Chapter: Introduction

A) Define the limited Liability?

Answer:
Limited liability is a legal status where a person's financial liability is limited to a fixed sum,
most commonly the value of a person's investment in a corporation, company or partnership. If a
company that provides limited liability to its investors is sued, then the claimants are generally
entitled to collect only against the assets of the company, not the assets of its shareholders or
other investors. A shareholder in a corporation or limited liability company is not personally
liable for any of the debts of the company, other than for the amount already invested in the
company and for any unpaid amount on the shares in the company, if any, except under special
and rare circumstances permitting "piercing the corporate veil. The same is true for the members
of a limited liability partnership and the limited partners in a limited partnership. By
contrast, sole proprietors and partners in general partnerships are each liable for all the debts of
the business (unlimited liability).
Although a shareholder's liability for the company's actions is limited, the shareholders may still
be liable for their own acts. For example, the directors of small companies (who are frequently
also shareholders) are often required to give personal guarantees of the company's debts to those
lending to the company. They will then be liable for those debts in the event that the company
cannot pay, although the other shareholders will not be so liable. This is known as co-signing. A
shareholder who is also an employee of the corporation may be personally liable for actions the
employee takes in that capacity on behalf of the corporation, in particular torts committed within
the scope of employment.
Limited liability for shareholders for contracts entered by the corporation is not controversial
because this could and probably would be agreed to by both parties to the contract. However,
limited liability for shareholders for torts (or harms not agreed to in advance) is controversial
because of concerns that such limited liability could lead to excessive risk taking by companies
and more negative externalities (i.e., more harm to third parties) than would be produced in the
absence of limited liability. According to one estimate, negative corporate externalities on an
annual basis are equal to between 5 and 20 percent of U.S. GDP.

B) Narrate the legal characteristic of company act, 1994?

Ans:
Some of the most important characteristics of a company are as follows:
1. Artificial Person:
In the eyes of law there are two types of persons viz:
(a) Natural persons, human beings and
(b) Artificial persons such as companies, firms, institutions etc.
Legally, a company has got a personality of its own. Like human beings it can buy, own or sell
its property. It can sue others for the enforcement of its rights and likewise be sued by others.
2. Perpetual Existence:
A company enjoys a continuous existence. Retirement, death, insolvency and insanity of its
members do not affect the continuity of the company. The shares of the company may change
millions of hands, but the life of the company remains unaffected. In an accident all the members
of a company died but the company continued its operations.
3. Limited Liability:
The liability of the members of a company is invariably limited to the extent of the face value of
shares held by them. This means that if the assets of a company fall short of its liabilities, the
members cannot be asked to contribute anything more than the unpaid amount on the shares held
by them. Unlike the partnership firms, the private property of the members cannot be utilized to
satisfy the claims of company’s creditors.
4. Separate Property/Entity:
The law recognizes the independent status of the company. A company has got an identity of its
own which is quite different from its members. This implies that a company cannot be held liable
for the actions of its members and vice versa. The distinct entity of a company from its members
was upheld in the famous Salomon Vs. Salomon & Co case.
5. Common Seal:
A company being an artificial person cannot sign for itself. A seal with the name of the company
embossed on it acts as a substitute for the company’s signatures. The company gives its assent to
any contract or document by the common seal. A document which does not bear the common
seal of the company is not binding on it.
6. Transferability of Shares:
The capital of the company is contributed by its members. It is divided into shares of
predetermined value. The members of a public company are free to transfer their shares to
anyone else without any restriction. The private companies, however, do impose some
restrictions on the transfer of shares by their members.
7. Registered office:
A company must have a register office.
8. Capital:
A company must have capital, otherwise it cannot work.
9. Professional management:
A company is management by the board of directors and also the bord of directors is elected by
the shareholders of a company.
10. Number of shareholders:
The number of member-ship is determined by the provision of law. Under Company Act, the
minimum number of shareholders is two in case of private company and seven in case of public
company. On the same way, the maximum number of shareholders is fifty in case of private
company and unlimited for public company.
11. Registration:
A company comes into existence in Bangladesh only after registration under the companies Act,
1994.
12. Capacity to sue & be used:
The company being a body corporate, it can sue and be sued. So as a legal person the company
can file a suit against other in its own name and the suits can also can be filed against the
company’s name.

