Making Companies Act up-to-date

The Companies Act, 1994 came into force from September 12, 1994 with changes/amendments/modifications.
Only a few changes/amendments took place during the past two decades. Many sections of the Act became outdated and ineffectual due to rapid technological innovations and emergence of new businesses. To make those relevant and compatible to the rapidly changing patterns of businesses, both local and global, many issues are required to be addressed. Before finalisation of the Act, the concerned authorities are obviously analysing the recent changes made in the companies Acts by different South Asian countries like India, Pakistan and Sri Lanka. Apart from this, U.K. and U.S.A.'s Acts should also be taken into cognisance for making it up-to-date. Moreover, focus on the recent and future technological advancement needs to be taken into consideration in order to avoid frequent changes/amendments in the near future.
In this respect, some recommendations are suggested in line with the Companies Act recently published by India for consideration in the formulation of the upcoming Act.
* One-person company
* Maximum/minimum number of members in private/public company may be increased
* Companies should be categorised as 'small', 'medium' and 'large' (depending on manpower, size of business: capital, profitability with minimum & maximum ceiling etc)
* Provision for maintenance of books of accounts and relevant papers in electronic means/mode.
* Mandatory provision may be incorporated as regards adherence to accounting standards.
* Compliance with accounting standards of listed companies regarding authenticity of accounts.
* Mandatory rotation of auditor(s) may be incorporated with time limit (i.e., two terms each of three years with intervals of three years)
* Adoption of accounting standards irrespective of size/nature of the company. Audit fees to be applicable depending on the size of business/categorisation, i.e., listed/unlisted company(s).
* Authentication of Financial Statements (FS) by the Company Secretary and/or Chief Financial Officer considering the nature of the company(s), within purview of rules & regulations.  
* Managing Director and Company Secretary should jointly sign all regulatory documents submited to the Registrar of Joint Stocks & Companies of Bangladesh (RJSC).
* Specific provision to be included describing scope/area of Corporate Governance certification to be provided only by the practising member(s) of the Institute of Chartered Secretaries of Bangladesh (ICSB).
* Mandatory clause/provision may be incorporated for conducting secretarial audit by the practising member(s) of ICSB including certification as well as submission of electronic returns/statements. Provision of collecting certified copy(s) should be made easier through electronic means i.e.. from RJSC web site.
* Secretarial standards issued by the ICSB should be complied with.
* CSR/Zakat should be considered subject to certain limits depending on the size of capital and/or profit and such power can only be exercised in the general meeting. In this respect, a comprehensive guideline may be prepared regarding constitution of the CSR Committee, auditors' report as well as Board of Directors' disclosure to be provided in the Annual Report.
* Audited report shall not be earlier than 180 days before the issuance of prospectus.
* Provision relating to issuance of digital share certificate/dividend acknowledgement certificate to be kept for listed companies.
* Stringent penal provisions may be incorporated for any misstatement/concealment of facts for preparing and presenting financial statements in respect of issuing shares at a premium including reporting of fund utilisation at regular intervals.
* Company(s) may only authorised to issue shares at a discount only from sweat equity among employees in lieu of their services.
* Annual General Meeting (AGM) should be held within 9 months from date of closing of the financial year/incorporation.
* Directors may attend and participate through video conferencing and other audiovisual means in board/committee/general meetings as well as in voting.
* Cost of publication of annual reports substantially increased in the last couple of years which may be avoided by introducing a new clause of publishing the annual/half yearly reports in companies' websites, abridged versions in four national dailies (two Bangla & two English) instead of sending the same to all the shareholders. However, on request of the shareholders, CD copy may be produced or limited copies may be printed for senior citizens or emailed to the respective shareholder(s)
* Notice period of calling/declaring AGM/GM may be shorter.
* In 'Miscellaneous' Agenda of AGM/GM, some prohibitions should be imposed in respect of approval to protect shareholders' right.  
* Separate explanation may be inserted for record date and book closure date with a time frame of at least 7 (seven) market days instead of the existing provision.
* Fulfilment of quorum should depend on the number of members, nature of company etc. (i.e., public/private).
* Appointment of Independent Director(s)/Woman Director(s) may be as a proportion of the Board's composition for listed/non-listed company(s) depending on share capital with certain conditions/liabilities/codes/Terms of Reference (TOR).
* Audit Committee (AC) may be formed entrusting it with the responsibilities for inclusion of independent directors having financial literacy (i.e., Chartered Secretary, Chartered Accountant, Cost & Management Accountant etc.).
* Nomination and Remuneration Committee (NRC) should be constituted by every listed company with certain criteria/condition(s) for formulating policies relating to remuneration, qualifications, positive attributes and independence of a director.
* Appointment/re-appointment of a managerial person may be executed upon previous performance on the basis of key performance indicators having a tenure of five years at a time.
* Mandatory provision(s) for the appointment of Company/Corporate Secretary (CS), Chief Financial Officer (CFO) and Chief Audit Officer (CAO) to be included having professional qualifications (such as qualified as Chartered Secretary for secretarial position and Chartered Accountant and Cost & Management Accountant etc., for other positions). Moreover, for unlisted companies, appointment of Secretaries should be made having qualification as a partly qualified Chartered Secretary. Mandatory provision should be made for listed companies regarding cash dividend through Bangladesh Electronic Fund Transfer Network (BEFTN) with few exceptions.
* Provision of submitting audited financial statements for the payment of interim dividend of listed companies.
* Reduction of share capital, buy-back, takeovers, merger & acquisition including cross border mergers, management buy-out and corporate debt restructuring to be specified elaborately.
(Sources: A few recommendations were taken from the paper prepared by Price Water House Coopers (Pwc), India on Indian Companies Act, 2013)

The writer is company secretary, Jamuna Bank.
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