CORPORATE LAWS & PRACTICES

Time allowed 3 hours

Total marks 100
[N.B. The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take
account of the quality of language and of the way in which the answers are presented. Different parts, if any, of
the same question must be answered in one place in order of sequence.]
Marks

1. (a)

Foreign Investors, Mr. Jones and his 5 associates, a client of your CA Firm- desire to
incorporate a Limited Company in Bangladesh with the view to investing USD 2 million in
Textile Sector. They choose any one of the two following names for their proposed company;
(a) JA Bangladesh and (b) Cleopatra Apparels Limited.
As a senior articled student of the CA Firm, you were asked by your principal to inform the client
clearly with reference to appropriate legal provisions contained in the Companies Act 1994:
i) How Jones & his associates will confirm that their proposed names are not identical.
ii) After incorporation, what are the legal procedures which should be followed if your client
desires to change their company name in the future.
iii) Whether your client would be able to choose the first name i.e. JA Bangladesh for their
proposed Limited Company? State the reasons.
iv) What type of limited company should you suggest to Mr. Jones to incorporate i.e. Private
Limited Company or Public Limited Company? Why?

(b) Can a company hold 2 AGMs in one English calendar year? Discuss.
2. A Company Limited intends to change its name. It has availed two separate loans from B Company
Limited and C Company Limited. In such situation what is the procedure to be followed for
changing the name of the company? Will the right of the lenders be any way affected by the change
of name of their borrowing company?

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3. The 157th Meeting of the Board of Directors of ABC Company Limited was scheduled to be held
on 16th November 2014 at 11.00 am at Head Office to discuss and resolve 15 nos. of agenda of
which agenda number 13, 14 & 15 are very important and sensitive for the company. The meeting
was started on time being required numbers of quorum were present (5 Directors were present out
of 7) and for some valid reason with the request of the members present in the meeting, the meeting
was adjourned immediately after the agenda no. 12 was resolved. The Chairman of the meeting
declared the next date of adjourned meeting to be held on 20th November 2014 at 11.00 at the same
place to resolve the rest of the three agenda.
As a Company Secretary, you made a gentle reminder to all the Directors over phone about the
meeting. The adjourned meeting was started on time and all the Directors were present. The two
Directors who were absent in the original meeting, raised an objection that the notice was not
served. They reminded the chairman that as per articles of association of ABC Company Limited,
notice must be served 3 days before the Board Meeting or any Adjourned Meeting and so the
meeting has no legal validity. They also raised voice to cancel the meeting and to call a fresh
meeting while chairman decided to continue the meeting.
You are asked by the Board to state the legal provisions contained in the Companies Act 1994 with
regard to the following:
i) Whether calling of the adjourned meeting was valid? Explain.
ii) What is the remedy to the aggrieved Directors against the violation of articles of association by
the Chairman regarding serving of notice? Explain with reasons.
iii) Frame the time limitations prescribed in the Companies Act 1994 to serve notice in respect of
holding of: a) Board meeting b) Statutory Meeting c) General Meeting d) Extra Ordinary
General meeting.
4. You are the Company Secretary of SRT Ltd., a Public Limited Company engaged in textile &
garments business, where you are the witness of many inappropriate corporate politics inside the
board. As per the Articles of Association, the maximum number of directors is 9 and the board has
currently 8 directors. Meanwhile, whereabouts of a Director Mr. Y is unknown for the last six
months. During the period of his absence, 4 legally valid Board meetings (meeting no: 123, 124,
125 & 126) were convened. As directed by the Chairman, you have served notice to all the
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Directors except Mr. Y for the 127th no. of Board of Directors Meeting to be held on 17/07/2014 at
11.00a.m. where three special agenda were included among others:
* To declare the office of director Mr. Y is vacated and appointment of Mr. K in place of Mr. Y
who is a nephew of the powerful Chairman.
* Appointment of Mr. L as a new director who is a son of the Vice Chairman.
* To appoint Director Mr. Q in SRT Ltd. in the position of Marketing Director at a monthly
salary & allowances of BDT 5,00,000/- with immediate effect.
In that meeting, Mr. Y was by chance present and raised his strong voice against the agenda which
has concerned him. He said right now he (Mr. Y) is present in the Board and still he is a valid
director. 3 other directors supported Mr. Y and said that directorship of Y is valid and appointment
of director Mr. K is no longer required and illegal. The decision was a tie and finally Chairman
had applied his casting Vote and resolved these agenda by declaring the office of Mr. Y as vacated
from the position as a director, appointed Mr. K as a new director and appointed director Q as
Marketing Director at a monthly salary & allowances of BDT 5,00,000/- per month.
You are required to give your opinion regarding the actions of the board with reference to the legal
provisions contained by the Company Act 1994;
(i) Is the declaration by the board to vacate the office of director of Mr. Y was lawful? Explain.
(ii) Is Mr. K a valid director? What is his legal position in the board? On what legal ground he was
appointed as a director?
(iii) Is Mr. L a valid director? What is his legal position in the board? On what legal ground he was
appointed as a director?
(iv) Justify the appointment of director Mr. Q in line with appropriate legal provisions.

