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Here's the simplified full explanation of your provided text excluding the summary
part:

Definition of Company (In Simple Words)

A company is a group of people who come together to do business and earn profit. It’s a
formal business organization that is created according to the law.

The word “company” has been used since the 13th century.

Types of Definitions

(a) General Definition

A company is an association of persons who come together to run a business for earning
profit.

(b) Definitions by Legal Scholars

1.​ Chief Justice Marshall: A company (corporation) is not a natural person, but a
legal creation. It only exists because the law allows it.
2.​ Haney: A company is a legal person created by law, has a separate identity, lives
forever, and has a common seal.
3.​ Lindley: People contribute money to a company, which is used in business. The
profits and losses are shared.
4.​ Y. K. Bushan: A company is like a person in the eyes of the law. It has its own name,
shares, limited liability, and can exist permanently.
5.​ T. E. Cain: He mentioned these points:
○​ A company is a separate person in law.
○​ Its property belongs to the company, not the members.
○​ A company must have members.

(c) Statutory Definition (Law-Based Definition)

●​ According to the Companies Act, 1994, a company is:

○​ One formed and registered under this law.
○​ An "existing company" means a company registered under earlier laws before
the current act came into force and is still operating.

Characteristics of a Company
Based on the definitions above, a company has some key characteristics:
(a) Legal Characteristics

1.​ Incorporated Association:​

○​ A company is born when it is registered.

○​ At least 7 persons are needed for a public company and 2 persons for a
private company (soon may allow just 1 person).
○​ Their names must be written in the Memorandum of Association (MoA).
2.​ Artificial Legal Person:​

○​ It’s not a natural person, but it can act through board of directors.
○​ Example: In Bates vs Standard Land Co., the court said the board is the
“brain” of the company.
3.​ Limited Liability:​

○​ If the company has debt or loss, the members (shareholders) will not lose
more than what they invested.
○​ Their liability is “limited.”
4.​ Separate Property:​

○​ The company owns its own property.

○​ Shareholders cannot claim this property as their own.
5.​ Perpetual Succession:​

○​ The company keeps existing even if owners or directors die.

○​ It does not “die” like a person.
6.​ Transferable Shares:​

○​ In a public company, shares can be sold or transferred freely.

○​ In a private company, this is restricted.
7.​ Common Seal:​

○​ A stamp used by the company to approve documents.

○​ It’s like the company’s signature.
8.​ Capacity to Sue and Be Sued:​

○​ The company can file a lawsuit or be sued in its own name.

9.​ Number of Shareholders:​

○​ Private Company: Minimum 2 members (may change to 1); maximum 50.

○​ Public Company: Minimum 7 members; no limit for maximum.
10.​Separate Legal Entity:​

●​ A company is legally different from its owners.​

 ●​ Important Case: Salomon vs Salomon & Co. Ltd.​

○​ Salomon created a company and transferred his business to it.

○​ When the company failed, the creditors wanted Salomon to pay from his own
pocket.
○​ Court said: The company and Salomon are two different persons. Company is
responsible, not Salomon.
●​ Lee vs Lee’s Air Farming Ltd.​

○​ Lee was a pilot and also owner of the company.

○​ He died in a crash.
○​ His wife claimed compensation.
○​ Court said: Lee and company are different. His wife can claim compensation.
●​ Other cases:​

○​ Macaura vs Northern Assurance Co.

○​ Dulia-Amalner Motor Transport vs Roychand
○​ These cases also support the principle that a company has a separate legal
identity.
11.​Company is Not a Citizen:
●​ It is not a citizen and does not have fundamental rights like a person.
●​ But it can claim rights available to non-citizens under the Constitution.

(b) Other Common Characteristics

1.​ Registration:​

○​ Company only becomes legal when it is registered.

○​ Partnership firms don’t require registration, but companies do.
2.​ Voluntary Association:​

○​ People join a company willingly.

3.​ Management:​

○​ Run by directors or managers (not all shareholders).

4.​ Capital:​

○​ A company must have capital to do business.

5.​ Statutory Obligations:​

○​ Companies must:
■​ Hold meetings.
■​ Maintain account books.
■​ Submit reports (balance sheets, etc.)
6.​ Residence:​
 ○​ A company has a legal address.
○​ Needed for taxes and other purposes.
7.​ Autonomous Body:​

○​ It runs independently within the rules of the law.

8.​ Definite Objectives:​

○​ A company must follow its purpose as written in its Memorandum and

Articles.
○​ Even if all shareholders agree, they cannot do anything outside the
objectives.
9.​ Liquidation:​

○​ Ending a company (winding up) needs legal steps.

○​ It’s not like closing a shop casually.

Is Company Treated as a Person in Law?

Yes, a company is treated as a legal person (not natural person). Here’s why:

●​ It has a separate identity.

●​ It can make contracts.
●​ It can own property.
●​ It can sue or be sued.
●​ It doesn’t die with the death of its shareholders.
●​ Salomon case proves that the company is a separate legal person.

However, the court may ignore this separation in some cases:

1.​ Fraud or Bad Intentions:​

○​ If the company is being used to cheat others.

○​ (e.g., Gilford Motor’s case)
2.​ Avoiding Taxes:​

○​ If a company is formed just to escape tax.

○​ (e.g., Commissioner vs Meenakhis Mills)
3.​ Enemy Company:​

○​ If the company is acting against the interest of the country.

4.​ Fewer Members than Law Requires:​

○​ If the number of members falls below legal limit, and still continues doing
business. [Section 222]
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Certainly! Here's a detailed and easy-to-understand explanation of the text you provided
— covering:

1.​ Lifting the Corporate Veil

2.​ Differences Between a Company and a Partnership​
(As requested, this explanation does not include any summary at the end.)

1.4 What is Meant by Lifting the Corporate Veil?

(i) What is Corporate Veil?

The corporate veil is like a shield or curtain between the company and the people who
manage or own it (like directors or shareholders).

●​ When a company signs a contract or does business, outsiders only deal with the
company — not the people behind it.
●​ The law treats the company as a separate legal person, so courts normally do not
look behind to see who is actually running it.
●​ This is called "drawing the corporate veil" — meaning the court respects the
company’s separate identity.

(ii) What is Lifting the Corporate Veil?

But in some special situations, courts do look behind the company to find out:

●​ Who is really in control

●​ Who is responsible for wrongdoing
●​ Whether the company is being used to cheat people, commit fraud, or break
the law

This is called “lifting the corporate veil.” When the veil is lifted, the individuals (owners,
directors, promoters) may be held personally responsible for the company’s actions.

When Do Courts Lift the Corporate Veil?

Courts will only lift the veil in exceptional cases, such as:

●​ To stop fraud
●​ To protect public interest
●​ To ensure justice
 ●​ To collect taxes
●​ When required by law (statutes)

These situations can be grouped into two categories:

(i) Cases Where the Corporate Veil is Lifted by Law

(Statutory Provisions)
The Companies Act gives clear situations when the veil may be lifted:

(a) Reduction of Members Below the Minimum Limit (Section 222)

●​ A public company must have at least 7 members, and a private company needs
2.
●​ If a company continues running for more than 6 months with fewer than the required
number of members, then the remaining members can be personally liable for any
debts the company takes during that time.
●​ This lets creditors look behind the veil to count the members.

(b) Fraudulent Trading (Section 259)

●​ If, during winding up (closing the company), it is found that the company was running
its business with the intent to cheat creditors, the real persons behind such
activities can be made personally responsible.

(c) Wrong Use of Company Name (Section 225)

●​ Legally, all documents must clearly mention the company’s name.

●​ If someone (a director or any officer) signs contracts without mentioning the
company’s name, they are personally liable.
●​ So, the court can lift the veil to find who made the contract.

(d) Holding and Subsidiary Companies

●​ A holding company controls a subsidiary by owning most of its shares.

●​ Legally, both are separate entities.
●​ But if the subsidiary is just a front (a tool) for illegal acts, fraud, or to cheat
creditors, courts can treat both as one by lifting the veil.
●​ This helps prevent the misuse of the separate identity.
(e) Investigation of Company Affairs (Sections 195, 197, 199)

●​ If the government suspects wrongdoing (like fraud, tax evasion, or financial

misconduct), it can appoint inspectors to look behind the corporate veil.
●​ Inspectors can:
○​ Identify real owners
○​ See who controls the company
○​ Check if other related companies are involved
●​ Especially useful for:
○​ Subsidiary companies
○​ Associated companies
○​ Group of companies

(f) For Tax Evasion

●​ If a company is set up just to avoid paying taxes, the court may ignore the
company’s separate legal status and make individuals pay taxes directly.
●​ Tax is considered a public demand, so the court prioritizes revenue.

(ii) Lifting the Veil by Court Decisions (Judicial

Interpretation)
Sometimes courts lift the veil even when the law doesn’t specifically say so. These are
based on past court rulings (case law):

(a) To Find Out Company’s Character

●​ If there is a suspicion that the company is being used by an enemy or enemy state,
the court may look behind the veil.
●​ For example: In war time, courts may check if a company is being used by enemy
nationals, even if it is registered locally.

1.5 Difference Between a Company and a Partnership

A company and a partnership are both business organizations — but they are very
different in many ways:
(i) Definition

●​ Company: A company is a legal group of people formed for business purposes, and
registered under the Companies Act.
●​ Partnership: A partnership is a relationship between people who agree to share the
profits of a business they run together.

(ii) Legal Entity

●​ Company: Has a separate legal identity from its owners (shareholders).

●​ Partnership: No separate legal status — partners and firm are the same.

(iii) Liability

●​ Company: Shareholders’ liability is limited to the value of their shares.

●​ Partnership: Partners are jointly and personally responsible for all debts of the
business.

(iv) Transfer of Ownership

●​ Company: Shares (especially in public companies) can be freely transferred.

●​ Partnership: A partner cannot transfer his share without the consent of others.

(v) Perpetual Succession

●​ Company: Continues to exist even if shareholders die or leave.

●​ Partnership: Ends if a partner dies or retires, unless stated otherwise in the
agreement.

(vi) Contract with the Entity

●​ Company: A shareholder can enter into a contract with the company.

●​ Partnership: A partner cannot contract with the firm, since they are the same legal
entity.

(vii) Number of Members

 ●​ Company:
○​ Private company: 2–50 members
○​ Public company: 7 or more
●​ Partnership:
○​ Max 10 members for banking business
○​ Max 20 for other businesses

(viii) Ownership of Property

●​ Company: Owns property independently. No member can claim it as their own.

●​ Partnership: Property is jointly owned by the partners.

(ix) Power to Bind Others

●​ Company: A shareholder cannot bind the company unless authorized.

●​ Partnership: Any partner can bind the firm and other partners by their actions
during business.

(x) Accounts and Audit

●​ Company: Must keep proper records and audited accounts are compulsory.
●​ Partnership: No legal requirement to audit, unless partners agree to it.

(xi) Alteration of Documents

●​ Company: Governed by Memorandum (MoA) and Articles (AoA) — changes

allowed only under legal rules.
●​ Partnership: Based on a partnership agreement, which can be changed easily by
mutual consent.

(xii) Registration

●​ Company: Mandatory to register.

●​ Partnership: Optional registration.

(xiii) Statutory Obligations

 ●​ Company: Must follow many rules — meetings, record keeping, capital
maintenance, etc.
●​ Partnership: Fewer legal formalities and obligations.

Let me know if you’d like these converted into slides or a visual comparison table!

Here’s a simple and detailed explanation of the text you provided, written in easy
language and organized by section, without the summary part as you requested:

🔹 2.1 Classification of Companies by Mode of

Incorporation
This means how a company is formed or created. Based on this, there are 3 types of
companies:

(a) Chartered Companies

●​ These are very old types of companies.

●​ They were created by special permission (a charter) from a king or queen.
●​ Example: East India Company, Bank of England.
●​ They had special powers written in their charter.
●​ These kinds of companies do not exist now in our country.

(b) Statutory Companies

●​ These are companies created by a special law passed by the Parliament.

●​ They don’t have the usual documents like Memorandum of Association or Articles of
Association.
●​ Their powers come from the law itself, not from internal documents.
●​ Purpose: These are not created to make profit, but to provide services to the
public.
●​ Examples: Bangladesh Bank, BRTC, WASA.

(c) Registered (or Incorporated) Companies

●​ These are companies formed under the Companies Act, 1994.

●​ They are the most common type of companies.
●​ They must have a Memorandum of Association and Articles of Association.
●​ They are divided into:
○​ Companies limited by shares
○​ Companies limited by guarantee
🔹 2.2 Classification of Companies by Liability of
Members
Liability means how much a member (or shareholder) has to pay if the company faces
losses or debts. Based on this, companies are 3 types:

(a) Company Limited by Shares

●​ This type of company has a share capital.

