Companies Act should be updated immediately

The Companies Act was first introduced in the subcontinent in 1913. This was continuing in Bangladesh until 1994 and then this Act was replaced by a new one. To meet the demands of time, many new provisions have been included but the basic flaw remains unattended even in the new law.

The Companies Act in Bangladesh is like an orphan. There is no authority to which one can approach for any redress. Conversely, there is none to take action for violation of any provision of the Act. In Pakistan, a corporate law authority has been functioning for monitoring application of the provisions of the Act. In India, the Company Law board was set up exclusively to deal with company matters, ostensibly under the provision of the Companies Act. Subsequently, another body in the name and style of the Board of Company Law Administration was set up replacing the Company Law Board. To discharge quasi-judicial function, the National Company Law Tribunal has been constituted.

The basic need underlying the establishment of such oganisations is more or less the same in all countries. We should have an authority to address proper implementation of the company law. The corporate sector is the life-blood of the national economy. Transparency, particularly relating to AGMs (annual general meetings), publication of reports and appointment of auditors should be strictly followed. Only in case of listed companies, the aggrieved person/party may approach the BSEC (Bangladesh Securities and Exchange Commission) for redress. The Companies Act 1994 should be updated immediately and an authority should be constituted without any further delay.

Almost a decade ago, state-owned commercial banks were converted into public limited companies. But till date not a single share has been issued to the public. True, in the Companies Act, there is no specific mention of flotation of shares. But it is implied since it is registered as a public limited company. As provided in the Companies Act, the AGM is to be held regularly where issues such as retirement or re-election of directors, appointment of auditors etc., are to be decided. So inclusion of the public in the public limited companies is virtually mandatory.

In Bangladesh, state-owned entities, such as banks, are strictly under the control of bureaucrats as all the shares are owned by the government. The bank executives can hardly raise their heads against the bureaucrats and speak properly for running the affairs of the banks. In the Companies Act of India, there is a provision for government companies. According to the provision, a government company means any company in which not less than 51 per cent of the paid-up share capital is held by the government. It also includes a company which is subsidiary of a government company. In the case of a government company, the auditor shall be appointed by the Comptroller and Auditor General.  The auditor shall submit a copy of his audit report to the Comptroller and Auditor General. This provision definitely ensures fairness, disclosure and transparency of the accounts and other reports.

In the context of Bangladesh, the BSEC hardly takes any action against the perpetrators of any manipulation of the share market. Like a typical bureaucratic organisation, it is only busy issuing paper directives called guidelines and regulations all of which together make a parallel Companies Act for listed companies. In the proposed amendment of the Companies Act, functions and responsibilities of the BSEC are to be clearly defined as to the issuance of guidelines within the ambit of the Companies Act.

 It is not possible to put forward all suggestions in a single article. However, this much can be said that the Companies Act 1994 is to be thoroughly revised and amended.  Bangladesh is having both FDI and foreign portfolio investors.  Internally, there has been tremendous growth in the corporate sector. To cope with the situation, the laws will have to be dynamic and global trends are to be taken into consideration. Some companies will be born. Similarly some will die. In Bangladesh, the liquidation process is very cumbersome. Sick companies are pushed inside the ICU and kept forever. This practice must go. The process of liquidation shall have to be made easy. The long and short of the story is that a commission drawing experts from concerned profession should be constituted. Membership of the proposed commission shall be broad-based. It should be remembered that now-a-days merely traditional companies are not registered under the Companies Act. A large number of commercial banks both at home and abroad, insurance  companies and financial  institutions are also registered under the Companies Act. Of course, separate authorities like the Bangladesh Bank and the Bangladesh Insurance Development and Regulatory Authority are there to oversee the activities of the concerned companies. But as registered under this Act, these have certain responsibilities to discharge. Moreover, with the progress of time, many new types of companies may come up. In the Indian Companies Act, there is a mention of producer company. A producer company is one where ten or more individuals, each of them being a producer, express the desire of forming a producer company. Activities may include production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce etc. In this connection, it may be mentioned that in view of the ever-growing corporate sectors, the company law shall have to be always under surveillance. For this, an advisory committee consisting of experts may be formed.

rezaulparvaz@live.com