UNIVERSITY - BANGLADESH
Faculty of Business Administration
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Group Name/No.:
No Name ID Signature
1 Md. Omar Faruque 18-90846-2
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Marks Obtained
Total Marks
Arbitration :
Arbitration is the process of bringing a business dispute before a
disinterested third party for resolution. The third party, an arbitrator, hears the evidence
brought by both sides and makes a decision. Sometimes that decision is binding on the
parties. To arbitrate a matter is to bring it before an arbitrator.
Arbitration is a process in which a dispute is submitted to an impartial outsider who makes a
decision which is usually binding on both the parties.
The arbitrator enforces his own point of view on the contending parties and the opinions of
the participants are not given any predominance. Arbitration is a less formal process
The award of the arbitrator is binding and rests on equity and justice, i.e., there is no scope
for compromise.
Arbitration is perhaps the most popular and widely known dispute resolution process. Like
litigation, arbitration utilizes an adversarial approach that requires a neutral party to render
a decision.
Arbitration agreements can take many forms. The Code defines an arbitration agreement to
include an arbitration clause in a contract or a separate agreement. It requires the agreement
to be in writing.
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Application of Non Arbitral Disputes
• Matters of criminal nature
• Disputes relating to matrimonial relations
• Testamentary matters relating to the validity of a will
• Relating to trusts for public purposes of charitable or religious nature
• Insolvency matters
• Matters relating to the guardianship of a minor or lunatic.
• Any execution proceedings.
Characteristics of arbitration:
Arbitration is:
• Voluntary: Parties must expressly agree to arbitrate in writing, or fall within the ambit
of legislation that mandates arbitration in a given situation. If the parties have agreed
to arbitrate, the court, on the motion of one of the parties to the agreement, will
generally require the parties to submit the dispute to arbitration, unless it is found that
the arbitration agreement is null and void, inoperative or incapable of being
performed.
• Controlled: The parties and their counsel are able to control procedural aspects of
the process, including the choice of neutral, timing and location of the hearing, as well
as who, other than the parties themselves, may be present.
• Informal: Subject to the CAA, there are no prescribed procedural or evidentiary rules
governing an arbitration. The rules of procedure are established by the adoption of
existing rules, by a negotiated arbitration agreement between the parties, or by the
parties and the arbitrator.
• Adjudicative: As in litigation, once a case has been presented by each side, the
arbitrator issues a decision. Article 31 of the Code requires that an arbitral award
shall be in writing, and that reasons be provided unless the parties have agreed that
no reasons are required.
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such as incapacity of a party; invalidity of an arbitration agreement; or that the award
is in violation of law or public policy.
• Adversarial: While the arbitration process is based on the adversarial style of the
litigation model, the demeanour and nature of the hearing are determined by the
parties, their counsel and the arbitrator.
• Flexible: The parties have discretion in choosing an arbitrator and the procedure to
be followed in resolving the dispute.
DUTIES OF ARBITRATOR
Advantages of arbitration:
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• Flexible
• Confidentiality
• Less formal than court
• Preservation of business relationships
Disadvantages of arbitration
Types of Arbitration
• Ad-hoc Arbitration
• Institutional Arbitration
• Statutory Arbitration
• Domestic or International Arbitration
• Foreign Arbitration.
• Med-Arb.
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• Institutional Arbitration: There is prior agreement between the parties that in case
of future differences or disputes arising between the parties during their commercial
transactions, such differences or disputes will be settled by arbitration as per clause
provide in the agreement and the name of the institution who will settle the dispute
may also be included in the contract. Normally the institutions will do all the work
regarding the arbitration procedure. All the institutions have their own arbitration
rules which they follow to resolve the dispute.
• Med-Arb:- Mediation and Arbitration are used in conjunction with one another and,
in the truest form of med-arb, the same third-party neutral plays the role of both
mediator and arbitrator.
However, sometime two neutral third parties are appointed, one as a mediator and another
as an arbitrator. If mediation is unsuccessful then the other party takes charge of the dispute
and acts as an arbitrator.
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Why use arbitration?
The dispute resolution process that best suits a particular case can only be determined upon
an analysis of the dispute itself and the needs and interests of the parties. What does
arbitration provide that litigation and the other dispute resolution processes do not?
A. Speed
One of the main advantages of arbitration is its capacity to have disputes resolved quickly.