●​ Each share has a fixed price.
●​ Members (shareholders) are responsible to pay only up to the face value of their
shares.
●​ If the company suffers loss, they don’t have to pay more.
●​ This is the most common type in our country.

(b) Company Limited by Guarantee

●​ Members promise to pay a certain amount (a guarantee) if the company is shut

down and has debts.
●​ Sometimes they may also buy shares.
●​ They are not required to pay more than the share + guarantee.
●​ Mostly used for non-profit organizations.

(c) Unlimited Company

●​ In this company, there is no limit on how much members must pay if the company is
in debt.
●​ Members may have to use their personal assets to pay the debts.
●​ These types of companies are very rare nowadays.

🔹 2.3 Classification Based on Number of Members

There are two types based on the number of members:

(i) Public Limited Company

●​ The Companies Act, 1994 says that any company that is not a private company is
a public company.
●​ Important characteristics:
○​ Minimum 7 members, no maximum limit.
○​ Can issue a prospectus (an invitation to the public to buy shares).
○​ Shares are freely transferable.
○​ Must have at least 3 directors.
○​ Needs Certificate of Commencement before starting business.
 ○​ Must hold a Statutory Meeting and submit a Statutory Report to the
registrar.
○​ Must write “Limited” at the end of the company name.

(ii) Private Limited Company

●​ Defined in the Companies Act with three main rules:

○​ Cannot freely transfer shares.
○​ Maximum number of members is 50, excluding employees.
○​ Cannot invite the public to buy shares or debentures.
●​ Important characteristics:
○​ Minimum 2 members, maximum 50.
○​ Must write “Limited” at the end of the name.
○​ Can start business immediately after registration.
○​ Does not need to issue a prospectus.
○​ Has limited liability.
○​ Keeps business matters private/secret.

🔹 2.4 Differences Between Private and Public

Company
Let’s compare the two clearly:

Topic Private Company Public Company

Formation Easier and quicker More complicated

Members Min 2, Max 50 Min 7, no max limit

Business Start Immediately after Only after getting Certificate

registration of Commencement

Prospectus Not required Must issue it

Transfer of Shares Restricted Freely transferable

Capital Need Less More

Name Suffix "Limited" or "Ltd." "Public Limited Company" or

"PLC"

Directors At least 2 At least 3

Board of Directors Not needed every year Needed every year

Director’s Remuneration No fixed rule Decided in general meeting

 Statutory Meeting Not required Required within 6 months

Quorum (minimum 2-3 (based on total size) 5 members

members for meeting)

Voting Rights Directors can vote even if Cannot vote if there’s

interested personal interest

Articles of Association Must create own Can adopt standard one

(Schedule-I)

Public Subscription Cannot invite public Can invite public to buy

shares

Member Index Not required Must maintain

Share Warrants Cannot issue Can issue

Right Shares Not required to offer to Must offer to existing

existing shareholders shareholders first

Relationship Easier to maintain among Hard to maintain among

few members many

Let me know if you want a chart, MCQs, or notes for memorization based on this.

Sure! Here's a simple and detailed explanation of the provided sections from your
Company Law topic. I’ve broken it down into parts, using easy language while preserving all
the key points.

2.5 Registered and Unregistered Companies

Companies can be of two types based on whether they are officially registered:

(i) Registered Companies

●​ These are companies officially registered under the Companies Act, 1994.
●​ They have a legal identity and are protected by the law.
●​ Registered companies can be:
○​ Limited Companies (where liability of members is limited)
○​ Unlimited Companies (where liability is unlimited)

(ii) Unregistered Companies

●​ These are not officially registered under any company law.

●​ According to Section 371, an unregistered company does not include:
 ○​ Companies registered under the 1994 Act or earlier Acts.
●​ An association or partnership with more than seven members, which is not
registered, is called an unregistered company.
●​ Note: Legally, unregistered companies are not recognized as companies.

2.6 Holding and Subsidiary Company

Holding Company

●​ A holding company controls another company (called subsidiary).

●​ It may do this by:
○​ Owning more than 50% of shares
○​ Having more than 50% of voting rights
○​ Appointing directors in the other company
●​ It exercises control directly or indirectly.

Subsidiary Company

A company becomes a subsidiary if:

1.​ Board Control: Another company can appoint/remove its directors.

2.​ Control over Voting Securities: More than 50% of its voting power is held or
managed by another company.
3.​ Indirect Subsidiary: If a company is a subsidiary of another company which itself is
a subsidiary of a third company, the third company is also a holding company.

Example:

●​ A → B → C → D​
If A owns B, and B owns C, and C owns D, then A is the holding company of D
too.

2.7 Other Types of Companies

(a) Existing Company

●​ These are companies formed before the 1994 Act.

●​ Earlier, companies were governed by the Companies Act, 1911.
●​ If still operating after the 1994 Act, they are called existing companies.

(b) Foreign Company

 ●​ A company incorporated outside Bangladesh, but has a place of business in
Bangladesh.

Requirements for Foreign Companies:

1.​ Registration (Sec. 379):

○​ Submit constitution, list of directors, address, etc.
2.​ Changes must be reported to the Registrar.
3.​ Accounts must be submitted annually like Bangladeshi companies.
4.​ Name must show country of origin and nature of liability.
5.​ Some local company laws apply to foreign companies.
6.​ Fees must be paid for registration.
7.​ Prospectus must be issued if offering shares publicly.
8.​ Winding Up: Can follow its own country’s law or Bangladeshi law (Sec. 372).

(c) Non-Trading Association

●​ A non-profit organization, like those working in religion, charity, science,

education, etc.
●​ It is registered as a company but:
○​ Does not add “Limited” in its name.
○​ Has limited liability.
○​ Treated as a registered company.

(d) Special Company

●​ Registered under the Companies Act but regulated by a special law.

●​ Example: Insurance companies, which are also controlled by the Insurance Act,
1938.
●​ Where the special law matches the Companies Act, both apply.

2.8 Privileges of a Private Limited Company

Though public companies can raise more money and grow faster, private companies also
enjoy special advantages:

(a) Common Advantages

1.​ Easy Formation: Fewer rules and faster process.

2.​ Easy Management: Simple decision-making.
3.​ Efficient Management: Small team = more efficiency.
4.​ Quick Decisions: Fewer people = faster action.
5.​ Good Relations: Few shareholders = closer relationships.
6.​ Secrecy: Easier to keep business secrets.
7.​ Avoiding Unwanted People: Share transfers are restricted, so outsiders can’t easily
enter.
(b) Legal Advantages

1.​ Fewer Directors Required:

○​ Private: 2 directors
○​ Public: 7 directors minimum
2.​ Can Start Business Immediately:
○​ No need for special permission like public companies.
3.​ No Prospectus Required:
○​ No need to publish details to public.
4.​ Fewer Directors on Board:
○​ Only 2 needed in private companies.
5.​ No Statutory Meeting/Report:
○​ Public companies must submit, private companies don’t.
6.​ No Member Index Needed:
○​ Since private companies have fewer than 50 members.
7.​ Directors Can Vote Even If Personally Interested.
8.​ No Minimum Subscription Required:
○​ Public companies must raise a minimum capital. Private companies don't.

2.9 Conversion from Public to Private Company

Sometimes a public company wants to become a private company. This is allowed under
Section 232 of the Companies Act, 1994.

Reasons for Conversion

●​ Founders change their minds.

●​ Want to enjoy private company benefits.
●​ Don’t have 7 directors (minimum for public companies).

Legal Conditions

1.​ Members must be 50 or fewer at conversion.

2.​ Company’s Articles must be changed to reflect private status.
3.​ Secured creditors’ consent must be taken before passing the resolution.

Steps to Convert

1.​ Pass a Special Resolution:

○​ In a general meeting with ¾ majority.
2.​ Change Articles:
○​ Remove public company rules and add private ones:
■​ Limit members to 50
■​ Restrict share transfer
■​ Ban public subscription
 3.​ Change Company Name:
○​ Add “Private” to the name (optional).
4.​ Submit Documents:
○​ Send resolution and altered articles to the Registrar.

2.10 Conversion from Private to Public Company

A private company can also become a public company under Section 231.

Reasons for Conversion

●​ Want to raise capital publicly.

●​ Need more shareholders.
●​ Want to grow the business.

Legal Requirements

●​ Must have at least 7 members.

●​ Change Articles to:
○​ Allow share transfer.
○​ Allow public to buy shares/debentures.
○​ Set no limit on number of members.

Steps to Convert

1.​ Pass Special Resolution in general meeting.

2.​ Change Articles to reflect public company rules.
3.​ File Prospectus (or similar document) with Registrar within 30 days.
4.​ Increase Directors:
○​ Must have at least three directors.
○​ Submit updated list to the Registrar.

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Modes of Payment:

If contract authorizes then the remuneration may be paid in any of

following modes:-

(a) Commission on the purchase price;

(b) Granting a lump sum either in cash or in the from of shares;

(c) Commission at a fix rate on shares sold;

(d) Subscription within a fixed period for a certain Period of t Company's unissued shares.

Whatever be the modes of payment, any payment within the Preceding years or intended to
be paid or given to a promoter m normally be disclosed in a prospectus.

Here is a complete explanation of the “Promoter – Definition, Characteristics, Legal

Status, and Role” in Company Law (based on the Companies Act, 1994 of Bangladesh)
in English. This is suitable for exams and academic understanding:

Promoter: Definition, Characteristics, Legal Status, and

Role
Under the Companies Act, 1994

1. Definition of Promoter

The term "promoter" refers to the person or group of persons who take the initial steps to
form a company, bring together the persons who will be the first directors, and handle all
legal and procedural formalities to get the company registered.

📘 Note:​
The Companies Act, 1994 of Bangladesh does not provide an explicit definition of
"promoter." However, based on common law principles and judicial decisions, the term can
be understood as:

“A promoter is a person who undertakes to form a company with reference to a given

project and to set it going, and who takes the necessary steps to accomplish that
purpose.”​
— Justice C. Cockburn in Twycross v. Grant (1877)

2. Characteristics of a Promoter

●​ ✅ Initiator of Formation: The promoter is the one who initiates the process of
✅ Visionary Role: The promoter conceives the business idea and determines the
forming a company.
●​

✅ Organizer: Brings together investors, directors, and experts to support the

purpose of the company.
●​

✅ Preparatory Work: Handles drafting of Memorandum of Association (MoA),

formation.
●​
Articles of Association (AoA), and other documents.
 ●​ ✅ Not an Agent or Trustee (initially): Before incorporation, the promoter cannot be
✅ Fiduciary Relationship: Although not an agent/trustee legally, the promoter
called an agent or trustee of the company, because the company does not yet exist.
●​
holds a fiduciary position — they must act honestly and in good faith for the future
company.

3. Legal Status of Promoters

●​ ❗ Not Agent or Trustee Before Incorporation: Since the company does not
legally exist before incorporation, the promoter cannot act as an agent or trustee in a

✅
strict legal sense.
●​ Fiduciary Position: Courts consider the promoter to be in a fiduciary
relationship with the company. This means:
○​ The promoter must disclose all relevant facts and profits made during the
formation.
○​ Any secret profit made must be returned to the company.

📌 Case Reference:​
Gluckstein v. Barnes (1900) – It was held that promoters must not make any secret profit
and must disclose any benefit they obtain.

4. Role and Functions of a Promoter

The promoter performs the following important roles:

i. Discovery of Business Idea

●​ Thinks of a new business concept or opportunity.

ii. Detailed Investigation

●​ Examines feasibility (technical, legal, and financial).

iii. Assembling the Team

●​ Brings together first directors, subscribers, legal advisers, and experts.

iv. Name Selection

●​ Chooses a suitable name for the company and gets name clearance from RJSC.

v. Preparation of Documents

●​ Prepares:
○​ Memorandum of Association (MoA)
○​ Articles of Association (AoA)
 ○​ Forms and declarations required by RJSC

vi. Funding

●​ Arranges initial capital or approaches investors.

vii. Contracts and Agreements

●​ Enters into pre-incorporation contracts with third parties on behalf of the company.

viii. Registration with RJSC

●​ Submits all necessary documents and completes the process of incorporation under
the Companies Act, 1994.

5. Duties and Liabilities of Promoters

🔹 Must act in good faith

🔹 Must avoid conflicts of interest
●​

🔹 Must not make secret profits without full disclosure

●​

🔹 If they make profits, must disclose to the company or its board/shareholders

●​

🔹 Can be liable for fraud or misrepresentation in statements or contracts made

●​
●​
before incorporation

6. Remuneration of Promoters

A promoter is not automatically entitled to any payment or profit. They can be

compensated only if:

●​ There is a contract between the promoter and the company (after incorporation), or
●​ The company, once formed, formally agrees to pay them.

