Assignment on
Converting a startup into public Ltd. Company
Fund raising by IPO: legal aspects and requirements by BSEC
#Course Name: Entrepreneurship
#Course Code: 315
Submitted To:
Shaheen Ahmed Chowdhury
Assistant professor
Department of Marketing
Faculty of Business Studies
University of Dhaka
Submitted By:
Habiba Anam
Roll: 163
Section A
B.B.A. 19th Batch
Department of Marketing
Faculty of Business Studies
University of Dhaka
Date of Submission
7th May, 2015
How to convert a startup into public Ltd. Company?
Fresh entrepreneurs and startup enthusiasts usually face a conundrum of what form of business
should they start with. Identifying the best choice involves balancing a range of factors. It has
been observed that most of the startups are formed as a private limited company. And if it needs
to be converted into public limited company, certain procedures are to be followed.
Conversion of a Startup Company into a Public Company requires following step-
1. A resolution needs to be passed in a board meeting approving the conversion.
2. The minimum paid up capital of the company needs to be increased from Taka 1 lakh to
Taka 5 lakh.
3. A special resolution is to be passed in a general meeting with the shareholders for the
amendment of the name clause in the Memorandum of Association and removal of
restrictive provisions in the Articles of Association.
4. Application to the Registrar of Companies with the following:
a. Form No. 23 which is for the registration of resolutions. This requires basic
information about when the resolution was passed and the purpose for the same.
b. A prospectus or a statement in lieu of prospectus needs to be filed which describes
the business of the company, its performance, investment strategies and the
company’s performance.
5. A certificate of commencement is required in order to start business as a public limited
company.
How Fund Is Raised Through IPO
Getting a piece of a hot IPO is very difficult, if not impossible. The months-long process starts
with retaining a law firm to engage in the tedious process of assembling the detailed public
disclosures needed in the Initial Public Offering prospectus.
The first thing is the interviewing and selecting of an investment bank or group of
investment banks that will handle the underwriting.
The company and the investment bank will first meet to negotiate the deal.
The underwriter sells securities for the company but doesn't guarantee the amount rose.
Once all sides agree to a deal, the investment bank puts together a registration statement
to be filed with the BSEC.
The SEC then requires a cooling off period, in which they investigate and make sure all
material information has been disclosed. Once the SEC approves the offering, a date (the
effective date) is set when the stock will be offered to the public.
As the effective date approaches, the underwriter and company sit down and decide on
the price.
Finally, the securities are sold on the stock market and the money is collected from
investors.
Legal aspects and requirements by BSEC to use of IPO funds
There are certain rules and regulations imposed by BSEC (Bangladesh Security & Exchange) for
raising fund through IPO. And this legal aspects and requirements are certainly to be met to get
fund through by IPO.
Legal Aspects & Requirements
Newly listed firms will not be allowed to offer rights shares for up to two years from the
date of publishing an IPO prospectus, and before utilization of the IPO proceeds.
Other listed firms will also not be allowed to offer rights shares before full utilization of
funds raised through the previous rights issue or repeat a public offer.
The OTC (over-the-counter) market issues, if allowed fresh listing, will not be entitled to
issue rights shares before completing three financial years from the date of fresh listing.
Companies will be barred from using more than a third of the funds raised in an initial
public offering (IPO) to repay loans.
A 3-year lock-in will be imposed on the shares transferred by the existing sponsors or
directors to any person, other than existing shareholders.
All money received against allotment of shares or in the form of share money deposit will
have to be kept in a separate bank account, and all amounts larger than Taka 5 lakh will
have to be deposited through account payee cheques or pay orders.