Even though the majority of court actions settle before trial, this often occurs only after
lengthy and expensive trial preparation, including examinations for discovery. Arbitration
may provide the opportunity to side-step prescribed procedural requirements of litigation.
The parties also determine the timeframe for the arbitration, allowing them to bypass delays
inherent in litigation.
Arbitration provides the disputants with the opportunity to choose the individual(s) who
will decide the issues in question. This freedom allows the parties to customize the
resolution process to suit these issues by, for example, choosing a neutral with expertise in
the subject matter of the dispute.
C. Technical issues
Many of the disputes involving the federal government are technical in nature. Resolution of
these disputes is often best served by special knowledge or expertise on the part of the
decision maker. Very often, judges do not have such expertise, and they must rely on expert
witness evidence. Arbitration gives the parties an opportunity to secure the services of an
individual experienced in a technical area, or one who has knowledge of the commercial
norms relevant to a particular business field. It is for this reason that disputes in the
construction industry and maritime law are often resolved through arbitration.
D. Confidentiality
There are cases which, by their very nature, require a confidential outcome. This may occur
because the dispute involves privileged information or issues of particular sensitivity. In
these cases, subject to the Access to Information Act and the Privacy Act, inclusion of a
confidentiality provision in an arbitration agreement may provide the required protection.
With respect to sensitive government information, article 27 of the Code read in conjunction
with sections 36 to 39 Canada Evidence Act may provide protection against disclosure. For
further discussion on this subject, please refer to the Department of Justice Civil Litigation
Desk book.
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Question: 02: What do you understand regards to INTELLECTUAL
PROPERTY LAW?
The term Intellectual property refers to creations of the intellect for which a monopoly is
assigned to designate owners by law, it grants with the aim to protect the creation of the
intellect. It covers PATETNS, INDUSTRIAL DESIGNS, COPYRIGHTS, TRADEMARKS. The scope
of intellectual property is expanding very fast attempts are being made by persons who create
new creative ideas to seek protection under the umbrella of Intellectual property rights.
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Other IPL sectors:
• Confidential Information / Trade Secret
• The geographical Indications of Goods
• The protection of Plant Varieties and Farmer’s Rights
• The Information Technology.
Copyright:
Copyrights protect an owner’s right to their own creative work. Works covered by
copyright include print, performances, music, choreography and movies. When you have a
copyright, other people can’t reproduce your work for their own profit. To receive a
copyright, your work must be unique. There must be significant creative work that goes into
your production.
Because of international copyright agreements, you don’t have to formally register a
copyright to have it. However, you can register it. If you do, it’s prima facie evidence that you
have a copyright on the work. Formal registration allows you to claim attorney fees and
statutory damages if someone violates your copyright.
Patents :
A patent is the legal right to an original invention. During the term of the patent, no one
else can make the product, sell it or distribute it without permission. In the United States, the
term of a patent is 20 years.
Asking for patent protection requires careful documentation of the novelty of the
invention. You must show that your idea is new. You must be able to carefully describe the
patent in sufficient detail so that both government officials and the public can determine
what your invention is and what rights you have.
Trademarks:
A trademark is a design, symbol, lettering or words that represent a company or
product. It’s an identifier. A trademark distinguishes your company or product from others.
Like copyrights, you don’t have to register a trademark to have it. You can have a
trademark just by regularly using a symbol or design to represent your product. However,
it’s important to register your trademark because registration gives you a legal presumption
of ownership.
Unlike a patent, a trademark can last forever. When you have a trademark, you have
the exclusive rights to make and sell products that use the trademark. An example of a
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trademark is the design logo of a sports team. Trademarks play an important part in
business, and trademark attorneys help their clients protect their brand.
Trade dress:
Trade dress is essentially packaging. When a company sells a product in unique
packaging, they may have exclusive rights to present the product in that way. Claiming a
trade dress right can be complicated. You must prove that your packaging is aesthetic rather
than functional. You must show that consumers are interested in the packaging as well as in
the product.
Trade secrets:
A trade secret is a formula or plan for doing business. It’s a system or a way of doing
things that gives a company an advantage over a competitor. For example, Coca-Cola doesn’t
have a patent on their signature Coca-Cola drink. However, it’s protected as a trade secret. If
a competitor gets the recipe in an unlawful way, Coca-Cola can bring an action for a trade
secret violation.
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Intellectual property law changes
With the advent of the digital age, intellectual property law has changed
significantly. Enforcement of intellectual property has become more challenging. Abuses of
intellectual property rights protections have increased too. The area of law continues to
grow and evolve. Intellectual property lawyers are part of this discussion.