✅ Conclusion
A promoter plays a crucial role in the birth of a company. Though not legally recognized as
an agent or trustee before incorporation, a promoter holds a fiduciary position and must
act transparently and in the best interest of the future company. Their conduct must be
honest, and all profits must be disclosed. Company formation would be almost impossible
without the promoter’s initiative, vision, and organization.

Let me know if you'd like a PDF version or a Bangla translation of this explanation.
Alright, let’s go step-by-step and turn all of this into easy, clear, and detailed language,
while keeping the legal meaning intact. I’ll follow the same order as in your text so it’s easy
for you to match.

8.1 Allotment of Shares

Meaning – Agreement for Allotment

When a company wants to sell its shares to the public, it usually issues a prospectus — a
document inviting people to apply for shares.

●​ If someone wants to buy shares, they apply to the company.

●​ When the company accepts that application, this is called allotment of shares.

📌 Case laws:
●​ Nicol’s Case – Allotment is basically the company’s acceptance of a person’s offer to
buy shares.
●​ Spitzel vs. Chinese Corporation – Allotment means the directors assign specific
shares to a specific person. Once allotted, that person becomes a shareholder.

Unconditional Acceptance

For an allotment to be valid:

●​ It must be unconditional (no new conditions added).

●​ It must match the terms of the original application.​
Example: If a person applies for 50 shares but the company gives him only 20
shares, he can refuse unless the application form already said, “I agree to accept
any smaller number of shares that may be allotted to me.”

Communication of Allotment

The company must inform the applicant that the shares are allotted.

●​ Even if the letter is lost in the post, as long as it was properly sent, the person is
considered a shareholder.

📌 Case: Household Fire Insurance Co. vs. Grant – The letter of allotment was sent but
never reached the applicant. Still, the court held that he was a shareholder.
Revocation of Offer

●​ An application for shares can be withdrawn before the company accepts and
communicates the allotment.
●​ If the conditions for allotment are not met, the offer ends automatically.

8.2 General Principles of Allotment of Shares

1.​ Allotment by Proper Authority​

○​ Only those authorized by the company’s Articles of Association can allot

shares.
○​ Usually done by board of directors through a formal resolution.
○​ Can also be done by a person who has been delegated the power according

📌
to the Articles.​
Bank of Peswar Ltd. vs. Madho Ram – Directors wrongly delegated
allotment to the manager. Court held it was invalid.
2.​ Allotment in a Reasonable Time​

○​ The company must allot shares within a reasonable time after receiving

📌
applications.​
Ramlalsa Gupta vs. M.E.R. Malak – Applied in December, allotted in
August. Court said it was too late.
3.​ Allotment Must Be Communicated​

○​ The company must send the allotment letter to the correct address with
proper postage. Delay or loss in the post does not matter.
4.​ Allotment Must Be Absolute and Unconditional​

○​ It should match exactly what was applied for unless the applicant agreed
otherwise in advance.
○​ If terms change, the applicant can refuse unless they accept by their conduct.

8.3 Procedure for Allotment of Shares

(Under Companies Act, 1994)

1.​ Registration and Issue of Prospectus​

○​ Public company must first register its prospectus with the Registrar.
○​ Must issue it within 90 days after registration. [Sec. 138]
2.​ Minimum Subscription​
 ○​ No allotment unless at least 5% of the value of shares offered is paid in cash.
[Sec. 148(1)]
○​ Purpose: ensure the company has enough starting capital.
3.​ Deposit of Application Money in a Scheduled Bank​

○​ Money received from applicants must be deposited in a scheduled bank until

the company is allowed to start business. [Sec. 148(4)]
4.​ Refund if Minimum Subscription Not Reached​

○​ If not achieved within 180 days from first issue or 40 days from closing of
subscription list, all money must be refunded without interest. [Sec. 148(7)]
○​ Directors personally liable with 5% interest if they fail.
5.​ Opening Subscription List​

○​ Company can open subscriptions after publishing the prospectus, but cannot
allot before 8 days have passed from the publication. [Sec. 148(8)]
6.​ Closing Subscription List​

○​ On the decided date, subscription closes. No more applications accepted.

7.​ Statement in Lieu of Prospectus​

○​ If no prospectus is issued, company must file a statement in lieu at least 3

days before allotment. Not applicable to private companies. [Sec. 141]
8.​ Final Allotment by Board of Directors​

○​ After all requirements are met, the board meets and finalizes allotment.
9.​ Over-Subscription​

○​ If more applications than shares, allotment is usually done by lottery.

10.​Letter of Allotment​

○​ Sent to successful applicants based on official allotment lists.

8.4 Splitting of Shares

●​ If allowed in Articles of Association, a company can split one share into smaller
shares.
●​ Example: A Tk. 100 share split into 10 shares of Tk. 10 each.
●​ Purpose: make buying/selling easier.
●​ Must inform Registrar within 15 days of splitting. [Sec. 54(1)]
●​ Fine of Tk. 200 per day for default. [Sec. 54(2)]

8.5 Irregular Allotment

An allotment done without following legal rules is irregular.​
Reasons:

●​ No prospectus or statement in lieu issued. [Sec. 141]

●​ Less than 5% of share value received as application money. [Sec. 148]
●​ No minimum subscription achieved or money not deposited in a scheduled bank.
[Sec. 148]

8.6 Effect of Irregular Allotment (Sec. 149)

1.​ Voidable by Applicant​

○​ Applicant can cancel within 1 month after statutory meeting or allotment date.
○​ Must notify company, no need to go to court immediately.
2.​ Compensation from Directors​

○​ Directors knowingly involved must compensate for loss.

○​ Claim must be made within 2 years.
3.​ Fine​

○​ Directors can be fined for irregular allotment. [Sec. 148(5)]

8.7 Return as to Allotment (Sec. 151)

●​ Within 60 days of allotment, the company must file a return to the Registrar with:
○​ Number of shares allotted.
○​ Nominal value.
○​ Names, addresses, occupations of allottees.
○​ Amount paid on each share.

Special cases:

●​ If shares issued for non-cash consideration, must file stamped copy of agreement.
●​ If no written agreement exists, must file contract details with required stamp duty.

Extensions: Registrar may allow more time if applied for before the 60 days expire.

Penalty: Fine of up to Tk. 1,000 per day for default.

Exceptions: Court can excuse delay if due to accident or reasonable cause.

8.8 Issue of Shares at a Discount (Sec. 153)
●​ When shares are sold below face value (e.g., Tk. 100 share sold at Tk. 90).
●​ Conditions:
1.​ Must be shares of a class already issued before.
2.​ At least 1 year must have passed since company started business.
3.​ Must be authorized by a general meeting resolution and approved by court.

If you like, I can now make a clear flowchart showing all steps and legal conditions for
allotment of shares under the Companies Act, 1994 so it’s easier to memorize for exams.​
Do you want me to prepare that?

Alright — let’s break this text into simple, clear English while keeping all the important
details.

Topic: Issuing Shares at a Discount – Special Rules

Normally, companies sell their shares at their full face value (for example, if a share’s face
value is 100 Taka, they sell it for 100 Taka).​
However, in some situations, a company is allowed to sell shares for less than their face
value — this is called issuing shares at a discount.​
The Companies Act, 1994 allows this only under strict conditions.

Here’s what the text is saying, step by step:

1. Time Limit – Six Months from Court Approval

●​ Before issuing shares at a discount, the company must get court approval (also
called “sanction”).
●​ After approval, the company has only 6 months to issue these shares.
●​ If more time is needed, the court may allow an extension.
●​ Law reference: Section 153(1)(d).

Example:​
If a court approves the discount issue on 1st January, the company must issue the shares
before 30th June (unless the court extends the time).

2. Maximum Discount Rate

 ●​ The company must pass a special resolution deciding the maximum rate of
discount.
●​ The law says the discount cannot be more than 10% of the face value.
●​ Law reference: Section 153(1)(b).

Example:​
If a share’s face value is 100 Taka, the maximum discount allowed is 10 Taka.​
So the minimum selling price would be 90 Taka.

3. Mandatory Disclosure in Prospectus and Balance Sheet

●​ The company must clearly mention the discount details in:

1.​ Every prospectus related to this issue (a prospectus is a document inviting
people to buy shares).
2.​ Every balance sheet issued later by the company until the discount is fully
written off (paid for).
●​ This ensures transparency so investors know shares were issued below face value.
●​ Law reference: Section 153(2).

4. Penalty for Not Mentioning the Discount

●​ If the company fails to mention the discount details in:

○​ The prospectus, or
○​ The balance sheet,​
then:
■​ The company and
■​ Every officer responsible​
can be fined up to 500 Taka.
●​ Law reference: Section 153(3).

5. Obligation of Shareholders Who Got Discounted Shares

●​ Even if the shares were bought at a discount, once a person’s name is in the
company’s register of members, they are legally bound to pay the full face value of
their shares if required.
●​ This means a discount at issue does not reduce their liability in future.

Example:​
If someone bought a 100 Taka share for 90 Taka (10% discount), and later the company
needs unpaid capital, that shareholder must still pay the remaining amount to make the total
100 Taka.
✅ In short:
●​ Court approval needed.
●​ Issue shares within 6 months (or extended time).
●​ Discount max = 10%.
●​ Must mention in prospectus and balance sheet.
●​ Fine for not disclosing = up to 500 Taka.
●​ Shareholders still owe full face value.

If you want, I can now prepare a very easy table chart summarizing this so you can quickly
memorize it for exams. That would make revision much easier.

Alright — let’s break this down step-by-step into plain English while keeping all the details
intact so it reads like a clear textbook explanation.

8.9 Issue of Shares at a Premium

Meaning:​
When a company issues shares at a premium, it means the shares are sold at a price
higher than their face value (also called nominal value).

●​ Example: If the face value of a share is 100 Taka and the company sells it for 120
Taka, the extra 20 Taka is the premium.
●​ Companies can do this when they have a good reputation or strong market demand.
●​ All the premium money must be put into a separate account called the Share
Premium Account.

Rules under Section 57 of the Companies Act, 1994

1.​ Open a Share Premium Account​

○​ All the extra money received as premium must be transferred to a separate

account named Share Premium Account.
○​ This account is treated almost like paid-up capital.
2.​ Rules for Capital Reduction Apply​

○​ Any use of the Share Premium Account must follow the same legal rules as
reducing share capital. This is to protect creditors and shareholders.
3.​ Allowed Uses of the Share Premium Account (Sec. 57(2)):​
The company can only use this money for:​

○​ A. Issuing fully paid bonus shares to existing members.

 ○​ B. Paying for preliminary expenses (expenses incurred before starting the
company).
○​ C. Covering expenses, commission, or discounts given for issuing shares or
debentures.
○​ D. Paying the premium when redeeming preference shares or debentures.
4.​ Shares Issued Before This Law Came Into Force​

○​ The same rules apply as if the shares were issued after the Act began.
○​ If any part of the premium is used in a way that it cannot be identified as part
of the company’s reserves, that part will be ignored when calculating the
share premium account balance.

8.10 Share Certificate

Meaning:​
A share certificate is an official document issued by a company that proves a person owns
certain shares in the company.

●​ It must be issued free of cost to the shareholder after the allotment of shares.
●​ This is a legal duty of the company.
●​ This rule does not apply to bonds.

Legal Provisions

●​ Every person listed as a shareholder in the company’s register must get a share
certificate without payment.
●​ If shares are held jointly, the company only needs to issue one certificate (given to
one of the holders, which counts as delivery to all).
●​ If a certificate is damaged, lost, or destroyed, it can be replaced after paying a small
fee.
●​ The certificate is prima facie evidence that the person named owns the shares.

Contents of a Share Certificate

(From general practice, since the Companies Act does not specify)

●​ Company’s registered name and address

●​ Certificate serial number
●​ Date of issue
●​ Shareholder’s name and address
●​ Number and class of shares
●​ Distinctive share numbers
 ●​ Nominal (face) value of each share
●​ Amount paid on each share
●​ Revenue stamp
●​ Company’s common seal
●​ Signatures of directors and secretary

Time Limit for Issue

●​ Must be issued within 90 days from the date of allotment.

●​ If not issued, the shareholder can send a notice demanding it.

Purpose and Legal Effects of a Share Certificate

1. Prima Facie Evidence

●​ It is the first and basic proof that the holder owns the shares.
●​ Helps the shareholder to sell or transfer shares easily.
●​ Must be issued according to law and company articles.

