costs shall not be
commenced after the expiration of two (2) years from the date of the allotment. [Section
146 (2)]
3. Misfeasance:
If a director of the company is found to have misused his authority or power, he may be
held liable in any Court of Law for misfeasance.
Q.22. Discuss the provisions of the Companies Act 1994 regarding filing of return
after allotment.
Ans.:
According to Companies Act 1994, Section 151, a company must file the following
documents, within sixty (60) days of the allotment being made: 
1. The company must submit a return describing the name, address, profession etc. to
the registrar.
2. If any share is issued on the basis of any consideration other than cash, that has to be
specifically mentioned. Total number of share distributed and duly stamped as per
Stamps Act 1899, must be submitted.
In case of default the concerned official of the company may be fined maximum
Tk.1000/- per day till the formalities are complied with properly.

47. 47
Q.23. What is share call? Discuss the rules regarding share called.
Ans.:
All shares other than fully paid up share payable at a fixed time in respect of that share. A
company may demand to its shareholder to pay whole or part of the balance remaining
due and unpaid on each share made at any time during the continuance of the company is
called share call.
An amount not less than 5% is always with the application for share, and a further
amount is called on allotment. If any further amount is required then the company may
call its as it deems necessary.
Let the value of each share of a company is Tk.100 which is payable as follows 
I. With application Tk.10
II. With allotment Tk.40
III. With 1st
call Tk.25
IV. With 2nd
call Tk.15
V. With final call Tk.10.
Rules Regarding Share Calls:
Rule regarding share calls by the company is as follows 
1. The board of directors of the company decides whether to call on share or not. If it
decides to call then it must clearly specify the amount, time and place. The calls must
follow the provisions entailed in articles. No call shall exceed one fourth (¼) of the
nominal amount of the share or be payable at less than one (1) month from the last
call. Each member shall receive at least fourteen (14) days notice specify the time, or
times of payment.
2. If a sum called in respect of a share is not paid before or on the day appointed for
payment, the persons from whom the sum is due shall pay interest at the rate of 5%
per annum from the day appointed for payment to the time of actual payment.
3. The joint-holders of a share shall be jointly and individually liable to pay all calls in
respect thereof.
4. The directors may make different arrangements to the holder on the issue of shares
for the amount of calls to be paid and in the time of payment.

48. 48
Q.24. Discuss the liabilities and duties of the shareholders.
Ans.:
Liability of The Shareholder:
1. Liabilities of shareholders are limited by the face value of his share.
2. Shareholder is liable up to his guarantee in the respect of the company is limited by
guarantee.
3. Shareholder is liable to pay the amount unpaid on every share on calls.
4. Shareholder is liable for all liability of the company in the respect of unlimited
company.
5. If shareholder being owner by share transfer will be liable to pay the unpaid amount
in respect of that share.
6. Shareholder who loses their ownership within one year from the date of liquidation is
liable to pay the unpaid amount.
Duties of shareholders:
1. To received distributed share in due time after distribution.
2. To pay all payables in the respect of share.
3. To pay unpaid amount in due time when called.
4. To work according to resolution.
5. Shareholder should respect memorandum and articles as document and follow them.
Q.25. What is meant by the reduction of capital? What is the procedure of reduction
of capital?
Ans.:
Reduction of Capital:
The power to reduce capital must be given by the articles. If no such power is given, the
article may be changed by a special resolution. The capital may be reduced:
a. by reducing or extinguishing the liability of members on uncalled capital, or
b. by writing off lost capital, or
c. by paying off capital which is in excess of the wants of the company, or
d. in any other way provided by the Court.
Pursuant to be reduction of the share capital, necessary alterations must also be made in
the memorandum. Minutes of reduction and court order shall form part of memorandum,
printed afterwards.
Procedure of Reduction of Capital:
Reduction of capital is possible only by passing a special resolution and the Court must
be conferred it. The Court would inquire into the objection, if any, raised by the
creditors. In this respect the Court settles the list of creditors entitled to object and issues
public notice. On hearing the objections, the Court may confirm the reduction on such
terms and conditions as it may think fit.