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Question: 03: Articulate your understanding in respect of Labor Law.
Labor Law:
Labor law, the varied body of law applied to such matters as employment,
remuneration, conditions of work, trade unions, and industrial relations. In its most
comprehensive sense, the term includes social security and disability insurance as well.
Unlike the laws of contract, tort, or property, the elements of labor law are somewhat less
homogeneous than the rules governing a particular legal relationship. In addition to the
individual contractual relationships growing out of the traditional employment situation,
labor law deals with the statutory requirements and collective relationships that are
increasingly important in mass-production societies, the legal relationships between
organized economic interests and the state, and the various rights and obligations related to
some types of social services.
Labor law has won recognition as a distinctive branch of the law within the academic legal
community, but the extent to which it is recognized as a separate branch of legal practice
varies widely depending partly on the extent to which there is a labor code or other
distinctive body of labor legislation in the country concerned, partly on the extent to which
there are separate labor courts or tribunals, and partly on the extent to which an influential
group within the legal profession practice specifically as labor lawyers.
In the early phases of development the scope of labor law is often limited to the most
developed and important industries, to undertakings above a certain size, and to wage
earners; as a general rule, these limitations are gradually eliminated and the scope of the law
extended to include handicrafts, rural industries and agriculture, small undertakings, office
workers, and, in some countries, public employees. Thus, a body of law originally intended
for the protection of manual workers in industrial enterprises is gradually transformed into a
broader body of legal principles and standards, which have basically two functions: the
protection of the worker as the weaker party in the employment relationship, and the
regulation of the relations between organized interest groups (industrial relations).
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Factors In Labor Law:
The general tendency in the modern development of labor law
has been the strengthening of statutory requirements and collective contractual relations at
the expense of rights and obligations created by individual employment relationships. How
important these latter remain depends, of course, on the degree of personal freedom in the
given society as well as the autonomy of both employer and worker allowed by the actual
operation of the economy. In such matters as hours of work, health and safety conditions, or
industrial relations, the statutory or collective elements may define most of the substance of
the rights and obligations of the individual worker, while with respect to such things as the
duration of his appointment, his level and extent of responsibility, or his place in the scale of
remuneration, these elements may provide what is essentially a framework for individual
agreement.
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the 19th century, but the bulk of the present labor legislation of the United States was not
adopted until after the Great Depression of the 1930s. There was virtually no labor
legislation in Russia prior to the October Revolution of 1917. In India children between the
ages of 7 and 12 were limited to nine hours of work per day in 1881 and adult males in
textile mills to 10 hours per day in 1911, but the first major advance was the amendment of
the Factory Act in 1922 to give effect to conventions adopted at the first session of the
International Labor Conference at Washington, D.C., in 1919. In Japan rudimentary
regulations on work in mines were introduced in 1890, but a proposed factory act was
controversial for 30 years before it was adopted in 1911, and the decisive step was the
revision of this act in 1923 to give effect to the Washington Convention on hours of work in
industry. Labor legislation in Latin America began in Argentina in the early years of the
century and received a powerful impetus from the Mexican Revolution, which ended in 1917,
but, as in North America, the trend became general only with the impact of the Great
Depression. In Africa the progress of labor legislation became significant only from the 1940s
onward.
The legal recognition of the right of association for trade union purposes has a distinctive
history. There is no other aspect of labor law in which successive phases of progress and
regression have been more decisively influenced by political changes and considerations.
The legal prohibition of such association was repealed in the United Kingdom in 1824 and in
France in 1884; there have been many subsequent changes in the law and may well be
further changes, but these have related to matters of detail rather than to fundamental
principles. In the United States freedom of association for trade union purposes remained
precarious and subject to the unpredictable scope of the labor injunction, by means of which
the courts helped restrain trade union activity until the 1930s. The breakthrough for trade
unionism and collective bargaining was achieved by the National Labor Relations Act (the
Wagner Act) of 1935. In many other countries the record of progress and regression with
respect to freedom of association falls into clearly distinguished periods separated by
decisive political changes. This has certainly been the case with Germany, Italy, Spain, Japan,
and much of eastern Europe; there have been many illustrations of it, and there may well be
more in the developing world.