2. Estoppel as to Title (Ownership)

●​ Once issued, the company cannot later deny that the person named owns the
shares.
●​ Example Case – Re Bahia & San Francisco Railway Co.:
○​ A shareholder’s certificate was stolen and transferred fraudulently.
○​ A buyer bought the shares in good faith.
○​ When the fraud was discovered, the company had to compensate because it
had issued the certificate in the first place.
●​ Exceptions:
○​ If the certificate was issued based on a forged transfer or forged power of
attorney, the company is not bound.
○​ But a bonafide purchaser (innocent buyer) may still have rights.

3. Estoppel as to Payment

●​ If a certificate states the shares are fully paid, the company cannot later claim more
money from the holder.
●​ Example Case – Bloomenthal v. Ford:
○​ A person lent money to a company and got a certificate saying the shares
were fully paid.
○​ In reality, no money had been paid for them.
 ○​ When the company went bankrupt, the court said the lender did not have to
pay because the company was “estopped” (legally stopped) from denying its
own certificate.

✅ In short:
●​ Premium shares = sold above face value → extra money goes to a special account
with strict usage rules.
●​ Share certificate = legal proof of ownership → gives protection, rights, and
transferability, and binds the company from later denying ownership or payment
status.

If you want, I can now go back and combine 8.9 and 8.10 into a single clean,
textbook-ready chapter so your notes are fully polished and consistent. That way, it’ll read
like your own custom law guide.

Alright — let’s turn 8.11, 8.12, and 8.13 into clear, detailed, but easy-to-read English while
keeping the legal meaning accurate.​
I’ll explain each part as if it’s a chapter in a law guide, but in plain terms so it’s
understandable.

8.11 Share Warrant

Meaning​
A share warrant is a legal document issued by a company stating that whoever holds
(bears) it is entitled to the shares listed in it.

●​ It is issued under the company’s common seal (official stamp).

●​ It replaces a share certificate.
●​ It can be issued only if the company’s Articles of Association allow it.
●​ Only fully paid-up shares can be converted into a share warrant.

Special Feature​
The most important thing about a share warrant is that it can be transferred simply by
handing it over to someone else — no need to register the transfer with the company.

●​ This makes it similar to cash or a cheque.

●​ It is considered a negotiable instrument, meaning a buyer who purchases it in
good faith and for value (a bona fide purchaser) will get a valid title, even if the
previous owner’s title was defective.
8.12 Difference Between Share Certificate and Share
Warrant
Here’s each difference explained in plain English:

1.​ Primacy of Document​

○​ Share Certificate: The first and main proof of ownership of shares.

○​ Share Warrant: An alternative to a share certificate.
2.​ Rule of Issue​

○​ Share Certificate: Can be for fully paid or partly paid shares.

○​ Share Warrant: Only for fully paid shares.
3.​ Authority to Issue​

○​ Share Certificate: Any company (public or private) with share capital can
issue it.
○​ Share Warrant: Only a public company can issue it (Section 46(2)).
4.​ Contents​

○​ Share Certificate: Has shareholder’s name, address, value of shares, and

share numbers.
○​ Share Warrant: Does not have the shareholder’s name or address — only
serial number, date of issue, and share value.
5.​ Status of Holder​

○​ Share Certificate: Holder is the registered shareholder.

○​ Share Warrant: Holder’s status depends on what the Articles say.
6.​ Permission from Registrar​

○​ Share Certificate: No permission required.

○​ Share Warrant: Needs Registrar’s approval.
7.​ Listing of Name​

○​ Share Certificate: Holder’s name is listed in the company’s member register.

○​ Share Warrant: Holder’s name is not listed.
8.​ Rights of Holder​

○​ Share Certificate: Holder is a company member with full rights (including

voting).
○​ Share Warrant: Unless Articles say otherwise, holder only has a financial
interest, not full member rights.
9.​ Transfer​

○​ Share Certificate: Must follow legal process — transfer deed/instrument,

signed, and stamped.
○​ Share Warrant: Transfer is by simple delivery.
 10.​Duty to Issue​

○​ Share Certificate: Company must issue within 90 days of allotment.

○​ Share Warrant: Not compulsory to issue.
11.​Payment of Dividend​

○​ Share Certificate: Paid via dividend warrant sent to registered address.

○​ Share Warrant: Paid through dividend coupons attached to the warrant.
12.​Right of Bona Fide Holder​

○​ Share Certificate: Not a negotiable instrument — buyer doesn’t get automatic

protection.
○​ Share Warrant: Negotiable instrument — buyer in good faith gets full
protection.
13.​Winding-Up Petition​

○​ Share Certificate: Holder can apply to wind up the company in some cases.
○​ Share Warrant: Cannot do so unless Articles allow.
14.​Director’s Qualification​

○​ Share Certificate: Can be used to meet the share qualification for directors.
○​ Share Warrant: Cannot.
15.​Stamp Duty​

○​ Share Certificate: Small duty.

○​ Share Warrant: Higher stamp duty.

8.13 Difference Between Share and Stock

1.​ Meaning​

○​ Share: A single, distinct unit of a company’s share capital.

○​ Stock: A bundle of fully paid shares combined for convenience.
2.​ Payment​

○​ Share: Can be partly or fully paid.

○​ Stock: Must always be fully paid (only created from fully paid shares).
3.​ Issuing Authority​

○​ Share: Issued by public or private companies.

○​ Stock: Only public companies can convert shares into stock.
4.​ Splitting​

○​ Share: Always equal denomination (e.g., all ₹100 each).

○​ Stock: Can be split into any fraction (e.g., ₹50, ₹25, ₹10).
 5.​ Membership​

○​ Share: Shareholder is a company member.

○​ Stock: Holder is not necessarily a member.
6.​ Numbering​

○​ Share: Numbered in sequence.

○​ Stock: Not numbered, but owners’ names are recorded in company books.
7.​ Direct Issue​

○​ Share: Can be issued directly to the public.

○​ Stock: Cannot be issued directly — must be converted from shares.
8.​ Time of Issue​

○​ Share: Issued when company is formed.

○​ Stock: Created later, after conversion.
9.​ Fragments​

○​ Share: Cannot be issued in fractions.

○​ Stock: Can be issued in fractions.
10.​Registration​

○​ Share: Always registered — cannot be transferred by delivery.

○​ Stock: May be registered or unregistered.
11.​Applicability of Law​

○​ Share: All share-related provisions in the Companies Act apply.

○​ Stock: These provisions do not necessarily apply.
12.​Face Value​

○​ Share: Has a fixed face value.

○​ Stock: No fixed face value.
13.​Certificates​

○​ Share: Multiple certificates may be issued for different shares.

○​ Stock: Usually one certificate for all holdings.

✅ In summary:
●​ Share warrant = like cash for shares, transferable by delivery, negotiable instrument,
only for fully paid shares, and only public companies can issue it.
●​ Share certificate vs share warrant = certificate proves ownership and requires
registration, warrant is transferable without registration and acts like a negotiable
instrument.
●​ Share vs stock = shares are individual fixed units, stock is a flexible bundle of fully
paid shares.
If you want, I can now combine 8.9 to 8.13 into one smooth, continuous, simplified
textbook chapter so it reads like a single clean law summary instead of scattered notes.
That way it will be easy to revise before exams.

Sure! Here is a detailed explanation of the text in simple and easy English:

9.1 Right to Transfer of Shares

●​ What is the right to transfer shares?​

Shareholders in a public company have the right to transfer (sell or give) their shares
to someone else. This is a legal right under the Companies Act and other related
laws.​

●​ Public vs Private companies:​

○​ In public companies, shares can be freely transferred.

○​ In private companies, the transfer of shares is usually limited and controlled
by the company’s rules (called Articles of Association).
●​ Reasonable restrictions:​
Even in public companies, the company’s Articles can have some reasonable rules
about how shares are transferred, but the basic right to transfer shares cannot be
taken away.​

●​ Example case:​
In a case called Re Discovers Finance Corporation Ltd, a shareholder transferred
shares to avoid paying liabilities, and the transfer was accepted by the company’s
board because there was no wrongdoing.​

●​ Legal basis:​

○​ Section 30 of the Companies Act, 1994 says shares are movable property
and can be transferred according to company rules.
○​ The Dhaka Stock Exchange rules say listed companies cannot restrict the
transfer of fully paid shares.

9.2 Requirements for Transfer of Shares

To transfer shares legally, certain steps must be followed:

1.​ Instrument of transfer must be delivered to the company:​

 ○​ The document that shows the transfer must be properly stamped (have a tax
stamp) and signed by both the person giving the shares (transferor) and the
person receiving (transferee).
○​ This document along with the share certificate (proof of ownership) must be
given to the company. If the certificate is missing, a letter showing the
transferee’s details can be used.
2.​ Instrument must be signed:​

○​ Both the transferor and transferee must sign the transfer document.
○​ If shares are held jointly, all joint holders must sign.
○​ If the transferor lives abroad, the signatures must be certified by the embassy.
3.​ Form of instrument:​

○​ The transfer document must be in a proper format prescribed by law.

4.​ Stamp duty and endorsement:​

○​ The transfer document must have the correct stamp duty.

○​ The company official will write the date of receipt on the document.
5.​ Notice to transferee and transferor:​

○​ The company must notify the transferee or transferor when a transfer request
is made.
○​ If there is no objection, the transfer is registered (the transferee’s name is
entered in the register of members).
6.​ Board of Directors’ approval:​

○​ The company’s board has the power to approve or reject share transfers
based on company rules.

9.3 Transfer of Shares to a Minor

●​ A minor is someone under 18 years old (legal adult age).

●​ The Companies Act does not forbid minors from becoming members or owning
shares.
●​ Minors can become shareholders through their guardian who acts on their behalf.
●​ Since minors cannot legally make contracts, their guardians manage the shares for
them.
●​ The company’s Articles may have specific rules about such transfers.

9.4 Transfer of Shares by Gift

●​ A gift is a transfer of property without payment.

●​ The Companies Act does not have special rules for share gifts, but other laws like the
Transfer of Property Act (1882) and Sale of Goods Act (1930) apply.
 ●​ For a valid gift of shares:
○​ It must be voluntary and accepted by the person receiving the gift (donee).
○​ The transfer must happen during the donor’s lifetime.
●​ The process of transferring gifted shares is the same as a regular transfer (the gift
must be registered and proper forms completed).
●​ So, a gift of shares is treated as a transfer legally.

9.5 Refusal to Register Transfer of Shares

●​ The right to transfer shares is a legal right, but sometimes the company can refuse to
register the transfer.
●​ The company, board of directors, or a sub-committee can refuse to register a
transfer.
●​ However, refusal must be reasonable and not done unfairly or with bad intention.
●​ The refusal must be decided by a board resolution (formal decision).
●​ Once shares are transferred and registered, the directors cannot refuse to register
again.
●​ If refusal happens, the company must notify the transferor and transferee within one
month.

9.6 Restrictions on Transfer of Shares

●​ Normally, companies cannot stop shares from being transferred freely, but they may
impose reasonable restrictions for the company’s benefit, if allowed in the Articles.
●​ Examples of such restrictions include:
○​ Transferee is mentally unstable.
○​ Transfer document is incomplete or improperly stamped.
○​ Transferee is undesirable or may harm the company.
○​ Transferee is a minor in case of partly paid shares.
○​ Transferee cannot pay remaining share money.
○​ Transferor owes money to the company and company has lien (right to keep
shares).
○​ Calls (payments) on shares are unpaid.

9.7 Certification of Transfer

●​ Sometimes one share certificate covers many shares, but the owner wants to
transfer only some of them.
●​ The shareholder must submit the transfer document and share certificate to the
company.
●​ The company endorses (notes) on the transfer document that the certificate is lodged
with the company.
 ●​ The company keeps the original certificate, cancels it, and issues a balance
certificate to the transferor if shares remain.
●​ The transferee receives a certified copy of the transfer document.
●​ Certification means the company confirms the transfer document was submitted.
●​ The company does not guarantee the title or ownership of shares, only certifies the
document was lodged properly.
●​ If the company negligently certifies a wrong transfer, it may be liable for losses
caused.

9.8 Transmission of Shares

●​ Transmission is different from transfer.

●​ Transmission happens by operation of law, not by the shareholder’s voluntary
action.
●​ It occurs when shares pass automatically because of events like death, bankruptcy,
or insanity.
●​ The legal heirs or representatives (like executors or guardians) get the shares.
●​ No transfer document is needed for transmission, but legal documents like probate or
court orders must be shown.
●​ Example: When a shareholder dies, the shares pass to the heirs automatically by
law.

9.9 Differences Between Transfer and Transmission

Aspect Transfer Transmission

Meaning Voluntary passing of shares Passing of shares by law

by the shareholder (due to death, bankruptcy,
etc.)