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5. ABC Ltd. is a publicly traded company engaged in production and distribution of FMCG having yearly
turnover of BDT. 7,000 million and listed with DSE & CSE. Products of the ABC Ltd. are recognized
by different International bodies by certifications and maintain high qualities which are eligible to be
exported in the advanced countries. The Company in its 53rd Meeting held on 29.10.2015 (Thursday) at
2.00 p.m. approved the following matters:
(i) Two directors of the board of ABC Ltd. Mr. X and Mr. Y have been authorized to travel to
U.K. and France with the view to exploring the export opportunities of ABC product in
European Market. Initially, these two directors have contacted with Maya plc. a UK based
company and had several conversations with them over phone from Dhaka. Company expects
that the directors visit to UK and France may be fruitful which will lead them to start export
and to boost up sale up-to BDT 9000 million within next year. In this regard company also
approved a budget of Taka 20 lac as foreign travelling expenses.
(ii) The Company has been doing banking with SB Bank Limited and approved to shift to KL Bank
Limited. KL Bank has offered ABC to take over entire loan outstanding balance with SB Bank
with a sanction of loan facility of BDT 1400 million. The present total loan outstanding with
SB Bank is BDT 820 million. KL Bank Limited has also offered interest rate 1% less than the
existing rate of SB Bank.
(iii) The company has approved its 3rd Quarter unaudited financial statements ended on 30th Sept 2015.
(iv) The Company has approved to shift some of its core departments (Marketing, Sales and R&D) from
Headquarters, Motijheel, Dhaka to Savar, Dhaka which is 20 k.m. away from Headquarters.
(v) Company has approved to purchase 500 decimal land at Savar besides Dhaka-Aricha highway at a
very cheap price of BDT 300 million from a Bangladeshi USA Citizen Mr. Z. The deal was
finalized by the Chairman while visiting USA in the last month and the land may be used to set up a
new factory in future. The current price of this land has been estimated to BDT 530 million. The
board of directors has asked all to keep the matter as highly confidential and must not leak until
making any valid contract with Mr. Z.
As a Company Secretary of ABC Ltd, you are well aware that any material decision must be
communicated with DSE & CSE within 30 minutes through fax/email of making such decision under
regulation 43 of the both DSE & CSE Listing Regulation. On the basis of the above 5 decisions of the
board, you are required to explain the materiality of the cases that requires immediate public disclosures.
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6. (a) You are in a discussion meeting with the Chairman, CEO and CFO of the Company to discuss
about holding of the next 20th AGM which management expects to hold in February 2016. CFO
said that considering the profitability of ABC Ltd., only 5% cash dividend is projected. Chairman is
considering to bring the following two agenda among others in the same board meeting where the
date of AGM will be declared:
(i) Shareholders may be aggrieved on the recommendation of 5% dividend. To convince the crazy
shareholders and for smooth holding of 20th AGM, the Company may consider to pay BDT
2,000 in cash to each shareholder as entertainment allowance who will be present in person or
by proxy at the AGM. In this regard, a memo will be placed before the board of directors for
approval.
(ii) Company may continue to appoint PQR & Co., Chartered Accountants for the 4th term as its
Statutory Auditors and such a memo may be placed for board recommendation which will
finally be considered by the shareholders in the 20th AGM.
You are required to give your legal opinion on the above issues.
(b) What are the reasons for which a listed company can be delisted or suspended by the Dhaka Stock
Exchange as per its listing Regulations in force?

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7. The draft audited financial statements for the year ended 31st December 2014 of CD Bank Ltd. (a
schedule commercial bank) has been placed in the board meeting for authorization to issue. The
financial results depict that as per BSEL-III ,the total capital of the bank stood at BDT 7130 million
(Paid up-capital BDT 4,000 million, Statutory Reserve BDT 1,830 million, Retained Earnings BDT 825
million, 1% Provision of Loans & Advances BDT 475 million). The Risk Weighted Assets (RWA) of
Bank as per BASEL-III stood at Taka BDT 69,200 million and as per BRPD circular ref: 18 dated
21/12/2014, the minimum required Capital Adequacy Ratio is 10% and as such the Risk Based Capital
requirement is BDT 6,920 million. In a confidential note, the Risk Management Division (RMD) of the
bank has informed to the Managing Director that some of big clients rating may be downgraded in the
next year due to Middle East Crisis and RMD has forecasted that RWA may rise to BDT 73,500 in the
next quarter. Face value of share is BDT 10 per share. The majority of the members in the board opined
20% cash divided while a few including chairman opined to keep the limit to 10% cash and 10% bonus
as dividend.
(a) As a CFO of the Bank, chairman is seeking your professional advice as to how to resolve the dividend
decision as per Bank Companies Act 1991 considering the capital maintenance issue of the bank.
(b) Assume that, the RWA is 73,500 i.e. required capital maintenance increased to BDT 7,350 million.
You are required to brief the board on dividend issue, Capital Reservation and future legal
consequences with reference to section-13 & 22 of Bank Companies Act1991.
(c) In another agenda, the Treasury Department has the following proposals for board approval:
(i) to enhance the existing investment limit of BDT 900 million to 1800 million in capital market.
The existing limit has dried up and treasury had good performance in the capital market in the
last two years and Management has full confidence on Treasury Head.
(ii) The entire budget (enhancement) would like to invest in the securities of CSD Ltd. It is
mentioned here that that paid up capital of CSD Ltd. is BDT 5000 million.
As a CFO, you are also required to suggest the maximum amount of investment limit for the
capital market and the amount to be invested in CSD Ltd. in line with the provisions 26KA of
Bank Companies Act 1991.

Hints: As per BASEL-III, total capital means = Shareholders Equity + 1% General Reserve on
Loans & Advance + 50% Revaluation Reserve)
8. What aspects are to be taken into consideration by Bangladesh Bank while granting license to a financial
Institution?
9. (a) What do you mean by the surrender value of life insurance policy?
(b) Mr. X had taken a Life Insurance Policy for 15 years for BDT1,50,000 and the premium payable
was BDT 12,000 per annum. X paid premium for three years and then stopped. The premium paid
is BDT 12,000 x 3=36,000 and payable is BDT 12,000 x 15= 1,80,000. Calculate the surrender
value of the above policy.

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