Labor codes or other forms of comprehensive labor legislation and ministries of labor were
not introduced until the 20th century. The first labor code (which, like many of its
successors, was a consolidation rather than a codification) was projected in France in 1901
and promulgated in stages from 1910 to 1927. Among the more advanced formulations
affecting the general condition of labor were the Mexican Constitution of 1917 and the
Weimar Constitution of Germany of 1919, both of which gave constitutional status to certain
general principles of social policy regarding economic rights. Provisions of this kind have
become increasingly common and are now widespread in all parts of the world.
Departments or ministries of labor responsible for the effective administration of labor
legislation and for promoting its future development were established in Canada in 1900, in
France in 1906, in the United States in 1913, in the United Kingdom in 1916, and in Germany
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in 1918. They became general in Europe and were established in India and Japan during the
following years and became common in Latin America in the 1930s. A labor office was
established in Egypt in 1930, but only in the 1940s and ’50s did similar arrangements begin
to take root elsewhere in Asia and Africa. Under differing political circumstances there
continue, of course, to be wide variations in the authority and effectiveness of such
administrative machinery.
Employment:
Employment considered as a basic concept and category of labor law is a
relatively recent development. Prior to the Great Depression and World War II the emphasis
was upon the prevention or reduction of excessive unemployment rather than upon long-
term employment policy as part of a comprehensive scheme to promote economic stability
and growth. The new approach, arising from changes in political outlook and contemporary
economic thought, has increasingly found expression in legal provisions that establish the
creation of employment opportunities as a general objective of policy. To this end, legislation
has established the necessary legal framework for the forecasting of labor needs and
availability and the provision of employment services including placement, recruitment,
vocational training, and apprenticeship. Freedom from forced labor, equality of treatment in
employment and occupation, and unemployment benefits may, in a broad sense, be regarded
as part of the same general subject.
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Conditions of work :
The conditions of work involve hours, rest periods, and
vacations; the prohibition of child labor and regulation of the employment of young persons;
and special provisions concerning the employment of women. This part of the law originated
in legislation for the protection of children, young persons, and women against the worst
evils of the Industrial Revolution. It originally dealt particularly with such matters as
admission to employment, night work, and excessive hours, but the elements of its content
and their relative importance were wholly transformed during the 20th century.
As economic and educational progress and changed social habits limited child labor in the
industrialized countries and increasingly in the modernized sectors of developing economies,
the special concern of labor law with regard to the young shifted to such areas as vocational
guidance and training, career planning and advancement, and medical protection.
As employment opportunities for women became more varied and responsible, there was a
similar shift in emphasis from protective legislation—which came to be regarded as
discriminatory, since it tended to limit such opportunities—to legal guarantees of equal pay
and equal employment, coupled with adequate maternity protection and the provision of
facilities to enable women with family responsibilities to continue to be employed. In the late
20th and early 21st centuries, similar, though less comprehensive, accommodations to male
employees (e.g., the provision of paid or unpaid paternity leave) were increasingly common.
Whereas previously any statutory limitation of the hours of work of adult males was
regarded as being highly questionable, except in mines where it had been introduced on
safety grounds, in a society of much increased leisure it has now become a general practice to
fix maximum hours of work by statute or collective agreement. In many countries the eight-
hour day has been superseded by the 40-hour week as the statutory maximum for a wide
range of occupations, and collective agreements providing for substantially shorter working
hours are not uncommon. The details of hours’ regulation, whether by statute or collective
agreement, include such matters as exceptions and adjustments necessary for continuous
shift working. In addition, such regulations cover the extensions permitted for preparatory,
complementary, and intermittent work; the special rules for force majeure (work of absolute
necessity), accident, maintenance, and repair work; and the limitation, authorization, and
remuneration of overtime.
The principle of resting one day of the week, sanctioned as it is by religious practice in many
places, was widely incorporated in legislation at an early date; the lengthening of this weekly
rest through the creation of the five-day week has been strongly influenced by statutory
requirements and collective agreements.
Legislation granting annual holidays with pay and collective agreements providing for such
holidays are almost entirely a development of the mid-20th century but are increasingly
common; moreover, there is a marked tendency for the minimum annual holiday to be
increased.
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Complex questions may arise concerning the qualifying period of service required for
entitlement, breaks in the continuity of service, the calculation of average or normal
remuneration for the purpose of the holidays, the extent to which holidays may be divided,
and the liability for holidays where there has been a change of employer.