When it happens During the shareholder's On death, insolvency,

lifetime, by sale, gift, etc. lunacy, or similar events

How title passes Title passes to the new Title passes to legal
shareholder (transferee) representative or guardian

Requirement of documents Transfer deed signed by No transfer deed; legal proof

transferor and transferee like court order or
succession certificate

I hope this explanation makes the topic easier to understand! If you want, I can help explain
any specific part more clearly.
Sure! Here's an easy-to-understand explanation of the text about shareholders and
members in companies:

Shareholders and Members — What’s the Difference?

●​ Usually, shareholders and members mean the same thing.

●​ But, for some types of companies (like those limited by guarantee or unlimited
companies), there may be members but no shareholders because they don’t have
shares.

10.1 What is a Member?

●​ A member is usually a person who owns shares and whose name is in the
company’s official register of members (a list of all members).
●​ According to the law (Section 32), anyone who signs the company's
Memorandum (founding document) automatically becomes a member when the
company is registered.
●​ If someone has shares but their name is not in the register, they are not considered a
member. The person who transferred the shares remains the member until the
transfer is officially recorded.

Exceptions to This Rule:

1.​ If someone signs the Memorandum, they are a member even if their name is not in
the register.
2.​ If someone's name should be in the register but is left out by mistake, they are still a
member if they take steps to correct it.
3.​ If someone’s name is wrongly put in the register and they don’t know about it, they
are not a member.

10.2 Members Without Being Shareholders

Sometimes, a person can be a member without actually holding shares:

1.​ A deceased person may still be listed as a member until their name is removed.
2.​ Someone who transferred shares may still be listed as a member until the register is
updated.
3.​ Companies limited by guarantee or unlimited companies can have members without
shareholders.
4.​ Someone can become a member just by signing the Memorandum when the
company is registered, even if no shares are given to them yet.
10.4 Shareholders Without Being Members

Sometimes, a person can have shares but not be a member:

1.​ Someone who received shares from a deceased or bankrupt member is a

shareholder but not a member until their name is registered.
2.​ If a person holds shares through a share warrant (a special document), they are
shareholders but not members since their name is not in the register.

10.5 How to Become a Member?

You can become a member in these ways:

1.​ By signing the Memorandum: Signing the founding document makes you a
member from the start.
2.​ By allotment of shares: When the company gives you shares and registers your
name.
3.​ By buying qualification shares: Directors sometimes buy shares to qualify as
members.
4.​ By transfer of shares: When someone transfers shares to you and your name is
registered.
5.​ By transmission of shares: You inherit shares by law (e.g., after someone's death)
and get registered.
6.​ By acquiescence: If your name remains on the register and you don’t deny it, you
are considered a member.

10.6 Who Can Be Members?

The law doesn’t say exactly who can be members, but to be a member, you usually need to
be able to enter a contract.

Some examples:

●​ Minors (under 18): Usually, minors cannot be members because they can’t contract.
But minors can hold shares through guardians and later choose to accept or reject
membership after reaching adulthood.
●​ Unsound persons: People who cannot contract due to mental incapacity cannot be
members.
●​ Insolvents: Bankrupt people might be members unless the company’s rules say
otherwise.
●​ Partnership firms: A partnership itself cannot be a member, but individual partners
can hold shares.
●​ Companies: A company can be a member of another company if allowed.
 ●​ Registered societies and trade unions: They can be members if authorized.
●​ Joint holders: When shares are held by more than one person together, they are
treated as a single member.
●​ Trustees: Trustees cannot be members as trustees but can be members personally.

10.7 How Can Membership End?

Membership can end in several ways:

1.​ When shares are transferred to someone else and the new owner’s name is
registered.
2.​ When shares are transmitted by law (death, insolvency) and the new owner is
registered.
3.​ By forfeiture of shares for unpaid calls.
4.​ By surrendering shares if allowed.
5.​ By sale of shares under a court order.
6.​ By conversion of share certificates into share warrants.
7.​ By the death of a member (when the legal representative is registered).
8.​ By redemption of redeemable preference shares.
9.​ By allotment of shares to others (original subscriber loses membership).
10.​By company exercising a lien and selling shares.
11.​By rescinding the share purchase contract due to fraud (except for subscribers to the
Memorandum).
12.​When the company is wound up (closed).

10.8 What Rights Do Members Have?

Members have rights given by the law or company rules, such as:

●​ The right to get copies of the company’s Memorandum, Articles, and certain
resolutions.
●​ The right to get share certificates within 3 months of share allotment.

10.9 What Liabilities Do Members Have?

Depending on the type of company, members’ liabilities differ:

1.​ Unlimited company: Members are responsible for all debts of the company, even
beyond their shares, with their personal assets.
2.​ Company limited by shares: Members are liable only up to the unpaid amount on
their shares.
3.​ Company limited by guarantee: Members promise to pay a fixed amount if the
company is wound up.
 4.​ Liability during winding up: Members (present and past) may have to pay
outstanding amounts to cover company debts, except those who left over a year
before winding up.

Other Important Points:

●​ The company cannot change its rules to increase members' liabilities without
agreement.
●​ If a limited company has fewer than the minimum required members (7 for public, 2
for private) for more than 6 months, members’ liability becomes unlimited.

If you'd like, I can also summarize or explain any specific part more simply!

Certainly! Here is a detailed, easy-to-understand explanation of the text about majority and
minority shareholders and their rights and protections:

11.1 Introduction: Majority and Minority Shareholders

●​ Majority shareholders have a lot of power in managing a company because they

hold most of the shares.
●​ The rule in company law is that the majority usually decides how the company is
run (this is called the supremacy of the majority).
●​ However, it is also very important to protect the interests of minority shareholders
(those who hold fewer shares).
●​ So, the law tries to keep a balance between the rights of the majority and the
minority.

11.2 Principle of Supremacy of the Majority

●​ The company’s decisions are mostly controlled by what the majority of

shareholders decide in general meetings.
●​ Directors have the power to run the company, but they must act within the rules set
by the company’s documents (Memorandum and Articles).
●​ Courts usually do not interfere with the company management decisions if the
directors are following their powers properly.
●​ This is called the principle of supremacy of the majority — the majority
shareholders’ decisions are final and courts will not interfere unless the law is broken.

Example: Foss vs Harbottle Case

●​ Two minority shareholders sued the company’s directors, accusing them of fraud.
 ●​ But the company itself had approved the directors’ actions.
●​ The court said that if the company is harmed, the company itself should sue, not
individual shareholders.
●​ So, minority shareholders cannot challenge decisions made by the majority unless
there is a legal violation.

Other Cases

●​ In similar cases, courts have refused to interfere in company decisions made by the
majority.
●​ Courts say that internal company management should be handled by the company
itself, not outside courts.
●​ Even if some shareholders object, the courts usually support the majority decisions if
those decisions are legal and proper.

11.3 Protection of Minority Shareholders

●​ Even though the majority rules, there are some exceptions where minority
shareholders can take legal action.
●​ This is called derivative action in some countries (like the USA).
●​ These exceptions allow minority shareholders to sue to protect their rights.

Situations Where Minority Shareholders Can Act:

1.​ Ultra Vires Acts​

○​ If the majority does something not allowed by the company’s rules

(Memorandum or Articles), the minority can sue.
○​ For example, if the company invests money in a way not authorized by its
objectives.
○​ Example: In Bharat Insurance Co. Ltd. vs Kanhaiya Lal, a shareholder
stopped the company from making unauthorized risky investments.
2.​ Illegal Acts​

○​ If the majority does something illegal, the minority can sue to stop it.
3.​ Acts Requiring Special Majority​

○​ Some decisions need approval by a special majority (like 75% of

shareholders).
○​ If the majority tries to pass such a decision without the required special
majority, the minority can challenge it.
4.​ Fraud on Minority​

○​ If the majority uses their power to cheat or harm the minority, the minority
can take action.
 ○​ Example: In Menier vs Hooper’s Telegraph Works, the majority shareholders
favored themselves at the expense of the minority. The court invalidated that
decision.
5.​ Infringement of Personal Membership Rights​

○​ Shareholders have certain personal rights (like voting, attending meetings,

receiving dividends).
○​ If these rights are wrongly denied, shareholders can sue.
○​ Examples:
■​ In Pender vs Lushington, a shareholder sued because votes were
wrongly excluded.
■​ In Karus vs Lloyd Property Ltd., a director refused to leave office as
required, and a shareholder challenged this.
6.​ Wrongdoers in Control​

○​ If the people in control of the company commit wrongdoing (e.g., fraud),

shareholders can sue.
○​ Example: In Glass vs Atkin, shareholders sued when directors fraudulently
took company assets.
7.​ Oppression and Mismanagement​

○​ If the minority’s rights are oppressed or the company is mismanaged, the

minority can sue to protect themselves.

11.4 Legal Provisions to Protect Minority Shareholders (In Bangladesh)

The Companies Act, 1994 has special rules to protect minority shareholders:

1.​ Inspection of Company Affairs by Government Inspectors​

○​ The government can appoint inspectors to check if the minority’s rights are
protected.
○​ Shareholders can ask for this if they represent at least 10% (for companies
with share capital) or 20% (for companies without share capital).
○​ If inspectors find oppression, the government or courts can take action.
2.​ Court’s Power to Protect Minority​
The court can act if:​

○​ The company’s affairs or director’s powers harm shareholders or debenture

holders, or
○​ The company discriminates against shareholders or debenture holders, or
○​ A resolution passed discriminates against shareholders or debenture holders.
3.​ Then, shareholders with the required number (same as above) can apply to court for
protection.​
Court’s Procedure:

●​ The court hears the petition from the aggrieved shareholders.​

●​ If the court agrees the minority is harmed, it can:​

○​ Cancel or change any company resolution or transaction,

○​ Regulate how the company is run,
○​ Order changes to the Memorandum or Articles, or
○​ Make any other appropriate orders.
●​ If the court orders changes to company documents, the company cannot change
them again without court permission.​

●​ The company must notify the Registrar about any changes ordered by the court
within 14 days.​

●​ If the company fails to notify, it and responsible officers can be fined.​

Summary

●​ Majority shareholders normally control the company.

●​ Minority shareholders have limited power but can sue in special cases like illegal
acts, fraud, or mismanagement.
●​ Courts generally support the majority unless laws or shareholder rights are broken.
●​ Bangladesh law provides specific protections and court procedures to protect
minority shareholders from unfair treatment.

If you want, I can explain any part in even simpler words or give you examples!

Sure! Here’s an easy-to-understand detailed explanation of the text about Borrowing Power
of a Company:

Meaning of Borrowing Power

●​ Borrowing power means the company’s ability to borrow money or take loans.
●​ A company with many assets and little debt usually has a strong borrowing power,
meaning it can borrow more easily.
●​ The Companies Act does not specifically state rules about borrowing power,
but trading companies (companies that do business for profit) naturally have this
power.
●​ Companies can also give security (like mortgages) on their property to get loans.
 ●​ Usually, the company’s Memorandum (a legal document) mentions the
borrowing power clearly.
●​ Even if the Memorandum does not mention borrowing power, trading companies
generally have an implied right to borrow money.
●​ But this implied right does not apply to non-trading or non-profit companies.

Exercising Borrowing Power

A. Private Company:

●​ A private company can start borrowing money right after it gets its certificate of
incorporation (official registration).​
(This is from Section 150 of the Companies Act.)

B. Public Company:

●​ A public limited company can borrow money only after it gets its certificate of
incorporation.
●​ When borrowing, it must do so in the company’s name, not in any individual’s
name.

Limitations on Borrowing Power

There are some important restrictions on how much and when a company can borrow:

1.​ Limitations by Memorandum or Articles:​

○​ If the company’s Memorandum or Articles put any limits on borrowing, the

company must follow those limits.
2.​ Restrictions Regarding Starting Business:​

○​ A private company cannot borrow unless it has its certificate of incorporation.

○​ A public company cannot borrow unless it has a certificate of
commencement of business.
○​ However, public companies can still invite people to buy shares or debentures
(loans) at the same time.
3.​ Silence of the Memorandum:​

○​ If the Memorandum or Articles do not say anything about borrowing, only

trading companies have the power to borrow money.
○​ Non-profit companies cannot borrow if nothing is stated.
4.​ Borrowing Based on Resolution:​

○​ The company’s directors can borrow money only if the shareholders

approve it by passing a resolution in the general meeting.
 5.​ Use of Company’s Name:​

○​ Loans must be taken in the name of the company.

○​ If directors borrow money in their own name, the company is not responsible
for that loan, even if it benefits from the money.
6.​ Limit on Borrowed Amount:​

○​ Directors cannot borrow more than the company’s issued share capital (the
total value of shares sold) unless the shareholders approve it.

