3 years ago

New move to amend Companies Act

An illustrative image — Collected
An illustrative image — Collected

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The government has again initiated a move to amend the Companies Act 1994 in order to make it more business-friendly.

In February, it amended the companies' mother law by scrapping the system of using "company seal" on the business documents.

However, the Ministry of Commerce has prepared a summary for the cabinet to further amend the law.

Under the second amendment, there will be a new chapter in the law containing detailed procedures for forming "one person company."

A new section named 'single person company' will be included in the 12th section of the companies law.

The company will be defined as an institution where a single natural person would be its lone shareholder, according to the proposed amendment.

Company is usually believed to be an "artificial person" as per the Companies Act, which is meant for a going concern as well.

Currently, "limited" or limited liabilities are added at the end of an registered company.

The memorandum and articles will be prepared for one-person company accordingly.

Trade officials said the government wanted to make all changes in one go. But some objections were raised last year against the single-person company by the stakeholders.

The cabinet approved the draft of the amendment in November 2018 and it did not see the light after opposition, they said.

They also said this is required in order to improve the country's ranking in the World Bank's ease of doing business index, where Bangladesh is still one of the poor performers.

Bangladesh had improved by eight notches to 168 out of 190 in 2020 ranking.

"We believe such type of entities will help attain higher ranking in the Ease of Doing Business Index of the World Bank," said an official at the commerce ministry.

However, Bangladesh will not get the benefit in the next Ease of Doing Business Index" as the World Bank considers reforms undertaken by member nations up to May each year. The World Bank will release its next ranking for 2021 in September or October this year.

The registered documents under such an enterprise must have a nominee, who will take over the responsibility after the death of the main sponsor or subscriber.

If the main subscriber dies or is unable to conduct the one-person business, the nominee will run it, according to draft.

In such firms, the lone sponsor will be treated as the first director of the company.

He may appoint another directors, manager and company secretary.

Such a company will hold at least one meeting in six months.

The main sponsor or first director will sign the balance sheets and other financial statements. The government had taken the step to amend the law in 2008.

It took the reform programme under financing from the World Bank's investment climate fund. In 2013, a draft was prepared, but it had failed to reach a consensus with the stakeholders.

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