Social Security :
Social security ranges from basic employers’ liability for occupational
accidents to comprehensive schemes that include income security in the form of sickness,
unemployment, retirement, employment injury, maternity, family, invalidity, and survivors’
benefits and medical care. As with other aspects of labor law, a progression from the
particular to the general has been characteristic of the development of social security
legislation. By the time of World War I, workers’ compensation schemes were general in
industrialized and industrializing countries, but they were highly restrictive in their
provisions for specific cases. Pension insurance was part of Otto von Bismarck’s legacy to
Germany, but elsewhere there was little more to be found than pension funds for the
privileged or noncontributory pensions for the aged. Great Britain had been the pioneer in
health and unemployment insurance. But social insurance remained a pragmatic experiment
limited to a few countries advanced in both economic development and social policies. The
coverage was limited to specific risks for certain categories of protected persons. Its object
was to protect the worker against the hazards of life for which preindustrial societies
provide by some form of community or family responsibility, but the approach was
piecemeal and was limited to the most-manageable cases of acute hardship. Eventually, the
impact of the Great Depression and World War II in the industrial countries and the
increasingly apparent inadequacy of earlier forms of community responsibility in developing
countries transformed the position. The concept of social security, first given statutory
expression in the United States in 1935 and in New Zealand in 1938, superseded that of
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social insurance, and the 1943 Beveridge Report (prepared by the British economist William
Beveridge) developed it even further to provide a basic income for all in need of such
protection, in addition to providing comprehensive medical care. The concept has continued
to broaden since that time, and social security has found increasing acceptance, though
necessarily with varying degrees of practical application, in countries in the most varied
stages of economic development.
Acute, sometimes highly controversial, problems, particularly in the cost and efficiency of
administrative organization of social security programs and of medical care, remain almost
everywhere. But many countries have made progress in making higher standards of medical
care available as a legal right and in converting the guarantee of a basic income as a
protection against want into provision for effective income maintenance in the event of
unemployment or loss of the family breadwinner. The idea is still developing. The trend is to
broaden it to the point at which it includes all the varied hazards of life, including accidents
of any kind, with the idea of facilitating economic growth by reducing the human cost of
structural change. The pattern varies widely in different countries, partly as a reflection of
different relationships between social security and private life, retirement, and health
insurance, and partly because of differences in economic and social conditions.
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Question: 04: Analyze COMPANY LAW in context of Bangladeshi Legal
System.
Company:
According to Sec. 2 (1) (c) the Companies Act, 1994-“Company means a
company formed and registered under this Act or an existing company”.
Thus, a company is an association of persons formed under the Companies Act, 1994 with a
view to achieving some common objectives. Though a company is regarded a legal person, it
possesses similar rights and owes similar obligations like a natural person.
Partnership :
Section 4 of the Partnership Act, 1932 defines the tern ‘partnership’ in the
following words:
“Partnership” is the relation between persons who have agreed to share the profits of a
business carried on by all or any of them acting for all.”
In short, a partnership is the relation between two or more persons who carry on a business
enterprise in which the profits and losses are shared proportionately.
The maximum number of members that can exist in partnership is 10 in case of a firm carrying
on banking business and 20 in case of any other business. This restriction is placed by the
Companies Act, 1994 (Sec. 4) and not the Partnership Act, 1932.
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Co-operative Society:
A co-operative society is a means for forming a legal
entity to conduct business. It means a voluntary association of persons who conduct business
together to promote their common economic interest. It works on the principle of self-help as
well as mutual help.
The main objective is to provide support to the members. Nobody joins a cooperative society
to earn profit. People come forward as a group, pool their individual resources, utilise them in
the best possible manner, and derive some common benefit out of it.
Limited Liability:
It means the fact that the liabilities of the shareholders are limited to
the extent of the value of shares held by them or the amount guaranteed by them. Thus, their
personal or private property cannot be attached for debts of the company. This advantage
attracts many people to invest their savings in the company.
Unlimited Liability:
It means the fact that the liability of the shareholders
is unlimited and their personal or private property can be utilized to meet the debts of the
company. However, in this case, the shareholders’ liability extends beyond the value of shares
held by them.
Limited Company:
A limited liability company refers to the company in which the
members bear limited liabilities. Here members’ liability is confined to a limited amount and
they are not personally liable for the payment of all liabilities of company.
For example, in the event of winding up of the company, if the assets of the company cannot
meet its liabilities, then personal property of the members cannot be utilized to meet
company’s liabilities.