Ultra Vires Borrowings (Borrowing Beyond Power)

"Ultra vires" means "beyond power" — borrowing beyond what is allowed.

There are two types of ultra vires borrowing:

1.​ Borrowing Ultra Vires the Company:​

○​ When the company borrows more than allowed by its Memorandum or

Articles.
2.​ Borrowing Ultra Vires the Directors:​

○​ When the directors borrow more than their own power allows, even if the
company itself can borrow that much.

Consequences of Borrowing Ultra Vires the Company

1.​ No Valid Loan:​

○​ Loans taken beyond the company’s power are invalid (void).

○​ The lender has no legal right to ask for the loan back from the company
because no valid contract exists.
○​ The company is not legally responsible to repay.
○​ This was decided in the Re National Permanent Building Society case.
○​ Even if the company later gives borrowing power, it does not make the
previous ultra vires loans valid.
2.​ Personal Liability of Directors:​

○​ Directors who borrow beyond their authority can be held personally

responsible for the loan.
○​ Lenders can sue the directors for breach of authority.
3.​ Subrogation:​
 ○​ If the ultra vires borrowed money was used to pay off a legal debt of the
company, the lender can "step into the shoes" of the creditor who was paid
and try to recover the money from the company.
○​ However, the lender cannot claim any security that the original creditor had.
4.​ Injunction (Court Order to Stop Use):​

○​ If the ultra vires borrowed money is still with the company and unused, the
lender can get a court order (injunction) to stop the company from using the
money, because the company does not legally own it.
5.​ Identification and Tracing:​

○​ If the ultra vires money is still in original form or was used to buy specific
property, the lender can claim that money or property back.
○​ If the money was mixed and cannot be traced, the lender cannot claim it
separately and must share with other creditors during winding up (closing the
company).
○​ Example: In Sinclair vs Broughman, a building society’s illegal banking funds
were mixed with shareholders’ money. When closing the company, the court
ordered that money be shared proportionally between depositors and
shareholders.

Consequences of Borrowing Ultra Vires the Directors

●​ If borrowing is within the company’s power but beyond the directors’ authority, it is
irregular but not void.
●​ The securities or guarantees given by the directors in such borrowing are not valid
unless the company approves it later.
●​ The company can choose to ratify (approve) the borrowing, which then becomes
valid.
●​ If the lender acted in good faith and didn’t know about the directors’ lack of authority,
the company cannot deny the borrowing’s validity (under the Turquand’s Rule).
●​ So, in such cases, the company may be legally bound by the borrowing.

If you want me to explain any part further or give examples, just ask!

Certainly! Here is a detailed explanation of the text about debentures in easy English:

What is a Debenture?

●​ A debenture is a way for a company to raise money or capital.

●​ It is a certificate or document issued by a company as evidence that the company
owes money to the holder.
 ●​ This document is like a loan agreement, showing the company has borrowed money
and promises to pay it back with interest.
●​ According to the Companies Act, the term “debenture” includes various securities
like debenture stock, bonds, or other kinds of company debts, whether or not these
are secured by company assets.
●​ The definitions given by experts show that a debenture is:
○​ A formal document sealed by the company,
○​ A proof of debt or loan,
○​ Usually it comes with a promise to repay the loan and pay interest at fixed
times,
○​ It can be one certificate or many similar certificates issued to multiple people.

Important Features (Characteristics) of a Debenture

1.​ Each debenture has a number to identify it.

2.​ It is issued under the common seal of the company (official company stamp).
3.​ It is a clear acknowledgement that the company owes money to the holder.
4.​ Usually, many similar debentures are issued together, but sometimes only one
debenture can be issued to a single person.
5.​ It promises to pay interest at a fixed rate until the loan amount is repaid.
6.​ Debentures often create a floating charge on the company’s assets (a charge that
becomes fixed if interest is not paid).
7.​ Debentures are generally secured by company assets, but it is not necessary—they
can also be unsecured.

Types (Classification) of Debentures

Debentures can be divided into different types based on various factors:

1.​ Secured Debentures:​

○​ These debentures are backed by a charge on the company’s property or

assets.
○​ The charge can be a fixed charge (attached to specific assets) or a floating
charge (attached to general assets until triggered).
○​ Most debentures are secured this way.
2.​ Unsecured Debentures:​

○​ These are not backed by any charge or security on company assets.

○​ They are just a formal promise of debt by the company.
○​ If the company is wound up (closed), holders of unsecured debentures are
treated as ordinary creditors and get paid after secured creditors.
3.​ Redeemable Debentures:​
 ○​ These debentures have a fixed date or time when the company must repay
the principal loan amount.
○​ The company is bound to repay the money either on a certain date or
whenever demanded.
4.​ Irredeemable Debentures:​

○​ The company issues debentures without fixing any repayment date.

○​ The company does not have to repay the principal at a fixed time.
○​ However, if the company is wound up, these debentures become
immediately payable.
○​ The law allows issuing such “perpetual” debentures but only under certain
conditions.
5.​ Convertible Debentures:​

○​ These debentures can be converted into shares of the company.

○​ The right to convert is given to the debenture holder.
6.​ Non-Convertible Debentures:​

○​ These cannot be converted into shares.

○​ The holders only get interest and repayment of principal.
7.​ Registered Debentures:​

○​ These are issued to specific persons whose names are recorded in the
register of debenture holders.
○​ They can transfer their debentures by following company rules.
○​ Only the registered holder can get interest and repayment.
8.​ Bearer Debentures:​

○​ These are transferable by simple delivery (handing over the certificate).

○​ The company does not keep a register of these holders.
○​ The holder in possession is considered the owner and can receive interest
and repayment.
○​ These are like negotiable instruments, so a person who receives them in
good faith has valid ownership.

If you want me to explain any part more or give examples, feel free to ask!

Sure! Here’s a detailed explanation of the text about debenture holders, issue of
debentures, transfer, charges, and related rules in easy English:

13.4 Differences Between Debenture Holders and Shareholders

Although both debentures and shares are ways companies raise money, the people who
hold them have different rights and roles:
 1.​ Ownership Interest:​

○​ Shareholders own part of the company (they have ownership).

○​ Debenture holders are creditors (the company owes them money) and do
not own the company.
2.​ Right to Interest or Profit:​

○​ Debenture holders get fixed interest payments.

○​ Shareholders get dividends based on company profits (which can vary).
3.​ Ownership:​

○​ Shareholders are joint owners.

○​ Debenture holders are lenders or creditors.
4.​ Priority in Payment (Liquidation):​

○​ If the company closes down, debenture holders get paid before

shareholders.
5.​ Security:​

○​ Shares are not secured by company assets.

○​ Debentures are usually secured by company property/assets.
6.​ Voting Rights:​

○​ Shareholders can vote in company meetings.

○​ Debenture holders do not have voting rights because they are creditors.
7.​ Capital of the Company:​

○​ Shares form part of the company’s capital.

○​ Debentures are loans, not capital.
8.​ Profit Distribution:​

○​ Interest to debenture holders is paid first.

○​ Dividends to shareholders are paid after debenture interest.
9.​ Return of Money:​

○​ Shareholders usually don’t get their money back during the company’s life
(except redeemable shares).
○​ Debenture holders have the right to get their loan repaid during the
company’s life.

13.5 Rules Regarding Issue of Debentures

A. Ways of Issuing Debentures:

●​ Debentures can be issued:

 1.​ At Par: Issued at the price printed on the debenture (e.g., Tk 100 debenture
sold at Tk 100).
2.​ At Discount: Issued below the printed price (e.g., Tk 100 debenture sold at
Tk 95).
3.​ Re-issue: When a company redeems (pays back) a debenture and then
issues it again. The company can keep debentures alive for re-issue.

B. Limits on Issuing Debentures:

1.​ Substantive Limits:​

○​ A private company can issue debentures after getting its certificate of

incorporation.
○​ A public company can issue debentures only after getting a certificate of
commencement of business.
2.​ Procedural Limits:​

○​ Directors must decide to issue debentures.

○​ Directors must pass a resolution to issue debentures in a meeting.
○​ The amount of debentures issued must not exceed the company’s authorized
share capital.
○​ Debenture holders have no voting rights.
○​ Contracts to take or pay for debentures are enforceable by law.
○​ Debenture certificates must be issued within 90 days of allotment.
○​ No need to file an allotment return with the Registrar (unlike shares).

13.6 Transfer and Transmission of Debentures

●​ Bearer Debentures: These are transferred simply by handing over. The company
does not keep records. A person who receives such debentures in good faith owns
them fully.​

●​ Registered Debentures: These must be transferred using a proper legal process:​

○​ An instrument of transfer (transfer form) must be stamped and signed by

both the transferor and transferee.
○​ The company must receive this form along with the debenture certificate.
○​ The company’s Articles provide the specific transfer form, sometimes
following share transfer rules.
●​ Stamp Duty: Stamp duty is payable on transfer, like with shares.​

●​ Registration: Except bearer debentures, all others must be registered by the

company within certain time limits:​

○​ Companies Act: 90 days

○​ Stock Exchange Rules: 45 days
 ○​ Securities and Exchange Commission (SEC): 7 days normally, 15 days during
book closure.
●​ Transmission: The process of passing debentures after death or legal transfer is
similar to shares.​

13.7 Register and Index of Debenture Holders

●​ For bearer debentures, no register of holders is needed.

●​ For registered debentures, the company must keep a register with:
○​ Names, addresses, and occupations of holders,
○​ Number of debentures held,
○​ Date of becoming and ceasing to be a holder.
●​ If the company has more than 50 debenture holders, it must keep an index (a list to
easily find holders).
●​ The register is open to inspection and holders can get copies for a fee.

13.8 Pari Passu Rule for Debentures

●​ When multiple debentures are issued in a series, and secured by company assets,
they share the assets equally and proportionally if there is not enough to pay all.
●​ If there is no Pari Passu clause, assets are paid based on the date debentures were
issued.
●​ Debentures re-issued after redemption rank equally (Pari Passu) with previous
debentures.

13.9 Remedies of Debenture Holders

●​ Unsecured Debenture Holders:​

1.​ Can file a lawsuit to recover their loan.

2.​ Can petition to wind up (close) the company if it cannot pay debts.
●​ Secured Debenture Holders:​

1.​ Can file a debenture holder’s action to recover debt and ask the court to
appoint a receiver.
2.​ Can appoint a receiver if allowed by the debenture deed.
3.​ Can sue for foreclosure to enforce their security and claim company assets.
4.​ Can sell company property if trust deed permits, to recover the loan.
13.10 Mortgage or Charge as Security

●​ A company borrowing money can give a mortgage or charge on its property as

security.
●​ The company cannot borrow using:
○​ The reserved capital as security.
○​ The books of accounts as security.
●​ Charges on uncalled capital (capital not yet called for payment) cannot be created.
●​ Normally, the company’s Memorandum or Articles give power to create charges. If
not, a special resolution is required.
●​ Even if a charge is created on uncalled capital, the company’s power to forfeit shares
still works.

13.11 Fixed and Floating Charges

●​ Fixed Charge:​

○​ A charge on a specific, identified asset.

○​ The company cannot sell or transfer this asset without permission from the
charge holder.
○​ The charge holder must be paid first from the sale of this asset.
●​ Floating Charge:​

○​ A charge on a class of assets that can change over time (like stock or
money).
○​ The company can use, sell, or dispose of these assets in the ordinary
course of business without asking permission.
○​ Most debentures are secured by floating charges.

13.12 Characteristics of a Floating Charge

●​ It covers assets both present and future.

●​ The assets are expected to change during normal business operations.
●​ The company can use the assets until the charge “crystallizes” (turns fixed).
●​ If the lender has possession of the asset, it is not a floating charge.
●​ Example: If a charge covers all company money and property but the company can
keep using it, it is a floating charge.

13.13 Crystallization of a Floating Charge

●​ A floating charge is “ambulatory”, meaning it moves with the assets until

crystallized.
 ●​ It crystallizes (becomes fixed) when:
1.​ The company goes into liquidation.
2.​ Debenture holders enforce their rights due to default on payment.
3.​ The company is barred from continuing business.
4.​ A receiver is appointed.
●​ When crystallized, the charge holder’s rights become stronger and they can control
assets.
●​ Preferential creditors get priority over floating charge holders during liquidation.

13.14 Registration of Charges and Effects of Non-Registration

●​ Certain charges must be registered with the Registrar within 21 days:​

1.​ Charges securing debentures,

2.​ Charges on uncalled share capital,
3.​ Charges on immovable property,
4.​ Charges on book debts,
5.​ Charges on movable property (except stock-in-trade),
6.​ Floating charges on company’s undertaking.
●​ If not registered in time, the Registrar may allow an extension of 21 days if cause is
shown.​

●​ Once registered, anyone who buys the property is considered to have notice of the
charge.​

●​ Consequences of non-registration:​

1.​ The charge is void against liquidators and creditors.

