Chapter 1: Introduction
Company law governs the formation, operation, and regulation of companies. It establishes legal
principles for corporate entities, ensuring transparency, accountability, and fairness in business
operations.
Key Objectives of Company Law
• Defines the legal identity and structure of companies.
• Protects the rights of shareholders, directors, and stakeholders.
• Ensures compliance with corporate governance principles.
• Regulates financial disclosures and accountability.
Definition and Characteristics of a Company
A company is a legal entity formed by individuals to conduct business, recognized as a separate
legal person distinct from its owners.
Key Characteristics
Essential Features of a Company
1. Registration – A company must be registered under the relevant company law to gain
legal recognition.
2. Voluntary Association – It is formed by individuals who voluntarily come together to
conduct business for profit or a specific objective.
3. Legal Personality – Once registered, a company is considered a separate legal entity,
distinct from its owners and shareholders.
4. Contractual Capacity – A company can enter into contracts, sue, and be sued in its own
name.
5. Management – A company is managed by a Board of Directors elected by shareholders.
Directors oversee operations and strategic decisions.
Prepared by: Md. Tariqul Islam, Associate Professor, Dept. of Management Studies, FBA, PSTU.
Ref: Companies ACT 1994, Bangladesh
6. Capital – Companies raise capital through the issuance of shares or loans, allowing them
to finance operations and growth.
7. Permanent Existence – A company has perpetual succession, meaning it continues to
exist despite changes in ownership or management.
8. Registered Office – Every company must have a registered office, which serves as its
official address for legal and administrative purposes.
9. Common Seal – Traditionally, companies used a common seal as an official signature
for legal documents, though its requirement has been relaxed in some jurisdictions.
10. Limited Liability – Shareholders are liable only to the extent of their shareholding;
personal assets are protected from business liabilities.
11. Transferability – Shares of a public company can be freely transferred, allowing
investors to buy or sell ownership. Private companies may have restrictions on share
transfers.
12. Statutory Obligations – Companies must comply with legal requirements such as
financial reporting, audits, and tax regulations.
13. Not a Citizen – A company is recognized as a legal entity but does not possess
citizenship or fundamental rights like individuals.
14. Residence – A company is considered to reside in the country where it is incorporated
and primarily operates.
15. No Fundamental Rights – Unlike individuals, companies do not enjoy fundamental
rights under constitutional law, though they have legal protections.
16. Social Objective – While primarily profit-driven, companies also have corporate social
responsibilities, contributing to societal development.
17. Centrally Administered – The management and decision-making of a company are
centralized under the Board of Directors and executive leadership.
Prepared by: Md. Tariqul Islam, Associate Professor, Dept. of Management Studies, FBA, PSTU.
Ref: Companies ACT 1994, Bangladesh
Types of Companies
Type of Company Description
Restricted share transfer, limited number of
Private Limited Company
shareholders (e.g., family businesses).
Can issue shares to the public, subject to regulatory
Public Limited Company
oversight.
One-Person Company (OPC) Owned by a single individual, limited liability benefits.
Combines features of partnerships and companies, with
Limited Liability Partnership (LLP)
limited liability.
Government Company Company owned or controlled by the government.
Non-Profit Organization
Works for charitable purposes without profit motive.
(NGO/Section 8 Company)
Key Features of Private and Public Limited Companies in Bangladesh with Examples
1. Private Limited Company
A Private Limited Company (Pvt. Ltd.) in Bangladesh is a business entity that operates
privately with restrictions on share transferability and ownership. It is the most common form of
business structure in the country.
Key Features of a Private Limited Company in Bangladesh
Feature Description
A separate legal entity incorporated under the Companies Act
Legal Recognition
1994.
Number of Shareholders Minimum: 2, Maximum: 50.
Shares cannot be freely transferred without the consent of other
Share Transferability
shareholders.
Prepared by: Md. Tariqul Islam, Associate Professor, Dept. of Management Studies, FBA, PSTU.
Ref: Companies ACT 1994, Bangladesh
Feature Description
Stock Exchange Listing Not listed on any stock exchange.
No mandatory minimum capital requirement (as per Companies
Capital Requirement
Act).
Liability of Shareholders Limited to the extent of their shareholding.
Management &
Managed by directors, appointed by shareholders.
Governance
Regulatory Compliance Fewer compliance requirements compared to public companies.
Public Subscription of
Cannot raise capital from the public.
Shares
Disclosure & Reporting Less stringent financial disclosure requirements.