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Unlimited Company:
An unlimited company is one in which the members’ liability is
unlimited. Thus, in such companies, the members remain personally liable for the payment of
all liabilities of company.
For example, in the event of winding up of the company, if the assets of the company become
insufficient to pay its liabilities, the personal property of the members will be utilized to meet
company’s liabilities.
Government Company :
A Company of which not less than 51% of the paid up capital
is held by the Central Government of by State Government or Government singly or jointly is
known as a Government Company. It includes a company subsidiary to a government
company. The share capital of a government company may be wholly or partly owned by the
government, but it would not make it the agent of the Government.
Foreign Company:
It means any company incorporated outside Bangladesh but has
an established place of business in Bangladesh.
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Private Company:
Sec. 2 (1) (q) of the Companies Act, 1994 provides,
“Private company means a company which by its articles-
• Limits the number of its members to fifty not including persons who are in its
employment.”
Thus, in a private company, the members cannot transfer their shares and the number of
members cannot exceed 50 (minimum 2).
Invitation to public to subscribe for its shares is not allowed.
Public Company:
Sec. 2 (1) (r) of the Companies Act, 1994 speaks,
“Public company means a company incorporated under this Act or under any law at any time
in force before the commencement of this Act and which is not a private company.”
In short, a public company is one the AOA (articles of association) of which don’t provide any
restrictions on-
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In this case, A is a holding company and B is the subsidiary company. The concept is illustrated
with chart-
Ultra-Vires Transactions
Transactions performed by the company going beyond its powers
granted by its memorandum are known as ultra-vires transactions.
Outsider Rights
The rights which attach to the outsiders of the company i.e., the third persons
who are not the members of the company are called ‘outsider rights’. Interestingly, a member
will be considered an outsider, if he does not purely remain in a capacity of a member.
EXAMPLE: A member as a solicitor, promoter or a director is considered an outsider in the
company laws as he possesses a capacity other than that of a member. Thus, such a member
has no right to enforce the articles of association against the company as the articles of
association do not create a contract between the outsiders and the company.
Prospectus
A prospectus means any invitation made to the general public inviting it to deposit
money with the company or to take shares or debentures of the company. Such invitation may
be in the form of a document or a notice, circular, advertisement etc. The sole requirement is
that the invitation must be issued to the public.
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Promoters
According to Sec. 145 (6) (a) of the Companies Act of 1994,
“Promoter means a promoter who was a party to the preparation of the prospectus or of the
portion thereof.”
In short, the term ‘promoters’ can be defined as those persons who think of forming a
company, take necessary steps to accomplish that purpose and thus actually bring the
company into existence.
Pre-incorporation Contracts
The ‘pre-incorporation contracts’ are those contracts entered
by the promoters on behalf of the company before its incorporation.
EXAMPLE: A contract for the purchase of assets for the proposed company is a pre-
incorporation contract.
Meeting
Generally, a meeting is defined as a gathering of a number of persons for transacting
any lawful business. A company meeting must be convened and held according to the
provisions of the Companies Act, 1994 and rules framed thereunder.
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Quorum
The term ‘quorum’ means the minimum number of members that must be present at
the meetings of the company. Sec 85 of the Companies Act, 1994 provides for the quorum of a
meeting of the company and that is 5 members for public company and 2 members for private
company.
Statutory Meeting
Statutory meeting means the first meeting of the members of the company
after its incorporation which is held within 6 months from the date at which the company is
entitled to commence its business. According to Sec. 83 of the Companies Act, 1994, this type
of meetings must be held within 6 months from the date of incorporation.
Class Meeting
Generally, there two classes of shareholders, namely equity shareholders and
preference shareholders. When any class of these two types of shareholders calls a general
meeting, it is called a class meeting.
Meetings of Directors
Meetings of Directors mean the meetings of the Board of Directors
which need to be held at least once in every three calendar months. However, there must be at
least four meetings of the Board of Directors in every year. [Sec. 96 of the Companies Act, 1994]
Resolution
The proposal which is voted at the meeting and accepted by the members is
termed as resolution.
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Ordinary Resolution
Ordinary resolution means the resolution which is passed by ‘simple
majority’ of members (entitled to vote either in person or by proxy) is called the ordinary
resolution. The term ‘simple majority’ denotes to the situation where the votes cast in favour
of the resolution are more than the votes cast against the resolution.