2.​ The debt becomes an unsecured debt.
3.​ The company and responsible officers can be fined (Tk 1000 per day for
default).
●​ Any interested party can apply for registration and recover fees paid.​

13.15 Register and Index of Mortgages and Charges

●​ The company must keep a register of all mortgages and charges, including:​

○​ Date of charge creation,

○​ Amount secured,
○​ Property details,
○​ Person entitled to charge.
●​ For debenture series, the register should also show:​
 ○​ Total amount secured,
○​ Resolution date authorizing issue,
○​ Description of property,
○​ Names of trustees,
○​ Any discounts or commissions paid.
●​ The company must keep a chronological index of charges.​

13.16 Certificate of Registration

●​ After registration, the Registrar issues a certificate to the charge holder.

●​ This certificate is legal proof that registration was done properly.
●​ A copy of this certificate must be endorsed on every debenture certificate issued
by the company.

If you want me to explain any specific section further or give examples, just let me know!

Sure! Here’s a detailed explanation of the text about Depository and Central Depository
Bangladesh Limited (CDBL) in easy English:

15.1 What is a Depository?

●​ Today’s business world depends a lot on technology, especially in share markets.

●​ A depository system helps buy, sell, and transfer shares smoothly using technology.
●​ Instead of holding physical share certificates (paper certificates), shares are stored
and managed electronically.
●​ A depository is like a bank, but instead of keeping money, it keeps shares safely in
electronic form.
●​ People who own shares open electronic accounts with the depository.
●​ This system makes share transactions faster and safer.

Legal definition:​
The Depositories Act, 1999 says a depository is a company registered under the
Companies Act that keeps and transfers securities (shares) electronically through book
entries.

Main job:​
The depository’s main job is to transfer shares quickly and safely using computers.

15.2 Why Do We Need a Depository?

The old system of managing shares has many problems:

●​ Transfers of shares take too much time.

●​ Share certificates can be lost, damaged, or forged (fake).
●​ Handling lots of share certificates and paperwork is difficult and slow.
●​ Checking the authenticity of shares is complicated.
●​ Paying dividends and bonuses to shareholders takes too long.
●​ Pledging shares (using shares to get loans) is complicated.
●​ Issuing new certificates for bonus or right shares is difficult.

How a depository solves these problems:

●​ Instant transfer: Shares are transferred immediately without delay.

●​ Safer: No risk of losing or faking certificates because shares are electronic.
●​ Less paperwork: No messy papers to handle.
●​ Convenient: Accounts are easier to manage and update.
●​ Faster payments: Dividends and bonuses are credited quickly.
●​ Electronic credit: New shares from IPOs (Initial Public Offerings) go directly into
investors’ electronic accounts.
●​ Faster settlements: Share sales and purchases settle faster.

15.3 What is CDBL?

●​ CDBL stands for Central Depository Bangladesh Limited.

●​ It’s a company set up by banks, stock exchanges, Asian Development Bank, and
other organizations.
●​ CDBL runs the central depository system in Bangladesh.
●​ It converts physical share certificates into electronic form.
●​ This stops problems like lost or fake certificates.
●​ Transfers and sales happen instantly using this technology.

Technology used by CDBL:

●​ CDBL has a Main Data Center with powerful servers.

●​ It also has a Disaster Recovery Center to back up data in case of problems.
●​ Data is updated every 15 minutes using wireless technology.
●​ It uses special software to manage all these records securely.

15.4 Who Owns CDBL?

According to the rules:

●​ Sponsors of the depository include stock exchanges, banks, financial institutions,

companies listed on stock exchanges, and other national or international
organizations.
 ●​ CDBL’s stakeholders include many banks, insurance companies, stock exchanges
(Dhaka and Chittagong), Investment Corporation of Bangladesh, listed companies,
and the Asian Development Bank.

15.5 Who Participates in CDBL?

Participants include:

●​ Banks
●​ Financial institutions
●​ Insurance companies
●​ Stock brokers or dealers (members of stock exchanges)
●​ Asset managers
●​ Merchant bankers
●​ Custodians (people who hold shares for others)
●​ Other organizations involved in capital markets registered with the Securities and
Exchange Commission (SEC)

Types of participants:

1.​ Trading participants: They can settle stock trades but cannot maintain customer
accounts.
2.​ Full service participants: Stock exchange members who can hold shares and
manage accounts for customers.
3.​ Custody participants: Not stock exchange members but can hold shares and
manage accounts for customers.
4.​ Settlement agents: Settle trades on behalf of stock exchange members.

15.6 Parties Involved in the Depository System

1.​ Depository: Keeps shares electronically and updates records for transfers, lending,
borrowing, etc.
2.​ Beneficial Owner: The actual investor who owns the shares recorded in the register.
3.​ Depository Participants: Authorized organizations (banks, brokers, etc.) who
interact with investors and the depository.
4.​ Issuer: The company or government that issues shares.
5.​ Stock Exchange: The marketplace where shares are bought and sold.
6.​ Investment Corporation of Bangladesh (ICB): Government-supported body
working on investments and record-keeping.
7.​ Clearing House: Part of the stock exchange that verifies and updates transaction
records to ensure smooth operations.
8.​ Banking System: Supports payment and settlement processes.
15.7 How Does the Depository System Work?

Steps in the system:

1.​ An investor opens an account with CDBL or a participant.

2.​ The investor gives their physical share certificates to the issuer to convert them into
electronic form (called dematerialization).
3.​ The issuer updates the company’s register and transfers the shares to the depository.
4.​ Investors buy or sell shares via stock brokers.
5.​ The stock exchange informs CDBL to update accounts.
6.​ CDBL deducts shares from the seller’s account and credits the buyer’s account.
7.​ If investors want, they can convert electronic shares back to physical certificates
(called rematerialization).

15.8 Opening a Depository Account

●​ To use the depository system, investors must open an account with a CDBL
participant.
●​ The process involves:
○​ Contacting CDBL to get a list of participants.
○​ Signing an agreement with the participant that explains the rights and duties.
○​ The participant opens an account in the investor’s name.
●​ Investors get monthly account statements if there is activity or quarterly if there isn’t.

15.9 What is Dematerialization?

●​ Dematerialization means converting physical share certificates into electronic form.

●​ This is necessary to trade shares electronically through the depository.
●​ Legal rule: All eligible securities must be held in the depository account before
transfer.
●​ Procedure:
○​ Surrender physical share certificates to the issuer.
○​ Fill out a Dematerialization Request Form (DRF).
○​ The issuer verifies certificates and membership.
○​ The issuer replaces the owner’s name with the depository’s name in the
register.
○​ Shares are credited electronically to the investor’s account.
●​ New shares from fresh issues can also be directly held in dematerialized form.

15.10 What is Rematerialization?

 ●​ If an investor wants, they can convert electronic shares back into physical share
certificates.
●​ The process involves:
○​ Filling a Rematerialization Request Form (RRF) with the participant.
○​ The participant instructs CDBL to debit shares from the electronic account.
○​ The issuer transfers shares back to the physical register.
○​ The investor gets physical share certificates within 30 days.

15.11 Buying and Selling Shares with CDBL

●​ Having shares in a CDBL account does not change how buying and selling works but
makes settlement faster.
●​ When investors sell shares through their broker, the broker transfers shares
electronically from the investor’s account.
●​ If the trade happens, shares move from seller to buyer.
●​ If not, shares move back to the seller’s account.
●​ If an investor has a custodian (not a broker), they must inform the custodian about
sales.
●​ Shares must be in a CDBL account before selling.
●​ Investors can keep shares in electronic form or convert them back to physical
certificates if they want.

If you want, I can help explain any specific part more or provide examples! Would you like
that?

Sure! Here’s an easy-to-understand detailed explanation of the text about Winding up of a

Company:

17.1 What is Winding up?

●​ A company is created by law and it keeps running according to legal rules.

●​ A company cannot simply die like a human being; it has to be ended through a legal
process called winding up.
●​ Winding up means officially ending the company’s life.
●​ When a company is wound up:
○​ Its business stops.
○​ Its assets (things the company owns) are collected.
○​ These assets are used to pay off debts (money owed to creditors).
○​ Whatever remains is shared among the shareholders (members).
●​ A person called a liquidator is appointed to take control during this process.
●​ The liquidator collects assets, pays debts, and distributes any remaining money to
shareholders.
17.2 Difference between Winding up and Dissolution

●​ Sometimes people get confused thinking winding up and dissolution are the same.
●​ Winding up is the process that happens before dissolution.
●​ During winding up, the company still exists legally and can be sued or sue in court.
●​ Dissolution means the company’s legal existence is completely finished—it no
longer exists.
●​ So, winding up is like closing the company’s affairs, and dissolution is the company’s
official death.

17.3 Winding up and Insolvency are Different

●​ People often think a company is only wound up if it is insolvent (unable to pay debts).
●​ But winding up can happen for many reasons, even if the company has enough
money.
●​ For example:
○​ Not holding required meetings.
○​ Not starting business within a set time.
●​ Winding up means ending the company and putting a liquidator in charge, regardless
of solvency.
●​ If winding up happens because of insolvency, the insolvency laws may or may not
fully apply.

17.4 Types of Winding up (According to the Companies Act, 1994)

There are three ways a company can be wound up:

1.​ Compulsory Winding up (by court order)

2.​ Voluntary Winding up
3.​ Winding up under Court Supervision

Voluntary winding up is when the company decides on its own to wind up. This can be:

●​ Members' voluntary winding up (company is solvent)

●​ Creditors' voluntary winding up (company is insolvent)

17.5 Court-Ordered (Compulsory) Winding up

●​ When the court orders winding up, it’s called compulsory winding up.
●​ The court supervises the whole process.
●​ A government-appointed liquidator takes control.
 ●​ The company directors lose their powers.

Who Can File a Petition to Wind up a Company? (Section 245)

Certain people can ask the court to wind up a company by filing a petition:

1.​ The Company Itself:​

○​ The company can file a petition but must first pass a special resolution (a
formal agreement in a general meeting).
○​ Only authorized persons can file the petition (not just anyone like a managing
director without board approval).
2.​ Creditors:​

○​ Creditors (people or companies the company owes money to) can file a
petition.
○​ This includes people who might become creditors in the future or have
conditional claims.
○​ If multiple creditors file together, they pay only one court fee.
○​ If a creditor’s claim is genuinely disputed, they cannot file the petition.
3.​ Contributories:​

○​ A contributory is someone who is liable to contribute to the company’s assets

if it is wound up.
○​ For example, shareholders who hold fully paid shares.
○​ There are certain conditions to prevent people from buying shares just to file
a winding up petition to harm the company.
○​ The court must be satisfied that the contributory has a valid reason to file the
petition (like the company has assets to share).
4.​ The Registrar of Companies:​

○​ The Registrar can file a petition if the company breaks certain rules, such as:
■​ Not filing statutory reports.
■​ Not holding required meetings.
■​ Not starting business within a year.
■​ The number of members falls below legal limits.
■​ The company is unable to pay its debts.
■​ The court thinks winding up is fair and just.

Grounds for Compulsory Winding up by the Court (Section 241)

The court can order winding up if:

1.​ The company passes a special resolution to wind up.

 2.​ The company fails to file required reports or hold meetings.
3.​ The company does not start business within one year or suspends business for a full
year.
4.​ The number of members falls below the legal minimum (below 7 for public, below 2
for private companies).
5.​ The company cannot pay its debts (is insolvent).
6.​ The court believes it is just and equitable to wind up the company (fair and right to
do so).

Explanation of Some Grounds:

●​ Special Resolution: The company itself decides to wind up and asks the court to
approve. But the court may refuse if winding up is harmful to public interest.
●​ Default in holding meetings: If the company does not follow legal requirements
about meetings, the court may order winding up.
●​ Not carrying on business: If the company fails to start or suspends business for a
year without good reason, the court may wind it up.
●​ Reduction in members: If membership falls below legal limits, the company may be
wound up.
●​ Inability to pay debts: The company is insolvent, meaning it cannot pay what it
owes. The court checks whether the company’s assets are insufficient to meet
liabilities.

Summary

●​ Winding up is the legal process to end a company.

●​ The company’s assets are collected and debts paid.
●​ There are different types of winding up: court-ordered, voluntary, and
court-supervised.
●​ The court can order winding up under various conditions.
●​ Certain people (company, creditors, contributories, Registrar) can ask the court to
wind up a company.
●​ Winding up is not the same as dissolution; the company legally exists during winding
up but ceases to exist after dissolution.

