Company Act, 1994 – A Foundation for Corporate Governance in Bangladesh

The Company Act, 1994 is the primary legislation governing company formation, operation, and dissolution in Bangladesh. It provides a comprehensive legal framework for different types of companies and ensures proper regulation of corporate activities.

Objectives of the Act

• To regulate company incorporation and registration.
• To provide governance and accountability of directors and shareholders.
• To ensure transparent financial reporting and auditing.
• To facilitate legal procedures for mergers, acquisitions, and liquidation.

Types of Companies under the Act

1. Private Limited Company – Most common form; requires at least 2 and no more than 50 shareholders.
2. Public Limited Company – Can invite the public to subscribe to shares and must have at least 7 shareholders.
3. One Person Company (OPC) – Introduced in recent years to promote entrepreneurship with single ownership.

Key Provisions of the Company Act, 1994

1. Incorporation of Companies

• Requires submission of Memorandum and Articles of Association to the Registrar of Joint Stock Companies and Firms (RJSC).
• Company name approval and digital registration process are mandatory.

2. Memorandum and Articles of Association

• The Memorandum outlines the objectives and scope of the company.
• The Articles define internal management, voting rights, meetings, etc.

3. Management and Directors

• At least two directors are required for private companies, and three for public companies.
• Directors are responsible for fiduciary duties, financial transparency, and regulatory compliance.

4. Share Capital and Allotment

• The Act defines authorized, paid-up, and issued capital structures.
• Shares can be transferred under rules set out in the company’s Articles.

5. Financial Statements and Audits

• Annual general meetings (AGMs) are compulsory for public companies.
• Audited financial statements must be submitted to RJSC.

6. Winding Up and Liquidation

• Voluntary or court-ordered winding up is allowed under the Act.
• A liquidator is appointed to settle debts and distribute assets.

Role of RJSC

The Registrar of Joint Stock Companies and Firms (RJSC) is the regulatory body for companies in Bangladesh. All companies must be registered with the RJSC and comply with reporting requirements.

Recent Reforms and Digitization

In recent years, Bangladesh has taken steps to digitize company registration and streamline governance practices. Online name clearance, e-filing, and company database searches have been introduced through the RJSC portal.

Impact on Business and Finance

• Improves ease of doing business and investor confidence.
• Promotes accountability, governance, and transparency.
• Helps align Bangladeshi corporate practices with international standards.

Conclusion

The Company Act, 1994 plays a vital role in supporting the legal and structural foundation of businesses in Bangladesh. Understanding this Act is essential for entrepreneurs, bankers, legal professionals, and anyone involved in corporate operations.