Perpetual Existence Exists beyond the lifetime of its owners.
Examples of Private Limited Companies in Bangladesh
1. Pran-RFL Group Pvt. Ltd. – A leading FMCG and manufacturing company.
2. Akij Group Pvt. Ltd. – A diversified conglomerate in industries like tobacco, ceramics,
and textiles.
3. Bashundhara Group Pvt. Ltd. – A major player in real estate, paper, and cement
industries.
4. Square Toiletries Ltd. – A subsidiary of Square Group, operating in consumer goods.
Public Limited Company
A Public Limited Company (PLC) in Bangladesh is a business entity that can raise funds from
the public by issuing shares, usually listed on a stock exchange.
Prepared by: Md. Tariqul Islam, Associate Professor, Dept. of Management Studies, FBA, PSTU.
Ref: Companies ACT 1994, Bangladesh
Key Features of a Public Limited Company in Bangladesh
Feature Description
Legal Recognition A separate legal entity incorporated under the Companies Act 1994.
Number of Shareholders Minimum: 7, No maximum limit.
Share Transferability Shares can be freely bought and sold by the public.
Can be listed on Dhaka Stock Exchange (DSE) or Chittagong
Stock Exchange Listing
Stock Exchange (CSE).
Capital Requirement Must meet minimum capital requirements set by BSEC.
Liability of Shareholders Limited to the extent of their investment in shares.
Management &
Managed by a Board of Directors, elected by shareholders.
Governance
Regulatory Compliance Must comply with RJSC, BSEC, and Stock Exchange regulations.
Public Subscription of Can raise funds from the public through IPO (Initial Public
Shares Offering).
Must publish annual financial reports and disclose key business
Disclosure & Reporting
operations.
Perpetual Existence Continues operations regardless of ownership changes.
Examples of Public Limited Companies in Bangladesh
1. Grameenphone Ltd. (GP) – The largest telecom company in Bangladesh, listed on
DSE.
2. BRAC Bank Ltd. – A leading commercial bank, publicly traded.
3. BEXIMCO Pharmaceuticals Ltd. – A top pharmaceutical company in Bangladesh,
listed on DSE & CSE.
4. Robi Axiata Ltd. – The second-largest mobile network operator, publicly listed.
5. British American Tobacco Bangladesh (BATB) – A major player in the tobacco
industry, publicly traded.
Prepared by: Md. Tariqul Islam, Associate Professor, Dept. of Management Studies, FBA, PSTU.
Ref: Companies ACT 1994, Bangladesh
Difference Between a Private Company and a Public Company in Bangladesh
Basis of
Private Company Public Company
Comparison
A company that restricts the A company that offers its shares to the
Definition transfer of its shares and has a public and is listed on the stock
limited number of shareholders. exchange.
Governed by the Companies Act 1994
Governed by the Companies Act and regulated by the Bangladesh
Regulating Law
1994 (Bangladesh). Securities and Exchange
Commission (BSEC).
Number of
Minimum: 2, Maximum: 50. Minimum: 7, No maximum limit.
Shareholders
Freely transferable; shares can be
Restricted; shareholders need
Share traded on the Dhaka Stock Exchange
approval before transferring
Transferability (DSE) or Chittagong Stock Exchange
shares.
(CSE).
Stock Exchange
Not listed on stock exchanges. Listed on stock exchanges (DSE, CSE).
Listing
Public Can raise capital from the public
Cannot invite the public to
Subscription of through an Initial Public Offering
subscribe to shares.
Shares (IPO).
Fewer legal and compliance
Regulatory requirements under the RJSC Strict compliance with RJSC, BSEC,
Compliance (Registrar of Joint Stock and DSE/CSE regulations.
Companies & Firms).
Disclosure Must disclose financial statements and
Limited financial disclosure.
Requirements business activities publicly.
Management and Managed by a small group of Managed by a Board of Directors,
Prepared by: Md. Tariqul Islam, Associate Professor, Dept. of Management Studies, FBA, PSTU.
Ref: Companies ACT 1994, Bangladesh
Basis of
Private Company Public Company
Comparison
Decision-Making owners, often family members. with oversight from shareholders and
regulatory bodies.
Must conduct annual audits and submit
Audit Audit requirements are generally
financial reports to BSEC and stock
Requirements less strict.
exchanges.