C. ‘A company is an artificial legal person completely separate and distinct

from its shareholders’ Explain?
Answer:
What are the different types of companies that are registered under the companies Act,
1994 in Bangladesh?
A) What is memorandum of association?
Ans:
The Memorandum of Association or MOA is the legal document that has to be filed with the
registrar of companies at the time of incorporation of the company. It is often called as a
memorandum and is comprised of fundamental conditions on the basis of which a company
operates.

The memorandum of association is the most important document that needs to be formulated
with utmost care. It is the document that governs the relationship between the company and the
outside. Memorandum of Association serves as the constitution of the company that defines all
the rules and regulations that must be complied by every company. It is mandatory for every
company that wants to get registered as a private/public limited to prepare the memorandum of
association.
B. Difference between memorandum of association and articles of association?
Ans:
Memorandum of association Articles of association
1. It is the principal document of a 1. It is the internal documents of a
company. It includes object, company. It is includes internal
power, and right of a company. operations rules.
2. It maintains the relation between 2. It maintains internal relations.
company and third party. 3. It is controlled by memorandum
3. It is the guidance and law of of association.
articles. 4. Company law and memorandum
4. Company law makes it. make it.
5. It maintains all general contents 5. It states and explains the content
of company. It must be of memorandum.
registered. 6. It is not obligated for registration.
6. Every company must have the 7. Joint Stock Company may not
memorandum. have this.
7. It cannot be altered without the 8. It can be altered without
permission of Court. permission of Court.

C. What is declaration of compliance? Draft a Specimen form of

declaration of compliance?
Answer:
The declaration of compliance is an online form that tells the pension’s regulator what you have
done to comply with your employer auto-enrolment duties. If this isn’t sent to the pension’s
regulator within 5 month of the 3rd anniversary of your staging start date, you could be fined.

Company No.
……………..

Declaration of Compliance
……………………………. (Name of Company)
I …………, I/C No. /Passport No…………of ………… sincerely declare the following.
 1. I am the person named in the articles as the first secretary of ………………. .
2. All the requirements of the company Act 1994 and the companies regulators in respect of
matters precedent to the registration of the company and incident to its registration have
been complied it.
3. As from the date of its incorporation the registered office of the company will be situated
at ……………..in the state of ………… post code………….. .
4. The first directors name in the articles of the company are as follows:
Name Address I/C No. / Date of Birth
Passport No.

5. The principal objects form which the company is incorporated are as follows:
(i) …………….
(ii) …………….
(iii) …………….
6. The authorized capital of the company is RM …………… share of RM ……… each.
Declared at …………. this ………..day of ……….. 20…….

……………………..
(Name)
(License No. / Present Body Membership No.)

D. Write down the contents of the articles association.

Answer:
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 directors.
5. Numbers of directors.
6. Appointment rules of management and secretary.
7. Remuneration of director.
8. Number and value and 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 condition 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, broker and managing agent.
20. Winding up procedure of company.

3. Winding

A. Define Winding Up?

Answer:
Winding up is the process of dissolving a company. While winding up, a company ceases to do
business as usual. Its sole purpose is to sell off stock, pay off creditors, and distribute any
remaining assets to partners or shareholders. The term is used primarily in Great Britain, where it
is synonymous with liquidation, which is the process of converting assets to cash.

B. Write down the different methods of winding up of a company?

Answer:
The different methods of winding up of a company are listed below:
1. Compulsory winding up by the court. 
2. Voluntary winding up without the intervention of the court. 
3. Voluntary winding up with the intervention of the court i.e., under the supervision of the court.