Recent Changes in the Companies Act 1994
Ms. Anika Bushra Tabassum
The Companies Act, 1994 has been amended twice in 2020 by the Parliament through the passing of Companies Act (1st Amendment) 2020 and Companies Act (2nd Amendment) 2020 dated 25th February 2020 and 26th November 2020 respectively. The amendments cover very important changes which are introduced in order to implement recommendations of World Bank Ease of Doing Business. The amendments include the abolition of common seal requirements, the introduction of One Person Company, clarification of share transfer registration process, digitalization of records, etc. This article describes the said amendments in detail.
Companies Act (1st Amendment) 2020 dated 25.02.2020
According to the amended Section ১২৮ (Execution of deeds), a company may, in writing authorize any individual, either generally or in respect of any specified matters, as its attorney to execute deeds on behalf in any place, either in or outside Bangladesh. Every deed signed by such attorney on behalf of the company shall be valid and bind the company.
The amended Section ১২৯ (১) stipulates, a company whose objects require or comprise the transaction of business beyond the limits of Bangladesh may, if authorized by its articles, have for use in any territory, district or place not located in Bangladesh, may in writing authorize any person and such person shall be considered as the agent of the company. In case of any period mentioned regarding the authority of such an agent shall continue during that period; or if no period is mentioned, then until further notice of revocation or termination the agent shall have the authority. In both sections, ১২৮ and ১২৯, the mandatory requirement of common/official seal has been withdrawn.
Section ৩৪৭ (৪) of the Companies Act 1994 have been repealed. Therefore, the requirement of seals or seals for the authentication of documents required for or connected with the registration of companies is not needed anymore given the recent amendment.
Furthermore, the requirement of official/common seal has been abolished in Sections ২০৮, ২২৫, and ৩৬৩ of The Companies Act 1994.
Companies Act ( 2nd Amendment) 2020 dated 26.11.2020
Previously, under the Companies Act, at least 2 shareholders and 2 directors were required for registering a private limited company. Internationally, the concept of One Person Company is very popular. The Government has also introduced this concept of One Person Company in Bangladesh Jurisprudence and such a company shall be termed as OPC. One Person Company [OPC] means and includes a company whose shareholder is a natural person [Section ২ (১)(খ) (খ) of the Companies Act, 1994].
A new Section ১১ (ক ক) [Indication of Limited Company] has been added which requires a public limited company to use the term ‘’PLC’’ at the end. Furthermore, new Section ১১ (ক গ) stipulates that “OPC” should be written at the end of One Person Company; however, the provision of this section will not apply in the case of NGO and Company Limited by Guarantee.
An important addition has been made by way of the introduction of Section ৩৮(৩)(ক) whereby, the signature of the share transferee must be confirmed in the transfer deed. After submitting the necessary share transfer documentation to the Registrar’s Office; the concerned share transferee will then have to appear in person and re-sign to confirm the authenticity of the share transfer [as inserted under Section ৩৮(৩)(ক ক)]. If the transferee is a foreign national or NRB, the transfer documents and affidavits in support of the transfer of shares must be certified by the authorized officer of the Bangladesh Embassy/ High Commission [Section ৩৮(৩) (ক খ)]. According to Section ৩৮(৩)(ক)(গ), if the transferee is to appear at the office of the Registrar due to cogent reason, the Registrar can construe a commission for verifying the signature, upon the payment of fees.
According to the newly amended Section ৮৫ (ক), an annual general meeting may be called by a minimum of 21 (Twenty-one) days notice in writing. Earlier, the date of such notice period was a minimum of 14 days. Amended Section ৮৫(খ) states each member shall be served with a notice of the meeting of the company along with the place, time, date, and details of the activities to be performed has to be mentioned in it. Three new subsections namely চ, ছ জ has been added with Section ৮৫(১).