EXAMPLE: At a general meeting of the company, 1000 members were present. Out of these
1000 members, 501 members casted their votes in favour of the resolution, and the remaining
499 members casted their votes against the resolution. In this case, the resolution is said to be
passed by simple majority (501 members).
Special Resolution
Special resolution means the resolution which is passed by ‘special
majority’ of the members i.e., by the support of 3/4th majority of the members present and
entitled to vote at a meeting. For the purpose of such a resolution, at least a twenty one day’s
notice is required to be given to the members specifying the intention to propose the
resolution as a special resolution. [Sec. 87 of the Companies Act, 1994]
EXAMPLE: At a general meeting of the company, 1000 members were present. Out of these
1000 members, 750 members casted their votes in favour of the resolution, and the remaining
250 members casted their votes against the resolution. In this case, the resolution is said to be
passed by special majority (750 members which is 3/4th majority of 1000 members).
Minutes
The term ‘minutes’ means the written record of the proceedings of every general
meeting and of every meeting of its Board of Directors. Sec. 89 of the Companies Act, 1994
deals with minutes.
Share
The term ‘share’ is defined in Sec. 2 (1) (v) of the Companies Act of 1994, which reads as
below:
“Share means a share in the share capital of a company, and includes stock except where a
distinction between stock and share is expressed or implied.”
Justice Farewell gave an exhaustive definition in the case Borland’s Trustees vs. Steel Bros.
(1901):
“A share is the interest of a shareholder in the company, measured by a sum of money for the
purpose of liability and dividends in the first place, and of interest in the second; and also
consisting of a series of contracts as contained in the articles of association.”
In short, the capital of a company is usually divided into different units of a fixed amount and
each unit is called a share. Thus, the persons who hold the shares of a company are called the
shareholders of the company.
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Stock
Stock means the aggregate of fully paid up shares legally consolidated. In other words,
it is a set of shares put together in a bundle.
Share Certificate
Share certificate is a document issued by the company to its every
shareholder certifying that he is the holder of the specified number of shares in the company.
Share Warrant
A share warrant is a document specifying certain shares, and stating that its
bearer is entitled to the shares specified therein. It may be noted that a share warrant, as the
substitute for a share certificate, is issued by the company under its common seal.
Preference Shares
The preference shares are those which enjoy some preferential rights over
the equity or ordinary shares. Thus, for the purpose of dividends (during the continuance of
the company) and repayment of the capital (in the event of winding up) these shares get
preference over the equity shares.
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Participating Preference Shares
The participating preference shares are those which, in
addition to their preferential dividends, are also entitled to participate in the ‘surplus profits’
or ‘surplus assets’.
Here the term ‘surplus profits’ means the balance of profits which is left after paying the fixed
amount of dividends to the preference shareholders and some dividend to the equity
shareholders. The term ‘surplus assets’ means the balance of assets which is left after paying
back both the preference and equity shareholders.
Deferred Shares
The deferred shares are those which are issued to the promoters or the
founders of the company in return of their contribution in forming the company. These shares
are also called ‘promoters’ shares’. The deferred shareholders rank after the ordinary
shareholders in terms of satisfying the claims.
Share Capital
A company usually raises an amount of money by issue of shares and the
amount so raised is called share capital or capital.
Authorized capital
Authorized capital means the maximum amount of share capital which is
mentioned in the company’s memorandum of association (MOA) with which the company
plans to be registered. By issuing the shares, a company is authorized to raise only the amount
of share capital which is fixed in the memorandum. This type of share capital is also termed
as ‘nominal’ or ‘registered’ capital.
Issued Capital
Issued capital means the part of the authorized capital which is offered to the
public for subscription. The company has no obligation to issue whole of its authorized capital.
It may be noted that the company cannot issue the capital to the public exceeding the
authorized capital.
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Subscribed Capital
Subscribed capital means the part of the issued capital which is subscribed
by the public.
Called-up Capital
Called-up capital means the part of subscribed capital which is called
(demanded) by the company to be paid. The rest part of subscribed capital which is not called
by the company is called ‘uncalled capital’.
Paid-up Capital
The total amount of money paid by the shareholders as the part of called-up
capital is called the ‘paid-up capital’.
Reserve Capital
Reserve capital refers to the part of the uncalled capital which cannot be called
by the company except in the event of its winding up. According to Sec. 74 of the Companies
Act, 1994, the company may, be special resolution, declare that a portion or whole of the
uncalled capital shall not be called except in the event of its winding up.
