Corporate Law

Corporate Law in Bangladesh is governed by several statutes, regulations, and practices that form the legal framework for the formation, operation, and dissolution of companies. The primary legislation governing corporate activities is the Companies Act, of 1994. Additionally, the **Bangladesh Securities and Exchange Commission (BSEC), the Bangladesh Bank, and other regulatory bodies play crucial roles in overseeing corporate practices.

Overview of Corporate Law in Bangladesh:

1. Companies Act, 1994:

– Formation of Companies:
– Types of Companies: The Companies Act, of 1994, recognizes several types of companies:
– Private Limited Companies
– Public Limited Companies
– Companies Limited by Guarantee
– Unlimited Companies
– Incorporation Process: Incorporation begins with the filing of a Memorandum of Association and Articles of Association with the Registrar of Joint Stock Companies and Firms (RJSC). Other required documents include:
– Declaration of Compliance
– Statement of Nominal Capital
– Notice of Situation of Registered Office
– Minimum Capital Requirement: The minimum paid-up capital requirement for private limited companies is typically BDT 100,000, while for public companies, it’s BDT 500,000.

– Corporate Structure:
– Shareholders: The owners of the company are the shareholders. In a private company, the number of shareholders cannot exceed 50.
– Directors: A company must have at least two directors, and directors must be individuals. The law outlines the responsibilities and duties of directors, which include fiduciary duties, the duty to act within powers, and the duty to promote the success of the company.
– Company Secretary: Every company must appoint a Company Secretary who is responsible for ensuring compliance with statutory and regulatory requirements.

– Corporate Governance:
– Board Meetings: Companies are required to hold board meetings periodically. The frequency and manner of these meetings are usually stipulated in the Articles of Association.
– Annual General Meeting (AGM): Companies must hold an AGM each year within a certain period after the end of the financial year. The AGM is where shareholders discuss and approve the financial statements, dividends, appointment of auditors, and other important matters.
– Statutory Audit: Every company must appoint an auditor who will audit the financial statements. The audit report is presented at the AGM.

2. Securities Laws:

– Securities and Exchange Ordinance, 1969: This ordinance regulates the capital markets, and securities transactions, and protects the interests of investors. It also governs the issuance of securities, listing requirements, and the disclosure obligations of publicly listed companies.
– Bangladesh Securities and Exchange Commission (BSEC): The BSEC is the regulatory authority for the securities market in Bangladesh. It ensures the protection of investors, fair market practices, and the promotion of the securities market.
– Listing Requirements: Companies seeking to be listed on the stock exchanges must comply with the listing regulations set by the BSEC, which include financial disclosure, corporate governance practices, and minimum capital requirements.

3. Bankruptcy and Insolvency Laws:

– Bankruptcy Act, 1997: This act governs the process of declaring a company bankrupt. It outlines the procedures for debt recovery, asset distribution among creditors, and the liquidation of a company.
– Insolvency Proceedings: The insolvency process can be initiated by creditors or the company itself if it is unable to pay its debts. The court oversees the insolvency proceedings and appoints an official receiver to manage the liquidation.

4. Labor Laws and Corporate Responsibilities:

– Bangladesh Labor Act, 2006: This act regulates labor practices within companies, including employment terms, wages, working conditions, and workers’ rights.
– Corporate Social Responsibility (CSR): Although not strictly mandated by law, companies in Bangladesh are increasingly expected to engage in CSR activities. BSEC encourages listed companies to adopt CSR policies.

5. Foreign Investment Laws:

– Foreign Private Investment (Promotion and Protection) Act, 1980: This act protects foreign investments in Bangladesh. It guarantees non-discriminatory treatment, protection against expropriation, and repatriation of capital and profits.
– Investment Promotion: The Bangladesh Investment Development Authority (BIDA) is responsible for promoting and facilitating foreign investments. It provides various incentives, such as tax holidays, duty-free import of capital machinery, and exemption from double taxation.

6. Taxation of Companies:

– Income Tax Ordinance, 1984: Corporate taxation is governed by the Income Tax Ordinance, which imposes taxes on the profits of companies. The tax rates vary depending on the type of company, with separate rates for publicly listed companies, non-listed companies, and banks.
– Value Added Tax (VAT): Companies are required to comply with VAT laws, as stipulated in the VAT and Supplementary Duty Act, 2012.

7. Environmental Laws:

– Environment Conservation Act, 1995: Companies must comply with environmental regulations, including obtaining necessary clearances and permits, adhering to environmental standards, and ensuring that their operations do not harm the environment.

8. Intellectual Property Laws:

– Trademark Act, 2009: Protects brand names, logos, and other marks used by companies.
– Patent and Design Act, 1911: Protects innovations and industrial designs.
– Copyright Act, 2000: Protects original works of authorship, including software, literature, and art.

9. Anti-Corruption and Anti-Money Laundering:

– Anti-Corruption Commission Act, 2004: Establishes the Anti-Corruption Commission (ACC) to prevent and investigate corruption in both public and private sectors.
– Money Laundering Prevention Act, 2012: Imposes obligations on companies to prevent money laundering, including the requirement to report suspicious transactions to the Bangladesh Financial Intelligence Unit (BFIU).

10. Dispute Resolution:

– Arbitration Act, 2001: Provides a legal framework for resolving commercial disputes through arbitration. Companies can choose arbitration as an alternative to litigation.
– Civil Courts: Companies can also resolve disputes through the civil courts, including the High Court Division, which has original jurisdiction in corporate matters.

11. Dissolution and Winding Up:

– Voluntary Winding Up: Companies can voluntarily wind up by passing a special resolution. The company must settle all debts, and any remaining assets are distributed among shareholders.
– Compulsory Winding Up: The court may order the compulsory winding up of a company under certain conditions, such as insolvency or failure to comply with statutory requirements.

12. Corporate Ethics and Compliance:

– Companies are expected to adhere to ethical standards, including compliance with anti-bribery laws, fair competition, and the protection of stakeholder interests.

Conclusion:

Corporate law in Bangladesh is comprehensive and covers various aspects of company operations, from incorporation to dissolution. The legal framework is designed to promote transparency, protect stakeholders, and ensure that companies operate in a manner that contributes to the economic development of the country while complying with legal and regulatory requirements.

For companies operating in or entering the Bangladeshi market, understanding and complying with these laws is essential for successful and sustainable business operations.