49. 49
Q.26. What does you meant by reserve capital and capital reserve?
Ans.:
Reserve Capital or Reserve Liability:
A limited company may by special resolution, determine that any portion of its share
capital which has not been already called up, shall not be capable of being called up
except in the event and for purpose of the company being wound up. So a limited
company may create a fund by uncalled share capital which is use to meet up the
expenses and liabilities of the company being wound up, is called reserve capital.
Capital reserve:
Capital reserve fund is created out of the profit of the company. These are two types 
1. Statutory capital reserve, and
2. Non-statutory capital reserve.
1. Statutory Capital Reserve:
Statutory capital reserve is specified to be used for certain purposes only which is
regulated by law, and such usage is also divided into two accounts 
a. Share Premium account, and
b. Capital redemption reserve account.
2. Non-statutory Capital Reserve
The usage of the non-statutory capital reserve is not regulated by legislation. The
company has the liberty to use the fund either to repaid its machines, replace an old
machine by a new one, or to use it deems mere appropriate. This fund may also be
created out of the rise of price of its fixed assets and payment of dividend.
Q.27. Distinguish between reserve capital and capital reserve?
Ans.:
Reserve Capital Capital Reserve
1. A part of authorized capital, which is
not called up.
2. It is reserve to maintain liability and
expense at the time of winding up.
3. It is not being invested.
4. If necessary, it is to be called at the
time of winding up.
1. A part of profit, which is not transferred
to reserve to make capital reserve.
2. It is reserve to use in further capital fund
against fixed assets.
3. It is to be invested.
4. If necessary, it is to be used in particular
purpose.

50. 50
Q.28. Describe the procedure for redemption of preference share.
Ans.:
Redemption of Preference Share:
This is controlled by Section 154 of the Companies Act 1994, which is summarized as
follows:
a. Articles must authorize issue of redeemable preference share.
b. Redeemable preference shares are capable of redemption only when these are fully
paid up.
c. A redemption fund must be provided out of either:
I. Profits available for dividend, or
II. Proceeds of new issue of shares for the purpose, or
III. Sales proceeds of any property of the company.
d. When redemption fund is provided out of profits available for dividend, a sum equal
to the nominal amount redeemed must be transferred to capital Redemption Reserve
Fund.
e. Any premium on redemption must be provided for out of either:
I. Profits, or
II. Share Premium Account.
f. Capital Redemption Reserve fund can only be reduced in the same way as Share
Capital A/C.
g. The Capital Redemption Reserve Fund may however be used in issuing fully paid
bonus shares to members.
Balance Sheet Disclosure Requirement for Redemption:
The company must state:
a. The earliest and latest date of redemption.
b. Whether the shares must be redeemed in any event or are liable to be redeemed at the
option of the company.
c. The amount of premium, if any, payable on redemption.
Other Affairs for Redemption:
a. Where new shares, issued for the purpose of redemption caused authorized capital
exceeded temporarily, no stamp duty is payable provided old shares are redeemed.
b. Redemption of preference share is not a capital reduction. The nominal value of the
redeemed preference shares must be replaced by Capital Redemption Reserve Fund,
or new issue, or by combination of both.
c. Premium on redemption or on the new issue is no way affects the amount of capital to
be replaced by Capital Redemption Reserve Fund, or the new issue. It is only the
nominal value that is to be considered.
d. Preference share Redemption A/C collects the total amount due to the preference
shareholders on redemption and is closed by payments.

51. 51
Q.29. Discuss the individual and collective rights of shareholders.
Ans.:
Individual Right or Personal Right:
1. Every shareholder must have right to transfer his share subject to restrictions imposed
by the articles.
2. Every member has the right to inspect the member register of the company.
3. Every shareholder has the right to present in the meeting of shareholders.
4. Every shareholder has the right to deliver his speech and to vote in the meeting.
5. Every shareholder can appoint his representative for vote.
6. Every member has the right to get a copy of memorandum and articles of association.
7. Member have the right to inspect the following documents of the company during
stipulated time:
I. List of directors, managers and managing agents
II. List of contracts
III. Minutes of the general meetings
IV. List of mortgages and charges on the company property.
V. List of debenture holders.
8. Every shareholder have the right to get a copy of register or any part thereof on
payment of Tk.5 for every hundred words or fractional part thereof.
9. Every shareholder have the right to get notice of the general meeting at least 14 days
prior to annual general meetings.
10. Every shareholder has the right to purchase new share.
11. Members have the right to get copies of annual balance sheet, profit and loss account
and auditor’s report.
12. If the AGM is not held in due time, any shareholder can apply to Court for calling
AGM.
Collective rights:
1. If articles provides then to alter the share capital, either to increase or to decrease.
2. Appointment of directors and auditors.
3. Right to terminate any director.
4. Appointment of managing agent.
5. Right to get dividend.
6. Right to classification and amalgamation of share.
7. Right to consider directors report, profit and loss account, balance sheet, statutory
report and to declared dividend.
8. Alteration of memorandum and articles subject to permission of the Court.
9. Right to call meeting in special circumstances.
10. Right to approve any ultra vires work of director.
11. If company was formed in pursuant to do any specific work or project and complete
that particular work or project, right to winding up the company.