Section ৮৫(১) (চ) stipulates that all activities undertaken at the Extraordinary General Meeting shall be treated as special activities except dividend grants, bonus shares, approval of audit reports, reports of directors and auditors, periodic retirement of directors, and determination of remuneration of auditors. If a particular agenda is to be discussed at a special general meeting, it is vital for that to be supported by a document, the time and place of the inspection shall be clearly stated in the notice [৮৫(১) (ছ)]. Section [৮৫(১) (জ)] further introduces that shareholders with a minimum of 5% share capital can propose an agenda at the company’s AGM. Section ২৫৫ (৪) (ক)] has been added to allow creditors to raise an objection to the appointment of a government liquidator at their first meeting after the liquidation of a company has begun.
Furthermore, Subsection ছ of Section ২৬২ of Companies Act 1994 has been replaced. The replaced provision stipulates a priority of unsecured creditors when collecting and spending the required funds by pledging the assets of the company.
Two more subsections namely subsection ৪ and ৫ have been added under Section ৩২৭ (Fraudulent preference). According to section ৩২৭ (৪), in cases where a payment is made by the company or for the purpose of taking action against the company within six months prior to the application for liquidation, or the supply or transfer of goods or property is granted, the transaction may be deemed appropriate by the court and therefore declared void and Court may rescind such action. It is further stated in Section ৩২৭ (৫) that where assets or goods are transferred or supplied by a company within one year before the filing of liquidation or voluntary winding decision is taken, it shall be void unless it is through the normal activities of the company or is done in good faith or the buyer is liable to pay a reasonable price.
Vital amendments have been brought in regard to OPC formation, registration, management, etc.
As per section ৩৯২(ক), Memorandum and Articles of Association refer to Memorandum and Article of Association mentioned in Schedule 9A and 9B.
It is stated in Section ৩৯২(খ), a natural person may form a One Person Company (OPC) for any purpose, and if he so desires, he may sign in the memorandum in accordance with the provisions of this law on registration.
A natural person can only form a One Person Company (OPC). The Memorandum and the Article of Association of OPC shall include the name of the nominee/ assignee. If such assignee dies, another assignee can be inserted in lieu of such deceased.
According to Section ৩৯২ (গ), the paid-up capital of an OPC shall be minimum Tk. 25 Lacs and maximum Tk. 5 Crore and preceding year turnover must be minimum Tk. 1 Crore and maximum Tk. 50 Crore.
If the paid-up capital of OPC exceeds the amount specified above and the annual turnover exceeds the amount specified above then subject to the necessary terms and conditions, a natural person can transfer OPC to a private limited company or a public limited company.
Section ৩৯২(ঘ), states the procedure followed for OPC registration, the rules followed for private limited company registration is same as the public limited company.
Section ৩৯২(ঙ) codifies that the sole shareholder of OPC shall be its Director as well as manager, company secretary, and other employees may be appointed to manage One Person Company (OPC).
As per section ৩৯২(চ), the Director of OPC will call at least one board of directors meeting in every half year.
As per section ৩৯২(ছ), if any changes are made in the Memorandum and Article of Association of the OPC, the Company will notify about such changes to the Registrar of Joint Stock Company (RJSC).
Section ৩৯২(জ) sheds light in relation to the law on transfer of shares to the ‘natural’ person. All shares of the OPC can be transferred to any other natural person subject to the provision of section 38.
In addition to it, its financial statements must be submitted to the Registrar within 180 days of the end of a financial year, [as inserted in section ৩৯২ (ঝ)]. Balance Sheet must be signed by the Shareholding Director.
Another important change has been introduced by the addition of In light of the recent amendment, Section ৪০১ (ক). This introduces the possibility of executing deeds and documents via digital/electronic means so far as possible under The Information and Communication Technology Act, 2006, and the rules and regulations made thereunder shall be followed. The government may also stipulate the fee for providing services electronically.
The above changes are expected to ease entrepreneurs’ burden and provides clarity on certain issues. The concept of OPC will allow many proprietorship concerns to easily convert their business into a professional manner.