If you want, I can also help summarize or explain specific parts more simply!

Sure! Here’s a detailed explanation of the text you shared, in easy English:

Just and Equitable Grounds for Winding Up a Company

Sometimes a court can decide to close (wind up) a company if it thinks it is fair and right to
do so. This is called the “just and equitable” ground. The law gives the court a wide power
to decide when this should happen, but the court will only use this power as a last option
when no other solutions work.

Whether it is “just and equitable” depends on the specific facts and situation of the
company. But usually, courts consider the following reasons as fair grounds to wind up a
company:

(a) Deadlock in Management

●​ A company needs proper management to succeed.

●​ If the directors or managers of the company are in a serious conflict or fight, making it
impossible to manage the company properly, the court may order the company to be
wound up.
●​ Example: In one case, two directors stopped speaking to each other and only
communicated through a secretary. This caused a deadlock (standstill), so the court
ordered winding up.
●​ However, if their disagreement can be solved by arbitration (a legal process outside
court), then the court won’t order winding up.
●​ Also, if the conflict is only between majority and minority shareholders, this reason
cannot be used for winding up.

(b) Continuous Losses

●​ A company is formed to make profits.

●​ If the company keeps losing money and there is no hope to make a profit in the
future, the court may decide it is fair to close it.
●​ But just suspecting that the company might make losses is not enough to wind it up.
●​ The court won’t close a company just because it lost money once or twice.

(c) Fraudulent Purpose

●​ If the company was created to do something illegal or to cheat others, the court can
wind it up.
●​ Example: A company was made mainly to run a lottery (which was illegal), so the
court ordered winding up.
●​ However, if the company cheated only in its prospectus (a document to attract
investors) or against third parties, that alone may not be enough for winding up.

(d) Loss of Substratum (Main Purpose)

 ●​ When the main reason for starting the company no longer exists, the court can order
winding up.
●​ This can happen if:
○​ The company’s subject matter (business) is gone,
○​ The main objective failed completely,
○​ Or the company cannot continue business except by making losses.
●​ But just making losses is not enough by itself to close the company.

(e) Oppression of Minority Shareholders

●​ In public companies, majority shareholders usually have control.

●​ If the majority misuses their power to harm or unfairly treat the minority shareholders,
the court may decide to wind up the company.
●​ Example: In one case, the directors favored their own family for profits and did not
share company reports with others. The court found this unfair and ordered winding
up.

(f) Bubble Company

●​ If a company never had any real business or assets (just a “bubble”), the court can
order it to be wound up.

(g) Mismanagement in Domestic (Family) Company

●​ In family-run companies, if the directors (usually family members) mismanage the

company badly, the court may order winding up.
●​ But just accusing the directors of mismanagement or losses is not enough.
●​ The shareholders should try to solve such problems themselves before asking the
court for winding up.

Summary:

●​ The court can wind up a company if it thinks it is fair and right based on the facts.
●​ But the court will only do this when no other solutions are available.
●​ The court looks at situations like deadlock, continuous loss, fraud, failure of company
purpose, minority oppression, bubble companies, or serious mismanagement.
●​ Minor problems or disagreements don’t usually justify winding up.
●​ The goal is to protect fairness and justice for everyone involved.
If you want, I can also give you some simple examples or summarize this further! Would you
like that?

Sure! Here’s a detailed explanation of the text you provided, in simple and easy English:

When Can a Company Be Forced to Close (Compulsory

Winding Up)?
A company can be forced to close by the court if any of these things happen:

1.​ If the company owes more than 5,000 taka to a creditor, and the creditor asks the
company to pay the money, but the company doesn’t pay or make any arrangement
to pay within 3 weeks.​

2.​ If a court has given a decision (decree) in favor of a creditor, but the company
has not followed that decision fully or partly.​

3.​ If the court is convinced that the company cannot pay its debts (money it owes).​

How Does Compulsory Winding Up Work?

When a company is forced to close by the court, there are several important steps:

1. Hearing the Application

●​ The court sets a date to listen to both sides (the company and the person asking for
winding up).
●​ After listening, the court may agree or reject the winding up request.
●​ The court cannot refuse to close the company just because the company’s assets
are mortgaged or it has no assets.

2. When Winding Up Begins

●​ The winding up process officially starts on the day the petition (request) for winding
up is filed with the court.
●​ If the company decides on its own to close before the court’s decision, then winding
up starts from the day the company passes the resolution.

3. Appointment of Liquidator and Order

●​ When the court orders winding up, the official receiver becomes the official
liquidator.
 ●​ The liquidator manages the closing process until the court says otherwise.
●​ If someone asks, the court can stop or pause the winding up for a time, if it thinks it’s
needed.

4. Preparing the List of Contributors

●​ After ordering winding up, the court makes a list of all the people responsible to
contribute (pay) towards the company’s debts.
●​ The court can also ask these contributors to pay money to clear company debts.

5. Collecting Documents and Assets

●​ The court can order anyone connected to the company (shareholders, bankers,
agents, etc.) to give money, property, or documents to the liquidator.
●​ Sometimes, money owed to the company must be paid directly into the liquidator’s
bank account.

6. Proof of Claim

●​ The court gives creditors a deadline to prove their debts.

●​ If a creditor fails to prove the debt, they may lose the right to claim money.

7. Payment of Debts

●​ The court makes sure the contributors’ rights are fair.

●​ If any money is left after paying debts, it will be given to those entitled to it.

8. Dissolution of the Company

●​ When everything is done, the court officially declares the company dissolved
(closed).
●​ The liquidator informs the Registrar within 15 days.
●​ The Registrar updates the official record showing the company is closed.

What Happens When a Company is Wound Up by

Court?
●​ The winding up protects the rights of all creditors and contributors.
●​ Once winding up starts, no lawsuits can be started or continued against the
company without court permission.
●​ The official liquidator handles all the company’s property and claims.
●​ The company’s directors lose their power; the liquidator takes control.
●​ The company’s property is considered under the control of the court.
●​ Secured creditors (those who have security on their loan) can collect their money
without court permission.
Voluntary Winding Up (Company Closes by Choice)
Voluntary winding up is when the company’s owners and creditors decide to close the
company without involving the court. This is more common and simpler because there are
fewer formalities.

Why Voluntary Winding Up?

●​ To allow the company and its creditors to settle everything freely.

●​ To give easier ways to apply to the court if needed.

How Does Voluntary Winding Up Start?

There are three ways a company can decide to wind up voluntarily:

1.​ Ordinary Resolution: When the company’s fixed duration ends or an event occurs
as stated in the company’s rules (Articles), the company can decide to close.​

2.​ Special Resolution: The company passes a special resolution (a stronger decision)
to close.​

3.​ Extraordinary Resolution: If it becomes impossible for the company to pay debts or
continue business, the company passes an extraordinary resolution to close.​

●​ The winding up starts from the day the resolution is passed.

Types of Voluntary Winding Up

There are two types:

1. Members’ Voluntary Winding Up

●​ The company declares that it can pay all its debts (financially solvent).
●​ Directors make a written declaration that after checking company’s affairs, they
believe the company can pay all debts within 3 years.
●​ This declaration must be submitted to the Registrar along with an auditor’s report.
●​ Then, the company passes a resolution for winding up.
●​ The company notifies this decision publicly in official gazettes and newspapers.
●​ A liquidator is appointed by the company to handle the process.
●​ Directors lose their powers after liquidator appointment.
 ●​ The liquidator must call meetings every year to report progress.
●​ After winding up is done, a final meeting is held, and documents are submitted to the
Registrar.
●​ The company is officially dissolved after this.

2. Creditors’ Voluntary Winding Up

●​ This happens when the company does not declare it can pay debts before passing
the winding up resolution.
●​ The decision is made by the members in a general meeting.
●​ A meeting of creditors is called soon after the winding up decision.
●​ The directors provide a full report on the company’s affairs and debts to the creditors.
●​ The creditors and members appoint a liquidator; if they disagree, the creditors’ choice
wins.
●​ Creditors can form a committee to oversee the winding up.
●​ The liquidator calls annual meetings with shareholders and creditors to report
progress.
●​ When finished, a final meeting is held to approve the winding up accounts.
●​ The liquidator submits final documents to the Registrar.
●​ The company is dissolved officially after this.

Summary:

●​ Compulsory winding up is forced by the court when the company cannot pay debts
or breaks court orders.
●​ The court supervises the whole process, appoints liquidator, protects creditors, and
ends the company officially.
●​ Voluntary winding up is chosen by the company’s owners and creditors, without
court interference.
●​ Voluntary winding up can be either members’ voluntary (company can pay debts) or
creditors’ voluntary (company can’t declare solvency).
●​ In both cases, a liquidator is appointed to manage the closing process, report
progress, and distribute assets.
●​ Finally, the company is legally closed after formal meetings and reporting to the
Registrar.

If you want, I can explain any part further or provide examples!

Certainly! Here is a detailed and easy-to-understand explanation of the text you provided:
Winding Up Subject to Supervision of
the Court
Sometimes, a company that starts voluntary winding up (closing itself down) may still need
the court’s supervision. This can happen if:

●​ The liquidator (person managing the closing) is unfair or careless in collecting the
company’s assets.
●​ The rules for winding up are not being followed properly.
●​ The decision to wind up was made through fraud or dishonesty.

This idea comes from a case called Re Prince of Wales State Quarry Co.

What Happens When the Court Supervises the Winding

Up?
When winding up is supervised by the court, these things happen:

1.​ Court controls lawsuits: The court has control over any legal cases involving the
company, just like in a compulsory winding up (forced by court).​

2.​ Court listens to creditors and shareholders: The court considers what the
creditors (people owed money) and shareholders want, including who should be
liquidators and how the winding up should be done.​

3.​ Court can appoint or remove liquidators: The court can add extra liquidators,
remove them, or replace them if they die or resign.​

4.​ Liquidator’s powers: The liquidator can use their powers freely without always
asking the court’s permission.​

5.​ Winding up order treated as court order: The winding up under supervision is
treated as if the court itself ordered it, including the power to stop lawsuits and
enforce calls for money.​

Differences Between Voluntary and

Compulsory Winding Up
Both voluntary and compulsory winding up end the company’s legal existence, but they differ
in many ways:

Aspect Voluntary Winding Up Compulsory Winding Up

(By Court)

Who decides Shareholders decide to wind Court orders winding up

up

Solvency declaration Directors must declare No need for solvency

solvency (ability to pay declaration
debts)

Start time Starts when resolution to Starts when court petition is

wind up is passed filed

Liquidator appointment Appointed by shareholders Court appoints an official

or creditors liquidator

List of Prepared by liquidator Prepared by court order

creditors/contributors

Committee of inspection Committee may be No committee appointed

appointed

Types Two types: Members’ Only one type

voluntary or Creditors’
voluntary

Submission of documents Documents submitted at Documents submitted to

meetings with shareholders court
and creditors
 Time of final dissolution After 90 days of submitting When court declares
final documents to Registrar company dissolved

Differences Between Members’ Voluntary

Winding Up and Creditors’ Voluntary
Winding Up
These two are types of voluntary winding up, and here are the main differences:

Aspect Members’ Voluntary Creditors’ Voluntary

Winding Up Winding Up

Declaration of solvency Directors declare company No such declaration by

is solvent (can pay debts) directors

When it happens When company can pay When company cannot pay
debts or wants to close by debts, creditors get involved
choice

Meetings Only members meet to pass Members pass resolution,

winding up resolution then creditors meet
immediately or next day

Committee of inspection No committee appointed Creditors may appoint a

committee

Appointment of liquidator Appointed by members in Both creditors and members

the general meeting nominate liquidator; if
disagreement, creditors’
nominee prevails
 Liquidator’s power Liquidator needs special Liquidator needs court or
resolution from members to committee or creditors’
use some powers meeting approval

Control over winding up Members mainly control the Creditors mainly control the
process process

Financial status of Usually solvent (able to pay Usually insolvent (unable to

company debts) pay debts)

Important Note:

●​ The key difference between members’ and creditors’ voluntary winding up is the
declaration of solvency by the directors.
●​ Even if a company is actually solvent, if the directors do not make the solvency
declaration, it will be treated as creditors’ voluntary winding up.

Summary:

●​ Winding up can happen voluntarily (company chooses) or compulsorily (court

orders).
●​ Voluntary winding up depends on the company’s decision and solvency status.
●​ Compulsory winding up happens by court order due to inability to pay debts or other
legal reasons.
●​ There are clear procedural and control differences between voluntary and
compulsory winding up, and also between the two types of voluntary winding up.

If you want, I can help simplify any part further or give examples to make it clearer!