Debenture
Sec. 2 (1) (e) of the Companies Act, 1994 says,
“Debenture includes debenture stock, bonds and any other securities of a company, whether
constituting a charge on the assets of company or not.”
According to Topham:
“Debenture the holder usually arising out of a loan and most commonly secured by charge.”
In short, debenture is a certificate of loan issued by the company which creates or
acknowledges a debt due from the company.
Fixed Charge
A charge is said to be fixed when it attaches to any specific property. Thus, the
company is not allowed to dispose of that specific property without the assent of the holders
of the charge.
Floating Charge
A charge is said to be floating when it is floating, i.e. which does not attach to
any definite or specific property. Thus, the company can dispose of its property without the
consent of the holders of the charge as if no charge were created on that property.
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Dividends
The profits of the company which are distributed among its members are called
dividends. It is noteworthy that dividends must be paid only out of company’s profits. The
payment of dividends cannot be made out of company’s capital.
Winding Up by Court
Sec. 241 of the Companies Act, 1994 speaks about ‘winding up by court’.
As per Sec. 241, a company may be wound up by the court;
• if the company has, by a special resolution, resolved that the company may be
wound up by the court; or
• if default is made in filing the statutory report or in holding the statutory meeting;
or
• if the company does not commence its business within a year from its incorporation
or suspends its business for a whole year; or
• if the number of members is reduced, in case of a private company below 2, or, in
case of a public company below 7; or
• if the company is unable to pay its debts; or
• if the court is of the opinion that it is just and equitable that the company should be
wound up.
Voluntary Winding Up
Voluntary winding up means the winding up by the members or
creditors themselves without any intervention of the court. Sec 286 of the Companies Act,
1994 deals with the cases in which the company may be voluntarily wound up.
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Members’ Voluntary Winding Up
The term ‘members’ voluntary winding up’ refers to the
winding up in which a ‘declaration of solvency’ is made and delivered to the Registrar (for
registration) as per the provisions of the Companies Act. [Sec. 290 of the Companies Act, 1994].
The ‘declaration of solvency’ means the declaration in which the directors of the company
states that the company has no debts, or that it will be in a position to pay its debts in full. [Sec
290 (1)]
Official Liquidator
An official liquidator is an officer who helps the court in conducting the
winding up proceedings. Generally, such an officer takes all the properties of the company into
his custody and acts in the name of the company with the sanction of the court. [SS. 260 &
262 of the Companies Act, 1994]
Contributory
The term ‘contributory’ means every person who is liable to contribute to the
assets of the company in the event of its being winding up. [Sec. 237 of the Companies Act,
1994]
Thus, on the commencement of the winding up of a company, its shareholders are called
contributories. Interestingly, the holders of fully paid up shares are also considered
contributories though their liability is nix.
Managing Agent
According to Sec. 2 (1) (l) of the Companies Act of 1994, a managing agent
is a person, firm or company who or which is entitled to manage the whole affairs of a company
by virtue of an agreement with the company, and under the control or direction of the directors
so far as provided in the agreement.
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Managing Director
According to Sec. 2 (1) (m) of the Companies Act of 1994, a managing
director is the director who is entrusted with the ‘substantial powers of management’ which
would not otherwise be exercisable by him.
The substantial powers of management means the powers to take decision concerning some
policy matters e.g., pricing of products, buying and selling, appointment of employees etc.
Class rights
Generally, there two classes of shareholders, namely equity shareholders and preference
shareholders. The rights which attach to any of these classes of shareholders are known as the
‘class rights’.
Majority Rule
A company is governed and managed by the will of the majority of its shareholders and the
minority is not allowed to bring an action about a thing which has fairly been substantiated by
the majority of shareholders. It is known as the ‘majority rule’ or the’ rule of supremacy of the
majority’. The rule is well established in the famous case of Foss v. Harbottle (1843).
Secured Creditor
Secured creditor means the creditor who has a charge on the company’s assets for the
repayment of his dues.
Reconstruction
The term ‘reconstruction’ may be defined as the transfer of the business and the undertaking
of one company to another new company formed for carrying on the same business.
Amalgamation
The term ‘amalgamation’ may be defined as the combination of two or more existing
companies to form a new company. In this process, one existing company is absorbed into and
blended with another existing company and thus, the business of those companies is carried
on by a new company (which is the result of the combination of the companies).
Misfeasance
Misfeasance means willful misconduct or willful negligence which results in loss to the
company.
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