Example Private Companies: Pran-RFL Public Companies: Grameenphone
Companies in Group, Akij Group, Bashundhara Ltd., BEXIMCO Pharmaceuticals Ltd.,
Bangladesh Group, Square Toiletries Ltd. BRAC Bank
Conversion of a Private Company into a Public Company & Vice Versa in Bangladesh
The transformation of a private company into a public company or vice versa in Bangladesh is
governed by the Companies Act 1994 and regulated by the Registrar of Joint Stock
Companies & Firms (RJSC) and, for public companies, the Bangladesh Securities and
Exchange Commission (BSEC).
1. Conversion of a Private Company into a Public Company
Reasons for Conversion
• To raise capital from the public through an Initial Public Offering (IPO).
• To expand business operations and enhance market credibility.
• To comply with legal or investor requirements.
Step-by-Step Procedure
Step 1: Amend the Memorandum & Articles of Association (MoA & AoA)
• Remove the restrictions on share transferability.
• Increase the maximum number of shareholders beyond 50.
Prepared by: Md. Tariqul Islam, Associate Professor, Dept. of Management Studies, FBA, PSTU.
Ref: Companies ACT 1994, Bangladesh
• Change the company’s name by removing the word "Private" (e.g., "ABC Pvt. Ltd." to
"ABC Ltd.").
• Obtain approval from the Board of Directors.
Step 2: Hold a General Meeting
• Pass a special resolution to approve the conversion.
• File the special resolution with the RJSC within 30 days.
Step 3: File Application to RJSC
• Submit a formal application along with:
o Updated MoA & AoA.
o Special resolution documents.
o Board resolution for conversion.
Step 4: Compliance with BSEC (If Listing on Stock Exchange)
• If the company plans to issue shares to the public, it must comply with BSEC
regulations.
• Submit a prospectus to the BSEC for approval before issuing shares via IPO.
Step 5: RJSC Issues a New Certificate
• Upon approval, RJSC will issue a Fresh Incorporation Certificate, changing the
company’s status to a Public Limited Company.
• The company must now comply with public company obligations, including audits,
disclosures, and governance regulations.
Step 6: Apply for Stock Exchange Listing (Optional)
• If the company wants to trade shares publicly, it must be listed on the Dhaka Stock
Exchange (DSE) or Chittagong Stock Exchange (CSE).
• File an IPO application with BSEC and comply with listing requirements.
Prepared by: Md. Tariqul Islam, Associate Professor, Dept. of Management Studies, FBA, PSTU.
Ref: Companies ACT 1994, Bangladesh
2. Conversion of a Public Company into a Private Company
Reasons for Conversion
• To avoid strict regulatory requirements for public companies.
• To reduce costs related to stock exchange listing and compliance.
• To limit ownership and regain control of the company.
Step-by-Step Procedure
Step 1: Board Meeting & Approval
• The Board of Directors must pass a resolution approving the conversion.
Step 2: Amend the Memorandum & Articles of Association
• Insert restrictions on share transfer.
• Limit the number of shareholders to 50 or fewer.
• Change the company’s name to include "Private" (e.g., "XYZ Ltd." to "XYZ Pvt.
Ltd.").
Step 3: Hold a General Meeting
• Pass a special resolution to approve the conversion.
• File the special resolution with RJSC within 30 days.
Step 4: Seek Approval from RJSC & BSEC (If Listed)
• If the company is listed on the stock exchange, it must:
o Seek approval from the BSEC.
o Notify shareholders and regulatory authorities.
o Delist its shares from the DSE or CSE following stock exchange procedures.
Step 5: Submit an Application to RJSC
Prepared by: Md. Tariqul Islam, Associate Professor, Dept. of Management Studies, FBA, PSTU.
Ref: Companies ACT 1994, Bangladesh
• Submit an application along with:
o The updated MoA & AoA.
o Board resolution and shareholder approval.
Step 6: RJSC Issues a New Certificate
• Upon approval, RJSC issues a Fresh Incorporation Certificate, changing the
company’s status to a Private Limited Company.
Key Differences in Compliance After Conversion
Aspect Private Company Public Company
Minimum Shareholders 2 7
Maximum Shareholders 50 No limit
Share Transfer Restricted Freely transferable
Listing Requirement Not listed Listed on DSE/CSE (optional)
Regulatory Authority RJSC RJSC & BSEC
Financial Disclosure Limited Mandatory audits & disclosures
Board of Directors Less regulated Stricter governance
Prepared by: Md. Tariqul Islam, Associate Professor, Dept. of Management Studies, FBA, PSTU.
Ref: Companies ACT 1994, Bangladesh